Fintech Association of Malaysia(FAOM)

Growing Steady

Funding

Growing Steady

Funding

Growing SteadyFunding

Angel Investors

Angel investors or also known as private investors are also a popular form of financing option for young businesses and small startups. Most of the angel investors are high-net-worth individuals or even family and friends who have excess funds available and are looking for investment opportunities with a higher rate of return as compared to traditional investment instruments.

Angel investors usually provide more favorable terms compared to VC as they usually use their own money and are also focused on helping startups in taking their first steps. In exchange for funding, an angel investor would typically request up to 10% of the company’s equity.

Business Accelerator

Business Accelerators is a fixed term (3-4 months), cohort-based programme which not only offers funding, technical resources and shared office spaces to the company but also mentoring opportunities by industry experts and networking opportunities between different startups in the same cohort.

Companies that have moved beyond the early stages and are able to stand on their own two feet may consider entering a business accelerator programme for more guidance and peer support. In exchange for funding in the Business Accelerator programme, a certain portion (5-10%) of the company’s equity is to be transferred to the investor.

Equity Crowdfunding

Equity Crowdfunding (ECF) is now quite a go-to financing method for many startups and young companies in Malaysia as the funds are raised through small amounts of capital from a huge crowd of individual investors on an online platform. In exchange for the funds, the company may offer different forms of securities to the individuals such as common stock, debt, revenue share, warrants and many more.

One main benefit of ECF is that companies have total control of the offering terms to the public instead of complying to demanding terms from VC.

Grants by Malaysian Government
There are also several grants provided by the Malaysian Government in supporting impactful new startups and young businesses. Grants are a form of financial award given by the government or governmental agencies for a company that aims to benefit the community and it is not required to be paid back. However, a grant does not include any additional form of technical assistance or financial assistance such as loan guarantee, interest rate subsidy or revenue sharing.
Peer-to-peer Lending

Peer-to-peer Lending (P2P) is an online loan platform and a popular financing method for startups and young businesses as many new startups and young businesses lack the requirement to obtain loans from banks for the amount they need to grow their business. P2P is similar to a conventional loan where in exchange of funding, interest payments are needed to be made but no collateral is required in a P2P loan.

The source of funds for P2P comes from individual investors that are registered on the online platform. There are many benefits to P2P such as easy application, fast loan approval and better interest rates than conventional loans.

Venture Capital / Private Equity

Venture Capital (VC) and Private Equity (PE) is a form of financing that is provided to non-publicly listed companies and businesses that shows huge prospects for long-term growth. In exchange for funding, large chunks of the company’s shares will be transferred to the VC and PE. The most common sources of funds from VC and PE are from high profile investors, investment banks and as well as other financial institutions.

VC tends to focus their portfolios on startups and new businesses whereas PE prefers funding mature companies that are more established. In terms of equity purchasing, VC typically only acquires up to 50% of the company whereas PE usually acquires up to 100% of the company.

Venture Debt / Conventional Loans

Venture Debt (VD) is a form of debt financing that is usually used by young businesses and startups after successfully completing several rounds of VC fundraisings. The main benefit of this financing method is to prevent further dilution of the existing company’s equities to other parties. VD is different from conventional loans as it does not require collaterals and the repayment schedules are relatively short (3-4 years).

The principal amount to be loaned is typically 30% of the last round of VC fundraising. In exchange for VD, interest payments are needed on the loans and warrants of the company’s common equity are to be issued to the lender.

It is advisable for you to approach a reliable company secretarial firm to assist you.