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Is crowdfunding successful in raising funds?

Dechen Dolkar

Lack of investment continues to be a challenge for startups, as only three start-ups seeking capital could raise their required investments through the Bhutan Crowdfunding platform since it was launched in 2019. 

Bhutan Crowdfunding is the first digital platform developed by the Royal Securities Exchange of Bhutan Ltd (RSEBL) to provide an alternative financing model for start-ups and to raise funds from the public and institutions while offering investment avenues to investors.

There are different types of crowdfunding, like equity crowdfunding, donation-based, and reward-based.

In 2019, Bhutan Alternatives managed to raise Nu 8.3M from 39 investors, Himalayan Food raised Nu 4.5M, and One Click Shop, an e-commerce shopping enterprise, got Nu 8.5M from more than 100 investors.

However, Druk Re-Com could raise only Nu 178,900 out of the Nu 888,000 required in 2022.

An official from RSEBL said that if start-ups cannot raise the required amount for equity shares, the invested amount will be refunded to the investors. “The amount that Druk Re-Com raised has to be refunded to investors.”

The official from RSEBL also said that people don’t seem to be interested in investing in start-ups.  He said the reason could be the viability of the business in the market, lack of marketing, and relevance of the business idea.  The reasons according to him include investors expecting immediate returns from the business, which is not possible, and lack of knowledge about the investments.

The RSEBL has, however, made it mandatory for the companies to form a board, conduct AGM, report on the performance, and empower the board over strategic decisions.

However, many investors complained that after investing, companies are not updating the financial report and the company’s status.  The official from RSEBL said that they received complaints from investors.

However, officials said that the office is only to facilitate the platform to raise the fund and to make sure that the fund is utilized as in the proposed project. “We make sure to have transparency between start-ups and investors.”

The One Click Shop, after raising the required investment in 2019, could conduct AGM only once.

The Co-founder of One Click Shop, Zigyal Tshering, said that they could not conduct AGM due to the pandemic after the 2019 AGM.

He also said that they also could not declare a dividend since the business was not doing well.

Meanwhile, Bhutan Alternatives conducted two AGMs so far. During the recent AGM, the start-up decided to give a 100 percent dividend to 39 investors.

Bhutan Alternatives founder, Leki Dawa, said that for three years, the company was running into a loss, and still, the company decided to declare a dividend for 2021 and 2020.  He said that the company has around Nu 303,583.9 to declare as a dividend.

“Even if we call for the AGM, only a few people attend, and some investors expect to declare a dividend yearly and immediately after the investment,” Leki Dawa said.  He said that there are a few listed companies that have not declared a dividend in many years. “How can a start-up declare dividends at once?

Similarly, five start-ups have raised donations through the crowdfunding platform. However, only one organization, Ability Bhutan Society, could raise more than the required amount and raised Nu 724,301.

The official from RSEBL said that the rest could not raise the required amount.

This year, RSEBL received three proposals from start-ups to raise funds.