In recent years, debt crowdfunding has been a growing market around the South East Asian region. With the recent spike in tech startups in Asia, this trend is set to continue well into 2020 and beyond.The internet and new technologies have bridged the gap between investors looking to invest and startups who need the capital to scale their operations.
Debt crowdfunding offers an opportunity for investors to crowdfund loans for small businesses and startups. Peer-to-peer lending platforms are an example of debt-based crowdfunding. With this type of crowdfunding, one will be responsible for paying back the money from investors that funded the campaign in the first place, typically with interest. This type of crowdfunding allows one to sidestep having to turn over equity in one’s company while investors benefit from the interest returns earned on their investment.
It’s expected that, by 2025, the crowdfunding market will be worth $300 billion. In the United States alone, $17.2 billion was raised in 2017. This equaled about half of the volume of crowdfunding around the world. Globally, Europe sits at the top of the list of funds raised, with over $6.48 billion. South America is at the bottom of the list, with just $85.74 million raised.
As always, investors from around the globe are looking for the next big thing, and CoAssets Ltd is one player that is constantly on the lookout for niche investments that can enrich the bottomline of their clients.
Asia Blockchain Review had the privilege to listen to the CEO & Co-Founder, of CoAssets Pte Ltd, Mr. Getty Goh, and his opinion on what to look out for 2020 in terms of the South East Asian marketplace.
Asia Blockchain Review: Can you tell us a little about fintech firm, CoAssets Pte. Ltd. (“CoAssets”)?
Getty Goh: CoAssets Private Limited is based in Singapore and is a debt-based crowdfunding platform. We were established in 2013 and were one of the first few debt-based crowdfunding companies in the market at the time. CoAssets was officially licensed in 2017 by the Monetary Authority of Singapore (MAS) and has been growing steadily ever since.
ABR: What does CoAssets foresee in 2020 for their market and what to look out for?
GG: In the last couple of years, innovation can be observed through the growth of activities such as crowdfunding, online lending, peer-to-peer and even ICO-related activities. Innovation continued to thrive as the US led the way in terms of inculcating a startup culture. In recent times, governments around the world have caught on the trend and are looking to replicate this culture.
Initially, big banks and traditional financial institutions were cautious of innovation as there were little or no regulations and guidance from the government. Interestingly, once the regulations kick in, the bigger boys have started joining in the mix.
This trend has become prevalent in 2020 even in Singapore. A prominent example is how DBS is currently rebranding itself to become a digital bank. Other countries such as Malaysia and Hong Kong are also planning on issuing digital banking licenses as well.
When I look at all of this, I note an interesting dynamic: the smaller players are restricted to a small share of the market while bigger players gobble up most of the action. However, that does not mean that smaller players can’t thrive in the marketplace. This simply means that smaller players have to be more selective in what they choose to focus on. For example, if these players are focused on technology, they will need to be able to achieve efficiency of processes.
Whilst the big players may be keen to work with these smaller niche players, it will still be an uphill task for these upstarts of setting up themselves for a platform play. A prime candidate for a scenario like this would be Binance, as it did pretty well for the last couple of years. Nonetheless, the question would arise if a platform came into the market today with something similar to Binance, how would it fare?
In my opinion, even with huge investments, backup and support, it is probably unlikely to be as successful because in most cases, what worked several years ago may not apply in the present day as market evolutions and demands from clients are always constantly changing.
ABR: Are there any new products for Q1 of 2020 that you could reveal?
GG: I wouldn’t go so far as to say we have a new product at this point in time but we are looking at and have always been looking at investment themes. We are very fortunate that the impact of the trade war is not as pronounced in the general market as we had feared but in the near term there will be some market uncertainties. These are caused by factors such as Brexit, which at this time, is something we cannot forecast in terms of its financial impact and associated risks that may abound in 2020.
Having said that, we are looking at opportunities in markets that will typically do well when the economy does not. We are looking at fast moving consumer products and startups, because even during typically depressed market scenarios, people will still need to spend on food, basic necessities and services. So, in terms of how we bring this value to our investors, we are actively exploring the possibilities of collaboration with select venture capitalists and funding some interesting startups that are being favoured by VCs. In a nutshell, 2020 would be quite busy for us as we explore these above-mentioned initiatives.
ABR: In your opinion, are there any developments that we should foresee for South East Asia? With many European and US companies coming into the South East Asian market, there is still a gap in terms of understanding the full potential of the digital scene in SouthEast Asia. What are your thoughts on this?
GG: I think first and foremost we need to recognise that these markets are very different from the South East Asian ones. I think in most cases, people tend to gauge the population as a starting point, and they say that the combined population in Asia surpasses that in their region.
However, they need to understand that for example in the US, you are looking at one single market but for Asia, it’s a combination of several fragmented markets with different government regulations, different currencies, different customer base, and different investing/buying preferences. That is why I think that some concepts and products which have done well in the US, may conversely not do so well in Asia.
For example, Groupon, a group buying platform which has worked well in the US, has had varied degrees of success in Asia. This is one example that stands out for me and reinforces my point that the market in the US is very different and if they want to come into Asia, they will need to take into consideration how each Asian market works and they need to know more about the market behavior, instead of purely on market size or the South East Asian market as a whole.
ABR: Is there a startup or market progressing rapidly in South East Asia?
GG: I foresee two particular markets which would be of interest to investors. Investors are finding Philippines and Indonesia attractive markets for these reasons. The Philippines is highly attractive due to its market size and language. While in the case for Indonesia, the main draw would be its market size.
These two markets present huge opportunities and it is clear to a lot of people. But of course, the devil is in the details. When it comes to these two countries, the cultures and marketplace dynamics could not be more different.
Let’s say if a Singaporean startup company was looking into expanding into these markets, the company will have to be very mindful of the local laws and prevailing business culture. In Singapore, for example, a lending business is quite simple to get into with the existing regulations and rule of law.
But in Indonesia, one will need spousal consent, among many other things before pledging one’s assets. It’s the little details that can make or break a company’s ventures into a new marketplace. I’ve always been a firm believer in doing the research and understanding the marketplace before setting foot into it. It’s always a tremendous help to the company if due diligence is carried out in a thorough manner.
In summary, whichever investment strategy you decide that is best for your business, the one thing that one needs to realize that marketing power is what makes or breaks a new journey. Investors and donors love a good story. If you want to sell it, you have to market it, and convincing people to invest in a new venture requires a certain degree of enticement. Ultimately, you need to ensure you gauge the pulse of your audience and make nuanced decisions that reflect the complexity and intricacies of these new investments that are prevalent in this day and age.
CoAssets Pte. Ltd. (“CoAssets”) is the leading digitally-enabled online crowdfunding platform which provides a wide range of projects. Our platform caters to all individuals: from entry-level retail investors to high-net-worth individuals.
Licensed by Monetary Authority of Singapore in 2017, CoAssets now boasts over 70,000 registered members on the platform. In 2019, the weighted* average of return (per annum) was 14.01% and the Non-performing Loan rates was 0%.
*Rates of Return and Non-Performing Loan Rates are computed with reference to MAS Circular No. CMI 27/2018
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