Inside Startups - December 2015

Bernard Chan

DEC

Inside Startups - Turning setbacks into opportunities – interview with Bernard Chan - China: ‘unicorns’ risk becoming tomorrow’s ‘unicorpses’ - Trends: real estate crowdfunding booms in Asia www.educationpost.com.hk/is-dec15

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CONTENTS High flyer

4

Turning setbacks into opportunities - interview with Bernard Chan GINN FUNG

In the news

8

Arist-ed development: Controversial Kickstarter project slammed for empty promises, failed delivery ALICE WOODHOUSE

Inside China

16

Today’s ‘unicorns’ risk becoming tomorrow’s ‘unicorpses’ REUTERS IN BEIJING

Inside Startups is published by Education Post, South China Morning Post Publishers Ltd. All rights reserved.

ISBN:9﹣789628﹣148516

Business

22

Tink Labs wants to bring its Handy smartphones to hotel rooms in Europe ALICE WOODHOUSE

Opinion

26

Government must do more to help start-ups in Hong Kong NISA LEUNG

Real Estate

28

Real estate crowdfunding booms in Asia despite regulatory uncertainties LANGI CHIANG

4

High flyer

Turning setbacks into opportunities interview with Bernard Chan Text: Ginn Fung

Photo: Steward Chan

During a varied career which has included high-profile stints as a banker, businessman, Legislative Councillor, and protector of Hong Kong’s heritage, Bernard Chan has proved to himself – and others – that a person’s choice of degree subject in no way limits their future career options.

Having graduated with a major in studio art from a leading US university, Chan was initially beset by doubt when he went into business. Sitting in meetings with colleagues or clients who had formal qualifications in economics, finance, marketing or management, plus years of experience, he used to worry about what he didn’t know and what traps might lie in wait.

In time, though, he came to realise that this difference in background could also be turned to his advantage. Firstly, he simply recognised that everyone has certain strengths and weaknesses.

And secondly, he saw that his own training in a creative discipline allowed him to offer new ideas and perspectives where others had a tendency to resort to the usual formulas and strategies.

6

High flyer

“There is no doubt my skills are more on the creative side,” says Chan, who admits to being not really a details or numbers person.

“I’m a fast learner, good at looking for new angles and building relationships. Over the years, I have also learned that it is important to stay positive, even when things aren’t going your way.”

That lesson effectively began during Chan’s first year at university.

Like many contemporaries, he had chosen to study economics, but ill health unfortunately intervened. Forced to spend lengthy periods recuperating back home in Hong Kong, and with family in Thailand, he found it was still possible to gain credits for independent off-campus study of the arts.

“I did that for three years, in between hospital visits and recovery, and really enjoyed it,” Chan says. “I ended up switching from economics to studio art and, towards the end of the course, had to present my work in a gallery. In other circumstances, I would never have done something like this, but it was an accidental opportunity, and meant I was lucky enough to finish college just one year behind the usual four.”

Ever since, that training has come in more than handy. In business circles, it has helped Chan win a reputation for well-structured, yet “out of the box” thinking. When elected to Legco in 1998 he was asked – as the best-qualified person – to oversee the selection of a suitable logo, which turned out to be as much about the art of politics and compromise as about design, colour and composition.

And when the government needed someone to spearhead heritage conservation and the revitalisation of historic buildings, they saw him as the person with the breadth of talent and outlook to do the job well.

“These days, I’m basically in business, but people know I also have that artistic side,” Chan says. “I am not a natural-born artist, but the training, which originated from a not-so-good experience, taught me about overcoming setbacks, making the best of my life, and accepting who I am. I found that once you can do that, everything

IT IS IMPORTANT TO STAY POSITIVE, EVEN WHEN THINGS AREN’T GOING YOUR WAY

Photo: Steward Chan

looks better because you learn to turn bad situations around and make things work in your favour.”

