There are many excellent opportunities for astute entrepreneurs and investors in Asia. However, access to capital is a key requirement for many projects and the primary question for many entrepreneurs in Asia is where to find it.
There are no shortage of projects of high potential in Asia from Dubai through to Shanghai. Whether it is real estate, a small or medium business or a major project venture, most need capital to develop the business to its full potential.
Whilst many Asian economies have high savings rates, such as China and Taiwan for example the movement of this savings into private investment is not as efficient as one may have thought. Many investors in Asia choose to put their savings into securities and the stock market or as cash. Private investors are not well organized compared to many developed markets. Japan and Korea may be the exception, but in general it can be quite difficult to for people to find a private investor. In a recent poll undertaken by Asia Business Investor on of the subject of raising capital in Asia, 72% of surveyed entrepreneurs said that that the capital raising process was difficult.
In Europe and the United States the capital raising process is more institutionalized. There are associations and networks well established where high net worth investors can view potential investment projects much more easily. The situation in Asia is the reverse, in the same poll, 85% of those private investors surveyed stated that finding potential investment projects was difficult. Hence, one could argue that the challenge in Asia is simply connecting those seeking investment with those looking to invest.
Informal networks tend to be the dominant form of capital raising especially for social and business networks where it is often just a matter of who you know. This is a very popular route in both the Middle East and certainly in much of East Asia for finding investors. This works well except the challenge for any person involved in capital raising is to maximize the number of potential investors to improve the chances of having a deal struck. In many instances, there are only a handful of known investors and they tend to be receiving a lot of investment proposals from their own network, so they many not necessarily be willing to invest. So, in effect
Nevertheless, there are a few organizations emerging specifically for angel investors and venture capitalists in Asia. These include Business Angel Network (South East Asia) in Singapore, Angels Shanghai and Arab Business Angels Network (ABAN) in Dubai. This should mature in the next few years and the region continues its rapid development.
One key issue with these is that they tend to have a strong technology focus and have much less the traditional businesses. This may be great for technology companies but most investment projects in Asia do not involve high technology start-ups, instead they are the traditional investments such as a hotel, a factory or an agricultural project.
The other option is to work with capital raising specialist firm to assist with the process. This typically involves amounts over US$10 million there are established capital raising private equity companies to handle this level in Asia. There are benefits for that approach as these firms do have access to investment capital, however at the same time many will not be interested in working on smaller deals less than US$10 million and there are normally significant costs incurred prior to any investment being successfully raised.
At this stage it should be noted that we have not included banks, the main reason is that in Asia as with many other locations they are not typically a source of investor capital. They work more in the field of working capital once the business is usually up and running, so they are not an option likely to be a major source of investor capital.
Magazine and newspaper advertising is another route used and does produce results, generally magazines more so that newspapers. The issue being that a magazine advertisement will run for a month whereas a newspaper ad generally tends not to be running each day due to the expense and secondly, the ad generally appears next to the wrong types of category. An investor is not going to be looking seriously at investing in a newspaper next to the motorbike for sale section.
The Internet is changing the landscape of raising capital by improving the communication process between investors and those seeking investment. The two main ways are social networking sites and specialist web sites which provide an investor matchmaking service.
Firstly, Social networking sites are a fairly recent phenomenon and they include more of the professional based ones such as LinkedIn, Ecademy, Plaxo and Xing to name a few. The professional connections involved do permit individuals to connect with others and this does on occasion result in a number of successful capital raising opportunities. It would be difficult to know how social network sites are but they have been known to produce results.
The most significant area rapidly developing are specialist websites that feature investment opportunities for investors. They provide a means whereby investors can choose from dozens of potential projects and those seeking an investor can find one. An on-line marketplace, in the truest sense where people find opportunities in a convenient location that is accessible 24/7. They can provide a great way of matchmaking investors to those seeking investment.
Asia has terrific opportunities at present and the chances of success are significant improved with the right attitude to finding investors. The road to raising capital requires a degree of flexibility in approach and the best option may be to ensure that the traditional methods be used alongside the more technologically advanced ones.
This article was submitted by Nicholas Cameron, Director of Singapore based Asia Business Investor.
Asia Business Investor connects investors to investment seekers in Asia with a web site featuring investment opportunities to investors. From Dubai, through to Hong Kong Shanghai and Singapore, covering the region with a focus on investment in Asia.
http://www.asiabusinessinvestor.com/Angel/AngelInvestor.aspx