Talino Venture Labs, a US-registered venture studio for financial services startups, is leveraging equity crowdfunding for working capital generation. Equity crowdfunding is a capital fundraising strategy that allows anyone to own a stake in a company with a minimum investment.
“I believe that equity crowdfunding or ‘early public offering’ is a great opportunity for Filipino startups to raise money, and for investors to make small investments in innovative ideas,” said Winston Damarillo, the Filipino-American founder and chief executive officer of Talino Venture Labs, in an e-mail to BusinessWorld. “A formal filing for small capital raise provides a degree of safety for small investors supporting early-stage entrepreneurs.”
Equity crowdfunding — also known as regulation crowdfunding (Reg CF) — he added, will allow casual investors to invest small amounts in promising companies that are going after game-changing innovation.
“What I appreciate [about Reg CF], both as an investor and entrepreneur, are the extensive legal requirements and overall transparency companies must provide, such as financial disclosures.”
Talino Ventures raised over $270,000 of its $1 million target through Wefunder Portal LLC, a crowdfunding platform. Early investors include friends, startup co-founders, graduate school students, and retired healthcare professionals.
Talino Venture Labs’s lead investor for its Wefunder campaign is venture capital firm Wavemaker Labs Asia, Inc., which has invested $100,000. The minimum investment in the said crowdfunding platform is $100.
The key difference between crowdfunding and equity crowdfunding is what is being sold, according to a Dec. 2018 article in Forbes. In the former, entrepreneurs raise capital through the presale of their product, with the contract between them and their investors ending as soon as the product is received by their investors. In the latter, companies sell securities in forms such as revenue shares or equity.
Equity crowdfunding is still in its nascent stages in the Philippines, Mr. Damarillo told BusinessWorld. “There’s a lot more work to be done on the side of regulators and platforms to make equity crowdfunding accessible to individual retail investors,” he added. “I am hoping that the US momentum becomes global and that the Philippines will catch up soon, to make this opportunity available to Filipino businesses and investors alike.”
His venture studio’s Reg CF investors are a heterogenous lot, noted Mr. Damarillo.
“The demographics are mixed,” he shared. “Some are young and just starting out in their careers; some are retired healthcare professionals and are looking forward to enjoying the fruits of their labor. Some are newlyweds and new parents starting a new chapter of their lives. Some are Titos and Titas who are excited to have fintech in their portfolio.”
In the US, Reg CF was made possible through the Jumpstart Our Business Startups (JOBS) Act. Signed into law on April 5, 2012, by then-President Barack Hussein Obama, JOBS was a means to address the decline of small business activity in the aftermath of the 2008 financial crisis. The maximum aggregate amount for US-registered companies raising funds through Reg CF in a 12-month period is $5 million. — Patricia B. Mirasol