Crowdfunding has been one of the most revolutionary means of acquiring funds for entrepreneurs and businesses the world over. With Pakistan having witnessed a dramatic 63% increase in venture capital funding over the course of a year, the ecosystem is ripe for even more innovation and positive upgrades in the domain of startup funding. Therefore, it comes as very welcome news that the Securities and Exchange Commission of Pakistan (SECP) has approved the first technology-based crowdfunding platform for live testing.
Crowdfunding is a digital platform that allows startups and small-and-medium enterprises to raise funds from investors in return for securities. Under first cohort of Regulatory Sandbox, the SECP has granted approval to the nation’s first technology-based crowdfunding platform for commencement of live testing.
The approved crowdfunding platform will conduct the required due diligence process on behalf of the investors so that only eligible issuers and candidates who meet the threshold criteria are able to pitch their issue through the platform and raise funds from investors.
As far as the testing is concerned, the crowdfunding business model will be tested in a live controlled environment under the SECP’s supervision for a period of six months. The applicant company has to follow the conditions associated with the approval.
Once the testing period concludes, the applicant company shall submit a comprehensive report to the SECP on the fund raising activities conducted through the platform. This report will then determine the future course of action regarding crowdfunding platforms and activities in Pakistan.
Given the impact crowdfunding platforms have had all over the world, this is a brilliant step in the right direction for the entrepreneurial ecosystem of Pakistan. Onwards and upwards!
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