Crowdfunding has emerged as a popular funding vehicle for startups in South Korea with the amount of funding raised from the general public via equity crowdfunding last year surging 60 percent year over year.
According to the Financial Services Commission (FSC) on Wednesday, startup businesses raised 27.8 billion won ($26 million) through equity crowdfunding last year, up 59.7 percent from the previous year. The number of companies that successfully attracted crowd-sourced funding reached 183, up 59.1 percent on year, while the number of retail investors participating in crowdfunding soared 173.3 percent to 15,283.
Equity crowdfunding is a mechanism that allows individual investors to fund startups in exchange for a stake in the company. It was introduced in Korea when regulators approved the platform in January 2016.
Data showed that the number of retail investors engaged in crowdfunding more than five times last year amounted to 551, with some having invested as many as 28 times. Among companies that successfully secured crowd equity, 52 raised a combined 36.1 billion won in subsequent funding and 113 were interested in participating in crowdfunding again.
Following the latest development, the FSC plans to tweak the current rules to establish crowdfunding as an effective financing option across all sectors from IT and manufacturing to cultural contents.
According to the plan, retail investment cap would be raised to 10 million won, with the investment ceiling doubled for experienced investors. The public offering limit would also be doubled to 2 billion won. More companies would benefit from tax breaks as the eligibility rules would be relaxed to include startups in their first seven years of operation. The scope of crowdfunding would also be broadened to include restaurant and beauty industries.
By Kim Tae-sung and Kim Hyo-jin
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