One thousand interested investors have already started crowdfunding platform ArawakX’s onboarding process, which tells the company’s spokesperson and Chief Technology Officer D’Arcy Rahming Jr. that there is a hungry market out there for new types of investments.
With almost 70 companies already in the beginning phases of being vetted and receiving regulatory approval to begin crowdfunding, Rahming is positive ArawakX will make an impression on the many micro, small and medium-sized enterprises (MSMEs) ready for funding to grow their businesses.
The ArawakX platform is in its beta stage, but Rahming said the platform could list its first company for investor uptake within one week.
And while the crowdfunding space can sometimes be misconstrued as a place for funding any run-of-the-mill idea, ArawakX is ensuring that companies have a market, market access, growth potential, innovation and corporate governance.
“Because of our experience in management consulting, we’ve seen what makes companies work from what doesn’t,” said Rahming.
“And this whole corporate governance is supposed to put a company in its best form so that it has its best chance to succeed.
“Let’s be honest, when a company succeeds not only do we make money as the platform, but society does better. We all need these companies to succeed. That’s what corporate governance is really about, putting that company in the best shape possible.”
Rahming said ArawakX is providing the platform as well as the parameters companies need to meet to begin crowdfunding. So far, ArawakX has seen interested companies coming from the agrobusiness space, tourism, technology and the medical sector.
Rahming said retail investors will be able to own a piece of the businesses by sinking as much money as they choose into the companies.
“If you can participate at the ownership level, then when some of these companies get acquired or they keep growing, you also see that long-term benefit,” he said.
“There’s a lot of people with five grand, ten grand sitting around and they’re hungry for new things, new ideas.”
Investors will be able to make money by selling their shares, waiting for dividends or waiting for a company to be acquired.
Yesterday Minister of State for Finance Kwasi Thompson revealed that the Cabinet approved the Securities Commission of The Bahamas’ (SCB) rules for crowdfunding, paving the way for this new source of fundraising for MSMEs.
On Wednesday the SCB released a statement on crowdfunding rules, explaining that retail investors (non-accredited investors) will be able to invest up to $10,000 per crowdfund distribution, or up to $50,000 over a single 12-month period. MSMEs will be able to raise up to $5 million through crowdfunding.
Both businesses and investors will have to go through a know your customer process to be able to participate in crowdfunding. While most of that process can be done digitally now, Rahming said he would like to get the process fully digitized and down to five minutes.
He also revealed that while the process of crowdfunding will cost markedly less than taking a company public, entry to the crowdfunding platform could still cost a business between $5,000 and $12,000.
“It’s much cheaper than traditional financing at that range, which is up to $5 million,” said Rahming.
ArawakX will soon be opening a community investor education center to assist investors in understanding what investing is all about.
According to Rahming, foreign investors have also been looking to ArawakX for the possibility of setting up local companies to join the crowdfunding space.
“They want to take advantage of things like the Commercial Enterprises Act and some of the economic zones,” he said.
“There’s a lot of good things going on, but they need structures for finance because at some point they too are going to look to grow.”
He added that foreigners will also be able to invest in local companies through an exchange system, though that mechanism is still being defined.