19 February 2016 12:00 am
Pic by Waruna Wanniarachchi
By Chandeepa Wettasinghe
CrowdIsland, a crowdfunding platform to support local start ups, was launched yesterday by a consortium of local investors, coincidentally planting seeds to remove the shareholder limit in private limited companies.
“Financing is a challenge in the local start up ecosystem. We hope that with CrowdIsland, we can contribute towards the infrastructure of the start up ecosystem,” SA Group Director Jeevan Gnanam, who is one of the co-founders, said.
He noted that a gap currently exists in funding local start ups, since formal banking and finance channels are averse to supporting nascent businesses.
Crowd funding became a worldwide trend following the successes of the Kickstarter platform in the United States.
The principal of crowdfunding is for a large number of individuals to contribute smaller amounts of funds towards small and medium scale enterprises, typically through an online platform in the
modern context.
While some crowdfunding platforms operate on debt-funding, CrowdIsland will facilitate an equity funding process, with the funders becoming shareholders of the start ups.
However, since the local legislation limits private limited companies from having more than 50 shareholders, Gnanam said that the regulations may need amending for crowdfunding to be truly successful.
“I will take this up personally, and also inform my fellow policymakers,” Foreign Affairs Deputy Minister Dr. Harsha de Silva, who was the Chief Guest, said of a possibility to remove the limitation.
Gnanam said that many local regulations limit the potential of crowdfunding.
Stanford Graduate School of Business Lecturer Amy Wilkinson said that despite the instant success of Kickstarter, the White House only recognized online crowdfunding and introduced regulations further facilitating such platforms in 2011.
“Entrepreneurs are usually ahead, and the regulations follow later,” she said.
York Street Partner Director Sujendra Mather, whose company co-founded CrowdIsland, said that the business model the platform will follow is to retain 5-6 percent of the attracted funds as a fee.
MAS Innovations Chief Growth Officer Nathan Sivagananathan has pledged a large sum of money for investments in CrowdIsland, while Dr. de Silva said that he too will be investing on the most promising start up.
The knowledge and expertise of the co-founders, especially related to the start up culture, is expected to contribute towards the success of start ups incubated through CrowdIsland.