CROWDFUNDING site ShareIn is targeting a slice of the potentially huge Chinese market in the wake of new regulations aimed at encouraging more investors to back local start-ups.
The Edinburgh-based firm, which launched last year, is now working with consultancy BOP on a partnership to build the first equity crowdfunding platform for firms and investors in both China and the UK.
The move comes after the China Securities Regulatory Commission (CSRC) and Securities Association of China (SAC) published draft regulations to help small and medium-sized firms lower the cost of finance and tap into overseas investment through the Shanghai Free Trade Zone, which was launched in September 2013 as a pilot for economic and social reforms.
ShareIn co-founder and chief executive Jude Cook said: “This is fantastic news for crowdfunding and we believe it will really open up financial trade routes between the UK and China.
“The is perfectly timed for us to maximise on the huge market opportunity there.”
According to research from the World Bank, the Chinese crowdfunding market could be worth $50 billion (£33.3bn) within ten years, and there are already more than 30 sites operating in the country.
However, BOP associate director Conor Roche, who is based in Shanghai, said: “A lack of clarity and a fear of reprimands from what might have been considered illegal activity has stalled development of equity crowdfunding in China. That appears to be about to change.”
Unlike some crowdfunding sites such as Kickstarter, which offer backers “rewards” in return for their investments, platforms like ShareIn that have adopted the equity model to enable people to buy a share in the companies pitching for finance.
Among the firms currently using ShareIn is Parkure, an Edinburgh start-up that is seeking to raise £100,000 to fund its search for a cure to Parkinson’s disease, which affects an estimated 127,000 people in the UK and millions more worldwide. The company, led by chief executive Lysimachos Zografos, is testing drugs on fruit flies that have been genetically engineered to develop Parkinson’s.
Under China’s proposed rules, an equity crowdfunding platform would have to be a Chinese company or partnership with a local firm, have net assets of about £500,000 and register with the SAC. It must carry out due diligence on investors and the companies seeking finance.
Investors would have to invest at least £100,000 in a single project to be able to participate.
Cook, pictured below,who hopes to have a Chinese platform up and running by the end of the year, said: “The draft regulations indicate that the government intends to establish an accredited investor model of equity crowdfunding similar to that found in the US.
“It’s not quite the ‘crowd’, but allowing the growing middle and wealthy classes to invest is certainly a step forward.”
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