Bigcolors is a startup stock exchange which combines equity crowd-funding by a pool of investors with a trading exchange. Bigcolors will help raise a maximum of US$100,000 for a startup idea, and for that, entrepreneurs will give up 20 percent of the company. But they can alternatively just raise US$25,000 or US$50,000 and part with 5 per cent and 10 per cent respectively. When the idea is posted on the platform, it then undergoes a two-week due diligence process by the Bigcolors team. Once approved, the idea is open to funding for eight weeks.
Should the funding be completed ahead of this period, investors can trade options, that is, trade the rights to own shares in the future company. Bigcolors says they have grown 80% in signups week on week since launching 3 weeks ago and they have over 900 investors on the platform as well as 79 startups who have signed up for funding. They have had funding for the startups of almost $25k USD since launching. They also have funding commitments from investors of over $500,000 ready to invest in early stage startups, shared the team.
How the platform works
Anyone can list their startup on Bigcolors, however if a startup wishes to get funding they need to initially go through a due diligence process. This involves interviews with the founders, a know your customer(KYC) background check, understanding the idea, business model and the potential of success of the idea. This process takes about 2 weeks. If the startup is approved for funding and has successfully completed the due diligence process, it can list for funding on Bigcolors. If the startup fails to reach their funding target, there is no charge for startups or investors.
“As part of our due-diligence process, we are very strict about the companies that can list and only companies that have a high chance of success are listed. Bigcolors aims to help the startups succeed by providing a platform for investors and advisors to help in the success of the startup”, adds James Giancotti, Co-Founder of Bigcolors.
If a startup listed on Bigcolors successfully reaches its funding target (within the funding period) only then can investors list their stock options on Bigcolors, and if purchased, can cash out. The funding period is eight weeks. Once the funding period has closed, the new company is formed and investors will be owners of the company. Investors are able to sell their stock privately (as with any private company).
How Bigcolors is different from equity based crowd funding
James Giancotti: Equity based crowd funding is where investors leverage funds and invest directly to finance a startup in exchange for a percentage of the company. Bigcolors is a startup exchange whereby similar to any other exchange, things are bought and sold. That is, they are traded. Bigcolors acts like an exchange where once a startup reaches its funding goal, startup options can be freely traded during a funding period. Liquidity is ONLY available during the trading period. After that time, all trading of that startup stops and the startup is incorporated.
Valuation of the startups
Each startup is valued at $500k USD or less. “We feel that $500k for a company which has no revenue nor traction should be the cap”, adds James.
Why Hong Kong
Hong Kong has traditionally been one of the best trading hubs in the world, so mixing financing and trading startups was a perfect fit for the city. Hong Kong is also home of some of the largest capital pools in the world which helps fund the startups.
Plans for Mainland China and global expansion
Bigcolors plans to launch in Singapore this week, with Thailand, Australia, Japan and Taiwan to follow in Q1 2014. It will launch in mainland China in Q2 2014. “In 2014 we are focused on Asia Pacific, and will use 2015 to expand to other regions such as Americas and the Middle East”, shares James.
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