Although it was not easy, that philosophy even helped Chan find a silver lining after a period of significant business difficulties in the early 2000s. The problems ultimately led to selling the bank in which he had an interest, in 2006. Not surprisingly, there were heightened emotions at the time, but when the repercussions of the global financial crisis hit a couple of years later, it was possible to see what had happened in a very different light.

“That experience taught me that if you can ride out the storm, better things will come of it,” Chan says. “So, nowadays, whenever I talk to young people, my message is to be positive at all times. You should be ready to make the best of every situation and realise that some setbacks can end up being a blessing in disguise.”

8

In the news

Arist-ed development: Controversial Kickstarter project slammed for empty promises, failed delivery Text: Alice Woodhouse

Photo: Nbition

A Hong Kong start-up that has been hailed by the government as a shining example of innovation and raised nearly US$1 million on Kickstarter for its smart coffee machine is now embroiled in controversy amid repeated product delays and an accusation of copyright infringement.

Nbition Development, which won the Best ICT Start-up Grand Award, part of the government-backed Hong Kong ICT Awards in April, attracted HK$6.5 million (US$840,000) at the end of 2014 to produce its Arist coffee machine.

The product is operated by a dedicated app and promises high-quality, barista-grade coffee.

Yet several missed shipping deadlines and accusations by a Danish coffee machine company that the start-up copied its app design have tarred the project, leaving some backers demanding answers and refunds from founding brothers Nelson and Benson Chiu.

The Chius registered Nbition Development in July 2013 to develop mobile-based software including a coffee-ordering app called Garffee.

That app was later featured by Hong Kong’s financial secretary John Tsang Chun-wah in his 2015 budget speech as an example of the city’s growing start-up ecosystem. Garffee has not yet been commercially released.

10

In the news

Nbition is also one of a number of “incubatees” at the Hong Kong Science and Technology Park, which it originally entered as a software start-up. It later shifted over to join the park’s hardware incubation programme.

It receives a 50 per cent reduction in office rental from the park.

Yet trouble is brewing for the company, and a number of backers have lodged complaints with local police amid fears they will lose their investments if the project is not completed. Many have demanded refunds.

Moreover, some people who attended the company’s launch party claim they were asked by the founders to back the Kickstarter campaign by making credit card pledges.

This was based on the understanding, they maintain, that the Chius would covertly reimburse them with the same cash amount later an alleged ploy to drum up fake support for the campaign to make it look more successful and encourage more backers to sign up.

Such questions and allegations have spurred concern that the Hong Kong government may not be conducting enough due diligence and oversight of start-ups - especially those it officially or tacitly lends its support to - thus leaving investors at risk.

One complaint is that Nbition won the ICT award earlier this year without even having to demonstrate the Arist machine to judges,

The Nbition app for the coffee machine - but not the hardware itself - was featured by Hong Kong’s financial secretary John Tsang Chun-wah (centre) in his 2015 budget speech as an example of the city’s growing start-up ecosystem.

Here he is pictured with the Chiu brothers.

Photo: SCMP Pictures

but organisers of the awards said this was normal operating procedure and in line with similar international competitions.

To qualify for the awards, Nbition provided shipping receipts from July to September 2014 showing that 1,000 customers had received the first-generation Arist machine, the organisers added.

Hong Kong technology lawmaker Charles Mok, who was following the development of Arist, later wrote to the government’s chief information officer seeking details on how the awards were evaluated.

“Providing incubation schemes and funding to start-ups is one of the methods to help foster a start-up ecosystem,” he said in an email to the Post. “[But] integrity, transparency and accountability in the process is very important,” he added.

After coming under fire in May for missing deadlines and not providing regular updates to Kickstarter backers, Nbition is taking flak again for missing another shipping schedule in October. This has raised hackles among backers and triggered more refund demands.

The Chius said in an announcement to crowdfunding backers in October that they had secured series A funding worth US$3 million from an unnamed venture capital firm. They also said they had received requests for refunds from 98 people, or 5 per cent of backers.

