Fundnel Crowdfunding Platform - Review for SMEs
Fundnel Crowdfunding Platform - Review for SMEs
- Ability to use equity, convertible bonds, revenue share or debt to raise funds
- Not the best for immediate financing for daily operations
- Not the best for simple business loans, asset purchase financing, or invoice financing
Fundnel is a great platform for startups that seek a variety of financing options. It caters to relatively large startups that are looking for access to equity, convertible bonds, corporate bonds, and revenue sharing financing. The platform has a large investor network (7,000+) and a strong track record (total value of completed deals: $100 million+).
|Summary of Fundnel Crowdfunding Platform|
|Total Deals: 36 deals, S$2.5 billion+|
|Option to upsize if campaign receives more than 100% funding|
|Large investor network; 7,000+|
|Financing within 3 - 4 months|
|Success Fee: 5%|
Table of Contents
What Makes Fundnel Stand Out to Borrowers
Fundnel is one of three crowdfunding platforms in Singapore that provide startups with channel to raise equity funding. Through Fundnel, businesses can access a large investor network (7,000+), and a platform that has completed deals greater than $20 million and total deals totalling more than S$2.5 billion. Fundnel is also quite selective in its application and financing processes: only 10% off applicants are accepted and only 3% of applicants receive funding. These factors indicate that larger and relatively mature startups are better suited for Fundnel, and that smaller and newer startups may have difficulty receiving funding through this platform.
The platform also allows businesses to "upsize" their financing in cases where they've exceeded the funding goal. Additionally, Fundnel charges a lower success fee (5%) than other P2P/Crowdfunding equity financing platforms. Further, it provides digitised paperwork and a centralised portal for communication with investors to facilitate the fundraising process.
Fundnel Financing Features
Fundnel offers SMEs a number of financing options to grow their businesses, including equity, convertible bonds, revenue sharing, or bond/debt structure.
In equity deals, SMEs sell shares of their business in exchange for financing. While giving up shares of equity may not be desirable for all businesses, it can provide massive amounts of financing and does not come with the rigid structure of tenure and interest rates of a business loan.
Convertible bonds are somewhat similar to traditional business loans. However, lenders are able to convert their bonds to shares of common stock or cash. Because of this optionality, these financing mechanisms charge lower interest rates compared to bond/debt structures, and offer flexibility in structure and share pricing. The downside is that successful businesses will likely have to give up shares of their business or pay out cash to investors.
Through bond/debt structures, borrowers receive loans over a fixed period of time. Interest rates can be fixed or variable. This option avoids dilution of shareholdings and provides a transparent repayment schedule. However, this type of financing tends to charge higher interest rates than convertible bonds.
Finally, through revenue sharing, businesses agree to pay investors a percentage of the their gross revenue over a predetermined period of time in exchange for financing. This option allows businesses to avoid dilution of shareholdings, unlike equity deals. But it requires that businesses pay a share of any sales generated even if the company is not very profitable. Revenue sharing provides a less risky compared to debt financing for businesses that aren't yet certain of its success. However, if the business produces a significant amount of revenue and profit, interest rate payments based on the loan principal amount may be cheaper than the percentage of revenue due to investors.
|Feature||Equity||Convertible Bonds||Bond/Debt||Revenue Sharing|
|Pros||No fixed tenure to repay principal, no interest rates||Lower interest rates, flexible structure||No dilution of shares||No dilution of shares, flexible payment structure, capped total payments|
|Cons||Dilution of shares||Potential dilution of shares||Higher interest rates||Fixed tenure|
Who Can Borrow: Eligibility Criteria & Application Process
Fundnel's website does not provide many details about its eligibility requirements. However, the platform highlights 6 key criteria for applicants. Businesses that want to raise capital via Fundnel should expect to disclose detailed information on these areas to Fundnel and its investor community, and to be examined thoroughly as part of a highly selective application process. Fundnel only approves 10% of applications and has provided funding to only 3% of the applicants.
- Management background
- Product and brand
- Customer focus
- Financial performance
- Industry/sector performance
- Deal and exit potential