The Next Crowdfunding Rush Could Be In Asia

Posted by Leroy D. Weaver on June 24, 2015

Asia Crowdfunding

Recent research suggests that some venture capitalists could begin to fund early stage businesses via crowdsourcing rather than institutional investors.

Robert Wardrop, executive director at Cambridge University’s Cambridge Centre for Alternative Finance in the UK, has said that in Europe the percentage of early stage seed deals funded by crowdfunding is growing, and is beginning to increase the volume of these deals funded by venture capital firms.

While crowdfunding accounts for a high percentage of the total market in Europe, Asia is still mostly untouched. In sophisticated regions such as Japan, Indonesia, Singapore and Thailand there is a demand for alternative financing for entrepreneurial innovation in order to keep up with development in China. One trend that Wardrop things could become adopted in Asia is the emergence of smaller venture capitalists using crowdfunding to both raise funds to make new investments and provide capital for later stages of existing investments.

Crowdfunding graphic

Crowdfunding was created after the global financial crisis. It is a means of raising money for a project or venture via the Internet. Entrepreneurs turned to the Internet to connect with investors when financial institutions restricted their lending capacity.

The University of Cambridge is partnering with the University of China as well as corporate sponsors to conduct an Asian alternative finance report, in Europe this scene is well recorded. The report is expected to begin in July 2015 and finished in the fourth quarter of 2015.

Crowdfunding can be seen as a quick capital fix for a businessperson in search on financial transactions only. This results in market validation and traction in the form of early adopters and customers. Going down the typical venture capital route requires building long-term relationships with investors and entrepreneurs that begins long before fund raising.

Crowdfunding allows the entrepreneur to be anywhere as long as there is a digital connection with investors. Before this, entrepreneurs had to attract and wait for angel investors to come to them to attract start-up funding. The relationship between crowdfunding and venture capital will continue to evolve, though there is still a strong need for traditional venture capital investments as long as there are institutional investors.

Filed under Crowdfunding