Crowd-funding started 15 years ago, when fans of the British rock band Marillion donated $60,000 on the Internet to finance the group's concert tour of the United States.

Kickstarter, founded in 2009 in the US, is a leading crowd-funding platform. Kickstarter has launched 45,000 projects, involving 4.5 million investors and raised more than $700 million. In the past year, crowd-funding platforms such as Indiegogo, Crowdfunder, and Pozible have mushroomed in the US, the United Kingdom and Australia.

Not all crowd-funding projects are successful. That's the risk for small investors. The University of Pennsylvania analyzed 48,000 crowd-funding projects. Only 25 percent were completed within the specified timeframe.

Approximately 600 crowd-funding platforms worldwide, are expected to raise $5.1 billion in 2013, representing an increase of 81 percent over the $2.7 billion raised last year, according to the Los Angeles-based crowd-funding research firm Massolution. In 2009, crowd-funding raised just $530 million.

Of the $2.7 billion raised in 2012 from crowd-funding sites, more than half, $1.6 billion, came from sites based in North America and another $950 million, from Europe, the Massolution report says. Crowd-funding platforms in Asia contributed only $33 million, accounting for little more than 1 percent of the total raised, according to the study.

In Asia, crowd-funding experiences relatively less popularity due to the specific business culture in the region. The reliance on guanxi business culture in Asia makes corporations less willing to raise funds just through online platforms.

The lack of a well-defined regulatory regime in the Asian crowd-funding industry also explains the retarded development of the industry in the region.

Crowd regulations

Colony 88's Co-founder Jono Lilley believes financial regulatory authorities in the Asian nations "should develop clear, secure and effective industry-wide regulation sooner rather than later to regulate the equity crowd-funding industry. Currently there is no specific legislation in Asia that explicitly regulates the parameters of equity crowd-funding."

Compared to Asia, the US Congress passed the Jumpstart Our Business Startups Act in April last year, allowing crowd-funding platforms to obtain licenses from the US Securities and Exchange Commission. Small firms can conduct equity crowd-funding and sell the company stake to raise funds, through the licensed crowd-funding platforms. The Act also strengthens control over crowd-funding to protect amateur investors.

(HK Edition 08/30/2013 page5)