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Business News/ Companies / People/  Getty Goh | Building a crowd of funders
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Getty Goh | Building a crowd of funders

Goh on why he set up crowdfunding platform CoAssets, hurdles in raising money, financing realty projects and transparency in the sector

Goh says wherever there is more land, there are alternatives to high rentals.Premium
Goh says wherever there is more land, there are alternatives to high rentals.

Singapore: On 17 August, Singapore-based crowdfunding platform CoAssets celebrated a landmark. The platform had helped Mountbatten Lights, a boutique cluster bungalow development, to raise S$500,000 in under a month from 40 crowdfunders.

Understandably, Getty Goh, fo-founder and chief executive of CoAssets, was elated. Prior to Mountbatten Lights, all its real estate crowdfunding projects had been for overseas developers. With its first local success, he felt the Singapore-based and Australia-listed firm had finally demonstrated it could also cater to funders with an eye on domestic projects.

“The response to Mountbatten Lights was better than we expected, despite the returns for the project being comparatively lower, at 6%; overseas projects generally offer returns above 10%. The returns for local real estate projects such as Mountbatten Lights are generally lower, but projects are more secure, which investors recognise. The positive response demonstrates that we have investors who are looking for security, rather than high returns," Goh explained.

Meanwhile, the initial investors on his platform have begun receiving returns. Lai Thai, a Thailand development, recently issued a second payout to its funders. A UK developer has started returning funders their principal investment after successfully completing its project.

CoAssets, launched in July 2013, crowdfunds for residential and commercial properties in Asia, Australia, the UK and the US. To date, projects on CoAssets have returned more than S$200,000. As the number of mature crowdfunding projects increases, it expects to achieve payouts and redemptions of more than S$700,000 this year.

“Mountbatten Lights is being developed by Chia Quee Khee, a retired lawyer-turned-private developer. He did not need to raise money through crowdsourcing, but was using this platform to understand if it could be an alternative source of funding for his other projects," Goh said. “He has actually gotten a bank loan for this project that is located in Singapore’s prime East Coast, and only a small part of this venture is therefore being funded through crowdfunding. We have a lot of developers coming in, dipping their toes in the water, raising $100k or $200k and just testing the market," Goh said.

Crowdfunding as a concept is still taking baby steps in South-East Asia. According to Goh, developers as well as investors who have signed on to his platform are still sizing up each other.

The concept of setting up a crowdfunding platform stemmed from the difficulties he encountered in raising capital when he took up a projects in Thailand.

Goh, who had studied building management and real estate nanagement, decided to build a career in the real estate when he left the Singapore armed forces, after serving for 10 years, in 2008.

His first venture involved setting up Ascendant Assets Pte Ltd, a boutique real estate research and property investment firm.

Ascendant, which also provides consultancy services to firms and individuals who want to invest in the property market, continues to be operational, although Goh is no longer involved in its day-to-day activities. In 2011, along with partners, Goh decided to take the plunge and become a developer, and set up MIGO Development, to undertake high-end residential as well as resort developments around South-East Asia.

Migo’s initial venture, a project under $3 million, in Krabi, Thailand, to build holiday homes turned a profit because of the appreciation of property prices. At the same time, he found most small developers around him in Thailand faced a problem: the reluctance of banks to fund small projects.

“I realised that there is money to be made lending funds to developers who needed between $1 million and $5 million in working capital. This space is too big for the small developers—and it is too small for the big developers, and it stuck me that you could make money by lending money. The business model is very similar to private equity (PE) funds, but PE is limited to accredited investors...we wanted to open it up for the man on the street, and that is how CoAssets was born," he said.

When setting up CoAssets, Goh roped in Seh Huan Kiat as both a co-founder and chief technical officer. Seh, who holds a doctoral degree from the Massachusetts Institute of Technology and a bachelors degree from Imperial College, London, was then with Intel Corp. in the US. Their interests converged over realty—Seh was also a real estate investor managing a multi-million-dollar investment portfolio.

Their crowdfunding start-up attracted seed funding from Singapore’s Expara Ventures, an early stage venture capital firm that also runs an incubation centre in the city-state. It also secured an investment from Jeffrey Chi, managing director of Vickers Venture Partners, among the largest venture capital firms in Singapore. Chi, who is also currently chairman of the Singapore Venture Capital and Private Equity Association, invested in CoAssets in his personal capacity.

The first major roadblock came when CoAssets tried to raise additional capital to expand operations last year. Despite posting revenue to the tune of S$700,000 in its first year, it failed to close the much needed funding round from VCs. “We wanted to raise $1 million, and met over 40 VCs. Crowdfunding is seen as being a very iffy space and not many were comfortable with funding a company in this sector," Goh explained.

