ECF sector continues momentum with pitchIN leading way

• Amidst pandemic, pitchIN said to record increased ECF investments, deals
• Founders claim successful execution will lead to digital investment hub

THE pitchIN 2020 ECF Report, revealed that investors continued to invest in equity crowdfunding (ECF) deals despite the impact of the pandemic. Released on May 15, the reported noted that pitchIN recorded its best ever annual performance.

Thirty six companies raised US$14.4 million (RM59.5 million) on pitchIN in 2020, sharply higher than the RM22.7 million and 19 deals in 2019, the company said in a statement.

[1RM = US$0.24]

In its fourth iteration, the 2020 report showed that larger companies were starting to raise funds through ECF. Fourteen companies raised US$730,000  and above in 2020.

PolicyStreet took the record of Malaysia’s highest funded ECF deal when it raised US$1.28 million entirely during the the implementation of the Movement Control Order (MC) restrictions last March – a remarkable achievement under the circumstances.

“There was a moment, when the first MCO was announced, that we genuinely wondered if we would be able to report anything for 2020," said Sam Shafie, PitchIN chief executive officer (CEO).

“But we’re happy to note that this was not the case, and for the fourth consecutive year, we’re delighted to report that the ECF sector continued to grow in 2020.”

The shift to digital solutions also advanced quality companies, with investors recognising that ECF enables them to access deals they would otherwise not have access till later stages, PitchIN said.

A total of 1,738 investments were made in 2020 by all class of investors with a healthy mix of retail, angel and sophisticated investors forming pitchIN’s base, it added.

Beyond its broad investor base, investors at pitchIN are also investing repeatedly with the company highlighting that the top three most active investors have made 45, 37 and 30 investments respectively.

“They are not alone in being repeat investors: Some 468 other investors have made two or more investments on pitchIN,” he said.

Kashminder Singh, pitchIN chief strategy officer, said another reason why the company has done so well is due to the quality of the deals it hosts.

He said since 2016, pitchIN has documented the growth of the companies on its platform. As recorded in previous annual reports, the vast majority have done very well and business failures are rare, he claimed.

Outlook

The big question now was how all these companies would fare in the business climate brought on by the pandemic.

To this, Kashminder said companies on pitchIN bucked the trend of lower growth as most companies reorganised their operations and continued to grow.

pitchIN has also tracked the value of a model pitchIN portfolio over the years. Based on actual valuations and secondary transactions, the model portfolio increased in value in 2020, it said.

“This is seen most clearly in earlier deals where companies have had time to deploy funds raised and reap the benefits. According to our model, RM37,473.50 invested in 2016/17 in every deal on pitchIN is worth RM101,967 today, an increase in value of 172.1%. We continue to look foward to delivering value to investors and we have great deals lined up this year.”

Meanwhile, two companies were exploring public listings, with others on track too. According to Sam, one company is looking at listing on the LEAP Market while another is considering an Ace market listing.

“When that happens, interest in ECF is bound to grow even more as those companies would have proven that ECF investments should be part of every serious investor’s portfolio.”

Sam added that the company is confident that it will be even do better this year as it is currently carrying out its own fundraising exercise through a combination of an ECF campaign on Leet Capital and an institutional investor to raise US$2.4 million (RM10 million).

“This is our first ever fundraising and we will use the funds to roll out an integrated digital equity crowdfunding and secondary market platform later this year. pitchIN has also applied to operate an Initial Exchange Offering (IEO) platform and if our application is successful, we will be well on our way towards becoming a digital investments hub.”