Another statement from the company that same month laid out a manufacturing timeline, but did not give a fixed date for when customers would have their orders filled.

Raymond Stone, one of the backers who is trying to get his money back, said the company initially seemed keen to negotiate but later proved unresponsive.

“When Benson offered a partial refund, I was willing to accept a refund minus any associated fees,” he said.

“But no response was ever given to me through the Kickstarter campaign, or through the email which they requested that we [contact].”

12

In the news

He said the company demonstrated a version of the machine one year ago that it claimed was almost ready for production, but that a more recent demonstration had caused many to lose confidence in the project.

“The machine [was] unable to brew hot liquid. It was leaking water like a sieve - and what was left burned up after its first failed cup,” Stone said.

Nbition declined to be interviewed for this story and would not answer any questions by email.

Delays are not unusual for Kickstarter projects. A 2013 study by Ethan Mollick, assistant professor of management at The Wharton School of the University of Pennsylvania, found that 75 per cent of founders delivered products later than expected.

The Chius demonstrated an earlier version of the machine to a Post reporter in May. The machine brewed a hot espresso - but only after a few tweaks with a screwdriver and a pencil.

In recent months, some backers have raised concerns about a number of alleged irregularities in the crowdfunding campaign.

The claims about the on-the-spot cash refunds to paint a false picture of the project’s popularity would, if proven true, represent a breach of Kickstarter’s rules and policy.

Those making the allegations said they used their credit cards to pledge US$300 – the retail cost of one machine – at a party in October 2014, and were immediately granted cash refunds.

“There was a laptop at the door and people were lining up to pay for an Arist and then get paid back instantly,” said Kadence Fok, who attended the party in Hong Kong.

“Benson was asking people to pay for it online and [saying] they will give those people the money back in cash or some other form.”

Under Kickstarter rules, creators are not permitted to financially back their own projects or allow any “misrepresentation of support by self-pledging”.

After enjoying success on the same platform, Nbition now offers a crowdfunding consulting service. Its fee is set at 30 per cent of the total funds raised.

Nbition’s Kickstarter campaign almost didn’t make it out of the starting grid. The brakes were applied by administrators after a coffee machine maker in Denmark accused Arist of copying its existing coffee-ordering app.

“We made a copyright infringement claim, which protested that Arist had 100 per cent copied our app design and user experience or app flow,” said Frederik Vibe-Petersen, business development manager for Scanomat.

His US$8,000 TopBrewer machine also makes drinks ordered through an app.

“In the end, they changed the design slightly,” he added.

Some backers claim co-founder Benson Chiu (pictured) handed out cash refunds to backers at a party in Hong Kong in October in a bid to make the project appear more popular, which would be a violation of Kickstarter rules.

Photo: SCMP Pictures

14

In the news

Nelson Chiu contacted Scanomat twice in 2014 - in March and May - and identified himself as a representative of Nbition’s sister company ToSavour, according to Vibe-Petersen.

Chiu proposed becoming TopBrewer’s distributor in Hong Kong and China, Vibe-Petersen said, adding that he was unaware the two companies were linked until he was informed by the Post.

Some Kickstarter backers have questioned the claims made by Nbition about the machine’s capabilities and expected delivery date; others have expressed cynicism as to whether the Chius have registered the correct patents as they claimed.

An update from Nbition in August said it had applied for patents in China, as this was where the machines were being manufactured.

However, the application number provided was found to contain 13 digits instead of the usual 12.

Despite assurances from the company that the patent number was correct and would be searchable in the coming months, it had not appeared on the website of China’s State Intellectual Property Office as of the first week of November 2015.

Nbition claims it shipped 1,000 coffee machines to barista testers over the summer of 2014. But two people who left the company in

A screen shot of the website aristscam.com, a focal point for complaints about the Kickstarter project.

