Madam Jamie Chua with her two and a half year-old daughter Yujia, who was born with oesophageal atresia, a rare birth defect in which a baby is born without part of the oesophagus, leaving a gap between it and the stomach. Photo: Raj Nadarajan/TODAY

How crowdfunding is changing the economy, philanthropy and so much more

Apr 8, 2016 · 14 min read

By Kenneth Cheng (

SINGAPORE — As some banks cut back lending to small businesses amid a turbulent economic climate, more firms seeking to raise capital quickly are latching on to crowdfunding which comes without the hassle of trying, often in vain, to impress venture capitalists with fancy presentations.

Charities and individuals, too, are looking to ride on the wide networks that crowdfunding platforms afford to solicit donations for their causes.

Getting money from both friends and strangers all over the world to fund business ideas, humanitarian and charitable causes or even personal pursuits is a growing global phenomenon: Crowdfunding platforms worldwide raised US$16.2 billion (S$21.9 billion) in 2014, a 167 per cent jump from the US$6.1 billion they attracted in 2013, according to the latest report published last year by the United States-based research firm Massolution. The figure was projected to balloon further to US$34.4 billion last year.

In Asia, crowdfunding volume grew 320 per cent between 2013 and 2014 to reach US$3.4 billion, making it the second-biggest region by crowdfunding volume after North America. This was higher than the US$3.26 billion raised by crowdfunding platforms in Europe in 2014.

Mr Kelvin Teo, co-founder of home-grown crowdfunding firm Funding Societies, said: “With the increased uncertainty in financial markets, traditional financial institutions are understandably cutting back on lending. We do see a larger demand from both SMEs and larger corporations, but we are also more careful.”

The four business crowdfunding platforms that TODAY approached — CoAssets, Funding Societies, Fundnel and Capital Match — all observed rising demand for crowdfunding from businesses, with one platform reporting a jump of about 30 to 40 per cent in the past quarter.

Businesses turning to crowdfunding — the majority are small and medium enterprises (SMEs), which are traditionally not as well-served by banks — cut across a broad spectrum of industries, from manufacturing and food and beverage, to biotechnology and logistics.

Away from the business sphere, more charities are also turning to the Internet to raise funds for worthwhile causes. Singapore-based charity crowdfunding platform GIVEasia has seen the number of local charities it serves surge ten-fold to more than 250 today, compared with 25 in 2010.

Over at, another fundraising portal for philanthropy, the number of charities registered on the site currently stands at 388, nearly double the 200 charities that signed up with its predecessor, SG Gives, in February 2010.

More individuals, too, are tapping the sizeable reach of such platforms to advance decidedly personal causes — with considerable success.

These range from socio-political causes — as in the 2014 case of blogger Roy Ngerng, who had crowdfunded his legal fees in the defamation suit brought against him by Prime Minister Lee Hsien Loong — to humanitarian aid in the wake of natural disasters, to private endeavours such as defraying study expenses or large medical bills.

Mr Lawrence Lim, Chief Operating Officer of the home-grown crowdfunding firm CoAssets. Photo: Koh Mui Fong/TODAY


For now, the overall regulatory regime, be it by the authorities or by the industry itself, for crowdfunding appears to be most developed in the commercial sphere. While not foolproof, middleman companies helping businesses raise funds have put in place checks and safeguards. Investors, by and large, also take it upon themselves to do their homework.

Crowdfunding firms engage in various forms of crowdfunding. Equity-based crowdfunding sees investors buying a firm’s shares and receiving a part of its profits by way of a dividend or distribution.

Debt-based crowdfunding sees investors financing a firm’s debts in the form of loans in return for repayments with interest, while reward-based crowdfunding sees investors pumping in money with the promise of a reward, typically a product produced by the firm. Donation-based crowdfunding involves donors marshalling their resources behind a charitable cause.

Homegrown firm CoAssets has seen demand for crowdfunding from SMEs grow by about 30 to 40 per cent presently compared with January, chief operating officer Lawrence Lim said. At Fundnel, more than half the 400 applications it screened from businesses since last October came in the first quarter of this year, said CEO Kelvin Lee. Funding Societies and Capital Match also saw growing demand, but the firms did not share figures.

Mr Lim said there is growing demand for crowdfunding as banks adopt a “more cautious” stance on lending and SMEs seek to transform themselves amid an economic downturn. “They need that cash injection to help them realise productivity gains (and) efficiency,” he said.

