Crowdfunding in Singapore: Platforms and regulations for entrepreneurs and creators looking to raise money for their projects
They say an idea without a plan is just a wish. It's true: having one decreases the likelihood of getting lost along the way. The thing is — and we all know this — putting a plan into action is easier said than done, because, more often than not, you need good old money to make sh*t happen. Unless you have an enviable amount sitting pretty in the bank waiting to be invested (in which case, we are so proud of you), you'll need to raise funds to bring your dream to life.
Now, there are several ways you can ask strangers for money. You can apply for a bank loan, seek out angel investors, or join a startup incubator. Or you can turn to crowdfunding, which is to get small amounts of monetary contributions from a large number of people. But, before we list the best platforms you can get on for some (or a lot of) seed capital, there are a few things to know about crowdfunding in Singapore, especially if you're new to the game.
Most of the international sites though, including big ones like Kickstarter and Indiegogo, are not regulated in Singapore. That's because MAS regulations aren't applicable to donation-based (donors don't expect anything in return) and rewards-based crowdfunding (financial backers provide funding to individuals, projects or companies in exchange for products or services). Then there are lending-based and equity-based crowdfunding: the former, also known as peer-to-peer lending, involves a legal commitment from the recipient company to pay back the contribution with a pre-agreed interest, while the latter works like an IPO (Initial Public Offering) — but within the private sector, where investors receive equity shares of a company.
Do you have to pay taxes for crowdfunded money? Yes, only if it's through a rewards-based scheme, as funds are collected for goods and services. Lending-based, equity-based and donation-based crowdfunding are generally not taxable.
The Internet is chock-full of crowdfunding sites with different purposes and mechanics, and, buyers beware, scams and fraud abound. So whether you're giving away or soliciting money, do your homework, read the fine print, and know what you're getting yourself into.
The king of rewards-based crowdfunding amasses more than 20 million unique visitors and has launched almost half a million projects — everything from film and games to design and technology. Funding on Kickstarter is all-or-nothing, meaning backers won't be charged until the campaign reaches its goal. If your project is successfully funded on the platform, it applies a 5% fee to the total amount raised.
Kickstarter's biggest rival has more categories, does not have an application process (unlike Kickstarter), so anyone can start a campaign without needing to get it approved. Indiegogo also offers flexible funding, which allows you to keep any money you raise even if the goal isn't met — though you're also charged higher fees with this option.
Instead of backing one-off campaigns, supporters on Patreon pay artists and creators for their work through established perks and tiers, on a recurring basis. In other words, you're not funding the product, but the brains behind it. The membership platform charges a commission of 5 to 12% of creators' monthly income, on top of payment processing fees.
If you're a new-ish startup looking at lending and equity crowdfunding, this local MAS-licensed platform can help you hit your financial objectives. That said, there are criteria involved: your company needs to be incorporated in Singapore, has a minimum of one local founder, a minimum paid-up capital of S$50,000, and been operating for more than three months.
Need financial support for your own personal passions and needs? This social fundraising platform could be your answer. Its biggest categories are medical, memorial, emergency, charity, education and animals, but it doesn't discriminate what you're raising money for. Take note of payment processing fees plus USD$0.30 for every donation.
Another platform that is great for charity causes is GIVE Asia, which counts more than 13,000 campaigns and $46 million raised to date. You can also utilise the free-to-use platform (though payment processing fees apply) to market and get additional support for your offline fundraising event.