Photo: SCMP Pictures

spring 2014 said that when they resigned the focus was very much on the Garffee app and another app for the popular Chinese game mahjong.

Speaking on condition of anonymity, they said they were not aware of any plans by the company to actually develop a coffee machine.

At that time, Nbition only had a handful of staff, they said, making it unlikely they would not have heard of such plans.

Others have questioned how the company was able to attract so many testers without launching an affiliated marketing or social media campaign. Nbition only set up Facebook and Twitter accounts in September, but registered a website dedicated to the product back in August 2014.

Meanwhile, the global industry standard to develop smart hardware is 18-24 months, according to industry insiders. But Nbition promised to bring the product to market within a year.

To give an indication of how difficult and time-consuming this process usually is, the Danish coffee machine was in development for four years and was designed by a company with production experience in this industry, according to Vibe-Petersen.

Frederik Vibe-Petersen, business development manager for Scanomat, which makes a similar smart coffee machine, said Benson Chiu contacted him and proposed becoming TopBrewer’s distributor in Hong Kong and China.

Photo: LinkedIn

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Inside China

Today’s ‘unicorns’ risk becoming tomorrow’s ‘unicorpses’ Text: Reuters in Beijing

A delivery man stops in front of the Beijing offices of Shequ001, a startup company delivering supermarket goods booked via smartphone.

Photo: Reuters

The Beijing offices of Shequ001, a start-up delivering supermarket goods booked via smartphone, stand almost deserted. Leaflets lie scattered on the floor.

Nearly 400 former employees, of a workforce that in March topped 2,000, have joined a social network clamouring to get their unpaid wages. Zhang, who gave only his family name, is one of fewer than three dozen workers left at a company that last year was worth 2 billion yuan (US$312 million).

“We just wanted to build the market, so we burned through our money,” he said, adding he hasn’t seen the firm’s CEO since March.

In China’s hottest tech sector, hundreds of “online to offline” (O2O) start-ups like Shequ001, which draw mobile users to local physical stores and services, have failed as skyrocketing valuations

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Inside China

deter investors and put the brakes on fresh funding. Many more are expected to fall by the wayside, or be driven into mergers in what executives and investors say is a market bubble.

Lured by a potential 10 trillion yuan (US$1.57 trillion) market for app-based, on-demand, logistics-heavy businesses, venture capitalists and others piled in, throwing billions of dollars at firms that often need only cash and a working app to enter the fray.

China now boasts 21 “unicorns” - private start-ups valued at over US$1 billion - says CB Insights. But now, those inflated valuations for companies that rarely make any money - are proving too much for investors and new funding is drying up.

Investors who helped fund the O2O sector now warn of a bubble, fuelled in part by backers’ own willingness to keep handing over cash. Having spent billions on their chosen champions, some are unwilling to admit defeat, signalling a war of attrition in the hope of backing the next Facebook or Alibaba.

“The number of ‘unicorpses’ will soon begin to catch up with the number of unicorns,” said Gary Rieschel, Shanghai-based founder and managing director of Qiming Venture Partners.

O2O has found particular traction in China through a combination of widespread smartphone use, a booming mobile payment sector and cheap migrant labour.

Entrepreneurs developing O2O apps - for firms offering anything from ride hailing and food delivery to group discounts at shops, restaurants and cinemas - have had easy access to money from technology giants Baidu, Alibaba and Tencent, as well as from venture capitalists, private equity, sovereign wealth funds and stateowned enterprises.

Start-ups backed by venture capital raised US$9.6 billion in July-September alone, four times the level of a year earlier, according to a KPMG and CB Insights report.

“The whole O2O concept is getting too expensive,” said Han Weiwen, head of Bain & Co’s private equity practice in China.

“The valuation is very, very high. There’s no traditional way to look at the valuation ... because they don’t have revenue.”