The businesses that the crowdfunding platforms serve range from smaller firms with revenues of S$300,000 to larger SMEs with annual turnovers of S$50 million.

Fundnel, which has more than 2,000 investors, has successfully funded 10 companies since January last year, while Funding Societies, with about 2,800 investors, has crowdfunded 62 companies since the launch of its Singapore platform last June.

CoAssets, which boasts more than 47,000 investors, has supported more than 50 businesses since it began operations in mid-2013. Late last month, one such business, a Singaporean toy-manufacturing SME, had its S$200,000 short-term business loan for a themed event funded in less than 30 minutes, in what CoAssets believed was “the fastest business crowdfunding deal” here.
On average, a business deal on the platform takes an average of 15 to 20 days to get funded, Mr Lim said.

The average size of an investment varies considerably across platforms, from about S$2,000 per loan at Funding Societies, to between S$30,000 and S$50,000 at CoAssets.

To minimise risks to investors, the platforms have robust internal checks and safeguards to ensure the companies listed are in sound financial shape. This includes due diligence procedures, analysis of the companies’ financial performance, and assessments of the creditworthiness and credibility of the firms and their directors. Site visits are also conducted.

The rigorous assessments mean not all crowdfunding hopefuls make the cut. Five in 10 companies do not pass CoAsset’s checks, said Mr Lim, and at Fundnel, its CEO Mr Lee said only about one-tenth of all screened opportunities end up reaching investors, so as not to “waste their time”.

The safeguards do not stop there. After the campaigns are funded, the platforms continue to track the firms closely for early warning signs of looming financial troubles. Capital Match director Pawel Kuznicki acknowledged that while full monitoring was difficult once funds have been disbursed, the firm would review the borrower’s financial situation “if we sense any impending troubles”.

Businesses who had turned to crowdsourcing to get their ideas off the ground said funding through other means was hard to come by.
For creative advertising platform SPARK, which reached its S$50,000 target on Fundnel in February, knocking on the doors of venture capitalists yielded little. “It’s difficult to even get a meeting with them without a recommendation or having some success under your belt,” said product director Luke Wu.

Crowdfunding, Mr Wu said, helps start-ups like SPARK build a larger network. “Having more interested parties means having more doors open for you and more efficiency in terms of sourcing for funding,” he said.
For Mr Chris Liu, CEO of Indonesian recruitment platform Kerjadulu, crowdfunding was a good way to raise the company’s visibility and receive market validation from investors.

Noting that fundraising was generally difficult, Mr Liu said it was important for a company to leverage partnerships and resources to grow. “Crowdfunding fulfilled just that, as it helps to bring people and funds together to support growing businesses,” he said.

For investors, crowdfunding platforms offer a wide variety of projects to invest in and the means to earn lucrative returns.

Mr Melvin Ho, 29, has invested in seven projects on Funding Societies in industries as diverse as marine and construction, sinking about S$2,000 to S$7,000 into each project.

Before diving into an investment, Mr Ho combs through the credit situation of the firm, examining its risk levels and financial projections, and studies the firm’s profile to assess its credibility. “Every investor has to be responsible for their own investments,” said the entrepreneur.

Real estate agent David Yong, a CoAssets investor, studies fiscal market trends and avoids investing in industries where there are signs of a slump. “I would go for those (industries) with a clear trend (and) with the flow rather than against the tide,” said the 42-year-old.

Delivery tins meant to collect funds for victims of the Japanese earthquake and tsunami in 2011. TODAY file photo


The crowdfunding fever has not only swept the business fraternity, but is taking root — albeit gradually — in the non-profit world, where demand for crowdfunding is also growing.

At GIVEasia, more than 50 per cent of the 250 Singapore charities on the platform are small ones, many of which have weak or no fundraising capabilities, said co-founder Aseem K Thakur.

He added: “GIVEasia is a great solution for such charities … as it is the only zero-fee solution in the market which also provides a really easy-to-use interface.” The platform does not charge donors or fund recipients a transaction fee, although the use of credit or debit cards incurs a bank fee.

While the platform allows users to mount fundraising campaigns, Mr Aseem stressed that GIVEasia does not “represent the campaign owners” and users choose to donate to campaigns “based on their own discretion and due diligence”.