Having exhausted all options, Goh and his team then decided to try crowdfunding.

“We told ourselves that since we are in this space, the best testimony for our business would be to crowdfund our funding requirements. We got private investors on board—we raised S$1 million from about 30 investors earlier this year, at a valuation of S$13 million. We felt this justified our venture. We could have sold some property that we owned, and raised S$1 million, but we then would not have been plugged into the start-up community here. We recognize that we need a business that needs a lot of endorsement—crowdfunding our own business was the very endorsement we needed," he added.

Last month, the company took its business to match-make mainstream property deals by listing on Australia’s junior market. By then, CoAssets had crowdfunded more than S$36 million for about 15 residential and commercial projects. Goh said the move to list the company on the National Stock Exchange of Australia (NSX) was primarily about winning credibility.

“Our financial accounts are audited twice – in Singapore as well as in Australia, by two separate auditors. By subjecting ourselves to rigorous third party assessments, it demonstrates that we conduct our business with a high level of transparency," he said.

“We thought that going in as a listed company offers us some advantages over some startups in this space, and at the very least, we win on consumer confidence, when compared to our competitors who are privately held. For a small firm, It is painful to come out with quarterly reports, but it is a necessary pain to show that what we do is transparent," he added.

Goh also explained that CoAssets was taking multiple steps to protect investors who come on board the platform. Using the illustration of Singapore, he pointed out that the company has a S$5 million cap on the amount of funds that could be raised to prevent frauds.

“We insist that you have to be a Singapore-incorporated company so that we check with the Accounting and Corporate regulatory Authority about the company, its history and whether it has had any bankruptcy issues in the past. We also insist on a local director, who must be prepared to give a personal guarantee that in an event that anything goes wrong, we have the legal recourse to take action against him. So far, we’ve had local directors who are willing to take the risk – we’ve set the bar high. If no one is willing to take the risk, the answer is clear – that company cannot be funded," he added.

Edited excerpts from an interview:

Why did you choose to list in Australia. Also, startups in this region are all headed to markets like Australia, Hong King and others to list. How can Singapore retain local companies and get them to list here?

The fact of the matter why we did not even bother trying to list in Singapore is that we were advised that we really would not stand a chance here – both in terms of compliance and also costs. Cost is a huge thing for listing on the Singapore Exchange. The other issue of listing in Singapore is eligibility. If my market cap is $150 million, or more, then I would list here. These benchmarks are indicative of the exchange’s willingness to accept such companies. My next point is such companies – the likes of us – there are not many such companies on the Singapore exchange. Look at a company like iProperty – they are an internet business and doing very well, but again they too are listed in Australia and that says a lot. Some people say the issue in Singapore really is that retail investors do not understand Internet companies – I don’t think that is the case. The issue actually is the size of our investors base – that is the biggest handicap. Next problem, as Asians most of prefer to invest in real estate, and this works against the equity market.

The other reason why we choose Australia was that we did a competitive analysis and found that in the US and UK, you have very established players in the crowdfunding space. There were no such players in Asean (Association of South-East Asian Nations) and the natural thing for us to do was to target this region and be known as one of the biggest players here. But South-East Asia alone is not enough – we wanted to co-opt Australia. We are therefore looking at four markets rights now. – Singapore, Malaysia, Indonesia and Australia.

If I were an investor, should peer-to-peer lending be in my portfolio? In the current context, how important is property in one’s portfolio?

The importance of property in one’s portfolio depends on the one’s time horizon. Property done right, at a good value, is ultimately akin to having blue chip stocks. Lot of people are not buying as much blue chip stocks as they want simply because it is not easy to leverage this. Property gives you more flexibility, and you can leverage it better. Not everyone wants to buy a blue chip stock, but by and large and a lot of people are rational, they want some security, and property is able to give them that.

It also depends on how you look at property. In this part of the world, people have long accepted that positive cash flow from property is not what we should be looking out for. Positive cash flow is a plus, but many accept that it won’t happen in immediate future, and lot of them hold property for the long-term and can accept one or two poor years. But Singapore is very different or the exception, as rental income from property offers significant returns, unlike other countries, where land is abundant. Wherever there is more land, there are alternatives to high rentals. When you sell to Singaporeans, you tell them about rental income, but when you sell a property in Malaysia, they don’t see rental income from it as a major factor.

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Published: 21 Aug 2015, 12:57 AM IST
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