“THE NUMBER OF ‘UNICORPSES’ WILL SOON BEGIN TO CATCH UP WITH THE NUMBER OF UNICORNS” - GARY RIESCHEL, QIMING VENTURE PARTNERS

ARMS RACE Driven by China’s competitive ferocity, companies such as Didi Kuaidi, Uber, Meituan-Dianping, Nuomi and Ele.me battle each other across multiple sectors, often armed with seemingly endless cash from their big technology backers.

“It’s an arms race,” said Hurst Lin, co-founder and general partner of DCM Ventures.

The fierce competition and high spending drives start-ups back to their investors for frequent cash injections, pushing valuations higher.

But as the financing roller-coaster has slowed, many start-ups have struggled to afford the subsidised discounts they need to keep users. In O2O, user numbers, whether from inflated demand or not, are a key metric to attracting fresh investment.

“This kind of craziness can’t go on forever,” said Liu Jun, who heads Baidu’s efforts in O2O and sits on the board of Uber’s China unit.

“Enough is enough.”

China’s market-leading ride-hailing app Didi Kuaidi is waging a war of attrition in China and Asia with long-term rival Uber.

Photo: May Tse

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Inside China

IRRATIONAL MARKET “O2O is an irrational market,” said Liu Bo, formerly head of human resources at Koala Bus, an on-demand bus service acquired by ride-hailing firm Didi Kuaidi.

“There are too many subsidies. It’s becoming more expensive to get new customers.”

Some companies, like Didi Kuaidi, Uber and Ele.me, say they have either ended or are reducing subsidies - but that risks killing off demand, and that’s not just a Chinese phenomenon.

In July, Homejoy, a US start-up offering house cleaning services through mobile apps, folded, leaving some top-tier private equity backers out the US$35 million or so they had sunk into the company. With a minimum hourly rate of US$25, Homejoy offered an initial 2.5-hour house cleaning for just US$19, leading to too many one-time-only customers.

A spokesman for Didi Kuaidi, though, says it has matured from a growth-driven firm to one that can now focus on innovating and improving user experience for its platform of 250 million registered users, and some 10 million registered drivers.

CRAZY HOT TO INSANELY COLD The slowing pace of investment has left many start-ups unable to support themselves and struggling to find fresh funding.

“In the first half of the year, the market was crazy hot, but in the second half it’s been insanely cold,” Lei Jun, a high-profile investor and CEO of private smartphone maker Xiaomi, itself valued at US$46 billion, told a technology conference in October.

“There are some very depressed start-up founders.”

Some investors note that start-ups and their backers are happy to see valuations inflate.

One venture capitalist, who declined to be named, said: “My peers, most of them are saying: ‘Get big, get a lot of users and figure out how to monetise later, that’s for the later-stage guys’.”

“And the later-stage guys are saying: ‘You still don’t need to be profitable, that’s for the public investors, the mutual funds, or the mom and pops when they buy [the stock]. That’s for them to figure out’.”

For some start-ups, consolidation is the answer.

Didi Kuaidi and Meituan-Dianping were both formed after investors tired of the cost of companies - in each case with one side backed by Tencent and the other by Alibaba - competing against one another. Alibaba is looking to offload its Meituan-Dianping stake, not so much to cash in on lofty valuations but to focus on its own in-house contender, Koubei.

Investors will push their firms to consolidate until one company dominates, said Jixun Foo, managing partner at GGV Capital.

“The market will go through a phase of consolidation to figure out if, through that, they will ever make money.”

Baidu’s Liu Jun, DCM’s Lin and others say the O2O sector has the makings of the dotcom bubble that burst in 2000, and some expect investors to write down what could amount to big losses. “[When] raising capital gets harder, then you find out who’s naked, and who doesn’t really have a business model,” said Qiming’s Rieschel.

Xiaomi CEO Lei Jun introduces the company’s low-priced smart wristband in Beijing in this file photo.