That said, it has implemented a series of measures to ensure “trust and safety”, including technological safeguards to detect potential fraud swiftly and staff who are continuously on the lookout for questionable campaigns.

For charities, the ability to navigate the crowdfunding space may be limited by constraints on resources and capabilities.

YMCA of Singapore general secretary Lo Chee Wen said the use of such platforms requires a certain level of tech-savviness and time to maintain a charity’s presence, which could place “a strain on already-limited resources”.

Singapore Red Cross (SRC) CEO and secretary-general Benjamin William said charities may not turn to crowdfunding in a big way because of a “lack of capabilities or resources to assess a platform’s trustworthiness or reliability”.

They might also lack confidence in the level of support they would garner from these platforms, he added.

For the Breast Cancer Foundation (BCF), raising awareness of campaigns is a significant challenge. “It’s not enough to put a campaign on an online platform. We have to reach out to the public and motivate people to donate and further share our campaign for it to really take off,” said Ms Katherine Tan, the foundation’s general manager.

Ms Tan added that because of their high visibility, on-the-ground donations drives were still more popular than crowdfunding — the outcome of which can be “very variable”. “Charities new to crowdfunding may also need some time to come up with effective strategies to maximise the potential returns,” she said.

While online fundraising platforms allowed the SRC to reach a “more targeted” group of donors, Mr William stressed that digital fundraising served as a “supplement” to the more traditional fundraising avenues, including Flag Days.

Fundraising expert Usha Menon, however, believes donation drives such as Flag Days are “long past their use-by date” and a lot more can be done to nudge charities towards the digital space.

She cited three barriers to the adoption of digital technologies by charities.

First, staff may not understand how to tap digital and social-media tools to mobilise support.

The leadership in charities may also not recognise the possibilities of the digital space, and, third, budgetary constraints and other priorities may mean qualified resources cannot be allocated to manage digital efforts.

“There was no budget, so given the many other things they need to do, they couldn’t allocate qualified resources … to this kind of (digital) community management,” said Ms Menon, executive chairman of Usha Menon Management Consultancy (Asia), which works exclusively with non-profits.

Ms Menon noted that the National Volunteer and Philanthropy Centre had allowed qualifying charities to tap the expertise of volunteer management consultants to aid them in managing their volunteer capabilities. Going forward, she suggested that digital community managers be made available too, to boost charities’ capabilities on the digital front.

Blogger Roy Ngerng (left) with his lawyer M Ravi. Mr Ngerng turned to crowdfunding to raise money to pay for his legal expenses after he was sued by Prime Minister Lee Hsien Loong for defamation. TODAY file photo


The crowdfunding landscape is not confined only to entities advancing charitable or business causes.

In recent years, individuals furthering socio-political ends have taken to the medium to raise money — and garner public support.

Embroiled in a defamation suit brought against him by Prime Minister Lee Hsien Loong over a May 2014 blogpost — in which he alleged that the prime minister had misappropriated Singaporeans’ Central Provident Fund savings — Mr Ngerng started a crowdfunding appeal in the same month to raise money to pay for his legal expenses.

His crowdfunding effort drew donations from more than 1,000 people, raising more than S$110,000. Mr Ngerng was subsequently found guilty of defamation by the courts and ordered to pay S$150,000 in damages to Mr Lee.

Activist Han Hui Hui also turned to crowdfunding to defray her campaign expenses when she contested the Radin Mas Single Member Constituency as an independent candidate in last year’s General Election. Ms Han said on her blog two days after Polling Day that she had raised S$11,436.

National University of Singapore sociologist Tan Ern Ser used a metaphor to explain the success of such crowdfunding efforts: In a normal curve, there would always be “a small percentage at either end of the curve who are strongly for or strongly against an issue, person or event”, he said.

And it should not be too difficult, he added, to obtain the support of this small percentage of people, which could result in “quite a tidy sum”.

Meanwhile, humanitarian agencies are seeing a steady number of individuals crowdfunding to support humanitarian causes, including disaster-relief efforts. SRC’s Mr William said: “Whether it’s (via) an upcoming birthday celebration or group participation in a marathon, individuals are now more inspired and empowered to do their part for a cause.”

Mercy Relief has also seen “some traction” in crowdfunding efforts, which are typically spearheaded by its volunteers and other supporters. Both agencies, however, did not provide figures for their observations.

