Crowdfunding expected to catalyse capital market

Third start-up, One Click Shop raises Nu 8.5M

Tshering Dorji

In a span of seven months since the launch of Bhutan Crowdfunding portal, three start-ups were able to raise funds to expand their businesses.

After the Bhutan alternatives and Himalayan Food, One Click Shop, an e-commerce based shopping mart was able to raise Nu 8.5M from about 91 investors, two days ago.

Bhutan Crowdfunding is the first digital platform developed by the Royal Securities Exchange of Bhutan Ltd (RSEBL) to provide alternative financing model for start-ups and to raise funds from the public and institutions while offering investment avenues to investors.

Studies have pointed out that start-ups and entrepreneurs are confronted with the financial capacity to upscale their businesses and most agencies are involved in promoting the culture itself. A missing link has been spotted between the initial phase and the first stage of expansion, primarily fueled by lack of access to finance and capital.

Platforms like Jabchor and crowdfunding are supposed to address this missing link.

But the RSEBL has given a new impetus to entrepreneurs and start-ups, simply by developing a cycle leading to initial public offering (IPO) and listing.

While three start-ups have raised the required capital from crowdfunding, the CEO of the RSEBL Dorji Phuntsho said that the life cycle of this small businesses should not end here. “We want to see these companies go for an IPO and adapt to the corporate governance culture with great ease,” he said.

The digital platform makes it easy for investors to register on the online portal and make payment via mobile appications.

Internationally, crowdfunding works on mutual trust and there are limited accountability and regulations in place. Involvement of stock exchange is not even necessary. The RSEBL has however made it mandatory for the companies to form a board, conduct AGM, report on the performance and empower the board over strategic decisions.

“We want these companies to enjoy certain freedom but we also want minimum compliance as per laws to protect public investment,” he said.

Young entrepreneurs, according to the CEO has ideas supported by new technologies and innovations, unlike the adults whose thought process is based on technologies of the 1980s.

“What they don’t have is the face value,” he said, adding that this is one of the biggest challenges to raise funds.

For instance, when Dungsam Polymers floated its IPO, it was not only oversubscribed but also overvalued. Many frustrated shareholders today are grumbling because the company was not in a position to declare dividends even after eight long years. In short, people took the risk and there is a consolation simply because the company was backed by the government, indirectly. But when young entrepreneurs campaign for crowdfunding, which requires minimum investment, people are not attracted. Lack of trust and confidence on  new and young faces, according to the promoters is the biggest challenge.

The RSEBL has charted a cycle of its initiative. The Bhutan Crowdfunding will support the start-ups to upscale their production or diversify their products. These companies will definitely need more capital as they grow and RSEBL has already put in place an alternative financing model, which is the SME board.

The SME’s can then trade their shares and derive their market value besides raising capital. At this stage, Dorji Phunthso said that most investor would be institutional investors. Gradually these companies will make headway to go for IPO, which is required to boost investment avenues in the capital market.

However, one major problem that is obstructing the evolution of the private sector and small businesses to incorporate under the comapnies Act is the fiery and heavily-regulated corporate governance code.

This said, the RSEBL, through the crowdfunding and its partnership agreement is imposing minimum compliance to the Companies Act. As these companies evolve, the CEO said that adapting to corporate governance would be an easy task. “Doing so would also teach our young entrepreneurs the business morale-accountability and responsibility, which would drive efficiency,” he said.

Crowdfunding portal is dear to the smallest stock exchange in the world to encourage more listing on the main capital market. “We don’t find much interest from the private sectors coming for IPO. So we have to create an opportunity for growing enterprises,” the CEO said.

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