Photo: Simon Song

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Business

Tink Labs wants to bring its Handy smartphones to hotel rooms in Europe Text: Alice Woodhouse

Hong Kong travel start-up Tink Labs, which provides smartphones to guests at hotels in the city, has plans to expand in Europe.

Launched in 2012, Tink Labs’ self-branded Handy devices were first rented to customers at Hong Kong International Airport to help them avoid expensive roaming charges.

But it later changed tack to target hotel guests. Handy is now available in 20,000 Hong Kong hotel rooms, where it serves as a neat little city guide among other features.

As well as offering free internet access and calls, Handy provides portable access to hotel services, such as the concierge, or details about the property’s restaurants and spas.

The company’s strategy saves tourists from expensive roaming charges while giving them instant access to a mobile city guide Photo: Shutterstock

“Even though a hotel is home base for travellers, you’re spending a very insignificant amount of time in the hotel,” Tink Labs’ chief executive officer Terence Kwok said.

“This essentially connects the hotel to you, being able to see all the services offered by the hotel anywhere you go.”

Data collected by Handy on the success rate of spa or restaurant offers made over the platform allows the hotels to better understand their guests, Kwok said.

A direct link to the property’s social media pages and TripAdvisor page have boosted engagement with guests, Kwok said, adding that average TripAdvisor scores for hotels increased by 0.31 points out of five after offering Handy with rooms.

26

Business

Handy devices are now available in three- to five -star hotels in Hong Kong, Singapore, Macau , Bangkok and Istanbul.

The smartphone is pre-loaded with travel guides written by an in-house editorial team as well as apps including Facebook and OpenRice. The average Handy user spends 113 minutes on the device each day and a third of users are business travellers.

Tink Labs’ chief technology officer Philip Yuen said the platform is now on its fifth generation, and that the latest search function has allowed the company to learn more about what users are craving in each city.

For Hong Kong, the new search tool prompted the team to add more suggestions about where to eat dim sum, the city’s favourite snack food.

In the past month, up to 200 new items of content have been published on Handy daily, an upgrade from weekly updates. Posts are scheduled to go up at the most appropriate time, for example brunch suggestions in the early- to mid -morning.

RECENTLY, TINK LABS ANNOUNCED IT HAD SECURED A US$13.5 MILLION INVESTMENT FROM FIH MOBILE, A SUBSIDIARY OF THE TAIWANBASED ASSEMBLY MANUFACTURER FOXCONN

TripAdvisor scores for hotels increased by 0.31 points out of five after offering Handy with rooms, Tink Labs claims.

Photo: SCMP Pictures

Recently, Tink Labs announced it had secured a US$13.5 million investment from FIH Mobile, a subsidiary of the Taiwan-based assembly manufacturer Foxconn. It said it will use this to expand in Singapore and major European cities.

Earlier investors include TCL Communication Technology Holdings, manufacturers of Alcatel Onetouch smartphones.

A limited pool of venture capital in Hong Kong pushed the company to find investment elsewhere, Kwok said.

“When we worked with TCL Alcatel, they’d never done any sort of investment deal. For Foxconn, this is their first ever Hong Kong investment. So it’s their first, it’s our first,” Kwok said.

Tink Labs is now working with FIH Mobile to develop customised devices designed for its software.

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Opinion

Government must do more to help startups in Hong Kong Text: Nisa Leung I refer to the report on the Secretary for Innovation and Technology’s nine-point plan (“New IT chief highlights reindustrialisation and smart production”, November 21).

It is encouraging to learn of the long-term vision for re-industrialisation and smart production. There may be too little vision in Hong Kong these days, but technologies are always about dreams and thinking big.

The Young Entrepreneur Development Council (YDC) has run a pan-university business plan competition for over 16 years with quite a few successful start-ups, but the quality of the start-ups in Hong Kong has lagged behind the likes of the mainland and the US. Through the years, groups of angel investors (people willing to invest in start-ups) approached YDC and asked why there were so few investible great ideas in Hong Kong. Things are about to change.