In recent years, individuals have also turned to crowdfunding for a variety of causes, with varying degrees of success. These range from helping abandoned animals and pets taken ill, paying for travel expenses to attend sports tournaments, to meeting aims as practical as going on a vacation or an overseas internship. There have also been appeals for financial aid to cover a sick or injured relative’s medical expenses, or funds to defray the costs of higher education.

Reuters file photo


As the popularity of crowdfunding soars, the pitfalls cannot be ignored, experts said.

Common risks include fraud on the part of campaign organisers or platform operators and the possibility that the promised returns on investment may not materialise.

Around the world, examples abound of how crowdfunding websites provide fertile ground for con artists.

In April 2014, a lawsuit — the first of its kind in the US against a crowdfunded project — was brought against a Kickstarter campaign that failed to deliver products, including a deck of playing cards featuring Serbian art, that it had promised backers in return for donations.

Its organiser, who had raised US$25,146 from 810 people, had stopped communicating with backers. A US court subsequently ordered Mr Edward J Polchlopek III to pay US$54,851 in restitution to 31 backers from Washington State and civil penalties, among other things.

So long as they are carried out here, all fundraising appeals, including those for charitable donations sourced through Internet crowdfunding platforms, are generally subject to the Charities (Fund-Raising Appeals for Local and Foreign Charitable Purposes) Regulations.

The regulations stipulate the duties and obligations of fundraisers, which include keeping proper records of donations received and disbursed, the Office of the Commissioner of Charities (COC) said in reply to TODAY’s queries. The COC will look into cases of possible infringement of the rules.

In giving to charitable causes, the COC advises donors to exercise caution and donate to causes they support and organisations they are familiar with.

“While some of these needs may be genuine, donors should be discerning in responding to such appeals and not feel pressured to give,” it added.

Securities-based crowdfunding — which involves the offer of securities by way of debentures or shares in return for investments — is also subject to regulations.

Under Monetary Authority of Singapore (MAS) rules, crowdfunding platforms that facilitate or provide advice relating to the offer of securities are required under the Securities and Futures Act (SFA) to hold a Capital Markets Services licence. Crowdfunding platform operators dealing in the offer of securities are also subject to requirements under the SFA.

In a consultation paper last February, the MAS had also proposed confining this form of crowdfunding to accredited and institutional investors, although retail investors could still invest in start-ups and SMEs through other forms, including donation-based crowdfunding.

Securities crowdfunding investments, for one, come with “significant risks”, the MAS said. “(Such investments) tend to have a high probability of capital loss and are more illiquid compared to traditional securities investment instruments,” it added. Investors may also be exposed to fraud and risk losing their money if a crowdfunding platform operator shuts, MAS said.

Should investors and donors fall prey to errant crowdfunding campaigns here, they have recourse to the law, lawyers said.

For instance, where a scam or dishonesty is involved, there may be a basis to bring criminal action against errant campaign organisers for cheating.
Nevertheless, Singapore Management University (SMU) law don Tang Hang Wu said while donors may have “theoretical” legal recourse, there is no “practical” recourse, since the costs of pursuing legal action may end up outstripping the amount donated.

“If your donation is S$100, S$200, is it worth (pursuing legal recourse)? … For S$100, I can’t even track (the organiser) down and sue (him),” he said.
Among other things, Prof Tang said donors should use their common sense in the first instance and conduct Google searches to ascertain whether the campaigns are “scams in the first place”.

In an environment susceptible to risks, lawyers cautioned that donors should exercise discretion and common sense before contributing to crowdfunding efforts, and be mindful of the possibility they might never recover their donations.

Ms Vivienne Lim, a lawyer at Genesis Law Corporation, said investors and donors may sue for breach of contract if there is an express contract or if one can be implied. In cases where there is no contract but dishonesty is involved, there may be a basis to bring criminal action for cheating or fraud. A civil claim in tort of fraudulent misrepresentation is probably also possible, she said.

Ms Lim stressed that those contemplating taking part in crowdfunding should keep “their eyes open, be aware of the risks involved and do so only when they are able to live with the risks”.

She added: “The person giving the money should do so with a mindset and awareness that the authorities are unlikely to be able to provide an effective remedy in the recovery of their monies if things go south.”

Read about a group of NTU students’ determination to produce a documentary and how they turned to crowdfunding to fund it here.

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