Cambodia's first home-grown crowdfunding platform is providing local NGOs and entrepreneurs with an alternative way of raising capital for their projects and ventures, filling a gap as traditional donor funding dries up.
Launched in March 2016, TosFund has raised close to $14,000 for projects posted on its online site during its first six months of operation.
The platform is based on crowdfunding, where projects are solicited to a large pool of potential investors with the hope of raising sufficient capital through numerous small individual monetary contributions.
Cedric Jancloes, co-founder and advisor of Action IEC, the local NGO that developed the platform, said the initiative aimed at addressing the decline in development funding expected to accompany Cambodia’s graduation out of the low-income country bracket.
“We are at a crossroads between the golden years of development and a new era of middle income to higher income private sector potential,” he said. “As the aid is diminishing, we hope that we can make the private sector and individuals come out to continue supporting projects that will need money.”
Though TosFund’s reach is nowhere near that of international crowdfunding websites, such as Kickstarter or Indiegogo, it provides Cambodians with fund-raising mechanisms specific to the Kingdom and an all-important local payment gateway.
The site allows individuals to fund a project using local payment systems such as Cellcard or Wing, or international systems such as Visa, MasterCard and Paypal, while a payment gateway developed by Acleda Bank allows project campaigns to receive the funds through a local bank account.
Jancloes hopes that expanding TosFund’s funding and payment options will encourage greater numbers of first-time Cambodians to utilise the crowdfunding model. Yet he said funding expectations must also be tuned to the reality of the local market, as the pool of potential donors is shallow – as are their pockets.
“In the West, you can get projects funded for up to hundreds of thousands of dollars or more, but here because we are young and just starting, we don’t expect this to be possible,” Jancloes said. “Projects should be looking for a smaller value, one or two thousand dollars, and it is really only complimentary funding at this stage, not core funding.”
For now, the majority of monetary contributions to TosFund’s projects come from foreigners. This will gradually change, it is hoped.
“The trend if you look at the donors is still not exactly what we want,” Jancloes said. “We prefer to have Cambodian donors, even if they donate smaller amounts. That is ultimately what we are trying to achieve.”
He underscored the importance of communication skills in campaigning for funds, stating that successful projects are those that compel people to engage in a cause.
“People assume that by simply putting up a project on our site, the money is going to follow effortlessly, but that is not the way it works, you need to campaign for the money,” he said.
Jesse Orndorff, the innovation program manager at Development Innovations (DI), a USAID-funded technology support project that helped support TosFund’s development, said the project was “ground-breaking” in that it sought to change local people’s behaviour toward giving money online while also working to integrate innovative payment systems.
“That is a space no one has really done a lot in yet, so they had to work closely with a lot of different groups to make that happen and to get Cambodians in the habit of being comfortable donating,” he said.
Orndorff said while the project has made a lot of progress, the local market is not yet ready to adopt more advanced forms of crowdfunding, such as equity crowdfunding.
“If you are talking Cambodian start-ups, they just aren’t ready for that yet, we are still convincing a lot of start-ups on why they need to have a business licence and why they should be paying taxes,” he said.
He said to grow as a viable fund-raising platform for local projects and ventures, TosFund will need to encourage more Cambodians to participate.
“If the crowdfunding platform is only serving local expats to donate to interesting businesses, that’s going to be a challenge because it will be a small market,” he added. Yet project developers who have campaigned for funds using international crowdfunding platforms have also discovered their challenges and limitations.
Ki Chong Tran, co-founder of local 3D printing start-up ARC Hub PNH, whose crowdfunding campaign on Startsomegood to raise $40,000 for the launch of a 3D design and printing curriculum for business failed to reach its funding goal, said the experience provided valuable insights into Cambodia’s crowdfunding potential.
“The payment issue was a challenge,” he said. “Because of the payments methods, the donors needed to have a credit card or a Paypal account, so basically, the only people that could donate to the platform were people with foreign bank accounts.”
He also underestimated the time and energy required to market the campaign to potential investors.
“We learned that crowdfunding is basically a large, concentrated marketing campaign and we just didn’t have enough people to do that for this campaign,” Tran said.
“I wouldn’t launch another crowdfunding campaign,” he said. “It’s a massive investment in time and energy. However, people who are good at outreach and marketing should definitely consider it.”