SINGAPORE - A private capital raising platform will be set up to address the challenges to fund raising faced by start-ups and small and medium-sized firms.
The facility will bridge entrepreneurs to accredited investors like private equity, corporate funds, institutional firms and family offices.
It provides a formal structure where investors can buy equity in start-ups and SMEs and have the shares stored in a central depositry.
Start-ups and SMEs who are likely to qualify must have revenue and products and services that are commercially viable. They must also be profitable or near to profitability. The facility is open to any start-up or SME here as well as others from overseas.
The Singapore Exchange announced this new facility in partnership with high-tech accelerator, Clearbridge Accelerator (CBA). They inked a memorandum of understanding recently to develop this fund raising platform.
The facility, which is yet to be named, will have a pilot run sometime after March and is targetted to be launched mid-this year. Details like equity structure between SGX and CBA, who will lead it, how it will work and the list of investors will be announced closer to its launch date.
SGX head of SME Development and listings Mohamed Nasser Ismail told The Straits Times that the platform is the first in the world.
This new capital raising platform is like an equity crowdfunding platform where individuals invest in return for shares in the cmpanies.
The SGX-CBA platform is different in that it is only open to accredited investors and is likely to be multi-million dollar deals.
It is also structured in a way that is allowed under the law, said Mr Mohamed.
Currently, the financial rules do not allow equity crowdfunding campaigns aimed at individuals here.
SGX is best placed to set up this new facility, he said, because it is already involved in raising capital for SMEs through Catalist, SGX's junior board.
"It's more or less the same kind of business for us, only slightly different in that we're going out to get funding from accredited investors."
CBA's partner Steven Fang, said existing equity crowdfunding have its disadvantages.
"Investors have no control over how the entrepreneurs are using the money. Entrepreneurs also can't tap these investors to help them grow their companies," he said.
The new facility aims to see that there is on-going communication between the companies and investors, he added, so that growth can be achieved as quickly as possible.
The SGX-CBA facility also addressed an immediate need because many start-ups founded in the last few years are maturing and are ready for business expansion.
"As an entrepreneur and investor I've built companies and we see there is a gap for funding for post Series A investment."
Post series A funding refer to multi-million dollar investments by venture capital firms in companies with commercially viable products and services but require funds to quickly expand.
Dr Fang said that the new facility will help start-ups and SMEs find the "smart money", the investors who can help companies get access to markets and customers.
"You can hire the best Ph.Ds and have the best technology in the market. But without smart money, the companies will be challenged and will be put in a psoition of trying to catch up," he said.
With smart money will come experienced managers who will mentor entrepreneurs in thinking about where companies ought to be, said Dr Fang.
"By providing the funding and mentoring, we hope to accelerate the growth of these companies which in turn could later list on SGX," he added.
Mr Mohamed said the SGX decided to partner with CBA because it was looking for partners with the knowledge and expertise in fund raising and entrepreneurship.
Launched in 2010 CBA is a local venture capital firm whose partners are experienced entrepreneurs. Dr Fang for example, founded Cordlife in 2001. CBA invests in healthcare, infosecurity and other high-tech com2panies.
Mr Leo Shimada, founder of equity crowdfunding platform Crowdonomic said the new facility will allow traditional institutions to embrace crowdfundin.
"This could potentially add value through the transfer of relevant know-how and transaction infrastructure", he added.