Part of the secretary’s plan should be to support start-ups. With the government’s added support, we will see faster progress. There are many private initiatives in the form of co-working spaces, incubators and accelerators. More importantly, underpinning all these activities is a privately initiated movement to get investment for start-ups.

Many active venture capitalists and angel investors are based in Hong Kong but invest primarily in the mainland. And a group of

Photo: Reuters

them formed the Venture Investors Alliance of Hong Kong to help nurture the growth of technology-based businesses in Hong Kong.

Members of the alliance have invested more than US$3.2 billion in start-ups on the mainland, Hong Kong and the US, spanning many sectors including internet, consumer, health care, IT and financial technologies. We provide a platform for young entrepreneurs in Hong Kong to get access to investor advice and funding and hope that, eventually, we will see successes with innovative companies originating from Hong Kong.

As we embark on this outreach, we find that the quality of the companies is improving and feel that, given the entrepreneurial spirit of Hong Kong people, there will be many exciting start-ups coming from this vibrant city. All they need is more understanding of the competitive environment on the mainland, and in the US and the rest of world, and potential partnership opportunities.

We are very willing to provide that, and hope more interested parties will join in, including the government. Together we will find good projects to invest in and nurture, for the good of Hong Kong and its emerging technology-based industries.

Nisa Leung is convener, Venture Investors Alliance of Hong Kong

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Real Estate

Real estate crowdfunding booms in Asia despite regulatory uncertainties In Asia, real estate crowdfunding is mostly about pre-sales and debts, instead of equity investment, as regulators have yet to pin down the details on how they would like to govern the fledging industry.

Mainland China had 128 crowdfunding online platforms as of the end of last year, including 32 for equity, according to a report by 01caijing, which provides broader online financial services, including data and research.

Although none of them are targeting only the real estate sector, many developers have been actively using such platforms to reach out to potential home buyers at a much earlier stage than before, as part of their efforts to reduce inventories.

Apart from that, crowdfunding can also help cut construction, marketing and sales costs while speeding up cash collection, said Shi Kancheng, chairman of Zhong An Real Estate.

Zhong An, like many other rivals, embraced the internet by testing crowdfunding in July when it put some units in a new project in Hangzhou up for sale online.

Text: Langi Chiang

“That enables us to find specified demand first and then make products,” he told the South China Morning Post.

Crowdfunding, which pools funds from a large number of investors via the internet, was acknowledged by Premier Li Keqiang last year and legalised in December. Then 10 different ministries issued a joint set of guidelines in July to define it as a public small equity investment via the internet to fund start-up firms. In August, the China Securities Regulatory Commission issued a notice to check crowdfunding activities in the country.

Despite regulatory uncertainties, many mainland developers including Dalian Wanda Group and Country Garden have been raising funds and selling homes through crowdfunding websites such as Zhongchou.com and e-commerce platform Taobao’s crowdfunding channel.

In Singapore, where it is not clear whether such investment activities should come under the oversight of the city state’s monetary authority, real estate crowdfunding operator CoAssets has been operating for more than two years and got listed in Australia’s junior stock market in July as it expands across the region.

“We have observed that developers, after using our site to crowdfund, found it very effective to reach out to the crowd to also sell some of their products,” CoAssets co-founder Getty Goh told a forum in Macau.

Goh described CoAssets as a website for developers to raise bridge loans or short-term working capital to a maximum amount of S$5 million per deal. “The hardest sum to raise is between the S$500,000 and S$2 million mark, because it is too big for friends and families to chip in, but too small to get banks interested in,” he said.

CoAssets has raised S$40 million through over 30 successful deals, in the form of debts. But Goh is moving into equity investment in Malaysia, where the local securities regulator approved six equity crowdfunding operators in June, ahead of many other Asian nations.

“There is a lot of demand for this kind of services here in Asia,” Goh said, when pointing out that the number of registered investors on CoAssets’ website has soared above 26,000.