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Friday, December 30, 2022

Agarwood firm opts for equity crowdfunding to raise funds


The global agarwood market is estimated to be valued at US$64 billion (RM283 billion) by 2029.

PETALING JAYA: Agarwood, the resinous part of the Aquilaria tree, is a valuable commodity many believe is as valuable as gold. It has been traded for several millennia and is used for medicine, wellness, and fragrance such as expensive perfumes.

The global agarwood market trade is estimated at US$32 billion (RM142 billion). This is expected to double to US$64 billion (RM284 billion) by end-2029, making agarwood the world’s most valuable plant species.

Despite Malaysia being a leader in the cultivation of Aquilaria with 2.3 million trees planted as of December 2019, not many Malaysians are familiar with this industry.

DAdvance Agarwood Solutions Sdn Bhd founder David Liew.

Not so for David Liew, founder of DAdvance Agarwood Solutions Sdn Bhd (DAAS), who saw the potential of agarwood more than a decade earlier.

Today, DAAS is one of Malaysia’s leading firms involved in bio-serum engineering for agarwood inoculation.

The interesting fact about the agarwood business is that not every Aquilaria tree produces agarwood. By using its all-natural inoculation vaccine, DAAS assists local agarwood plantation owners increase their resin yield, and thus their profits.

Traditional versus unconventional

For a seemingly traditional business anchored in agriculture, DAAS has opted for an unconventional method of raising funds to expand its business.

It recently raised RM1.92 million through an equity crowdfunding (ECF) campaign on Alta (formerly known as Fundnel), an ECF platform registered with the Securities Commission Malaysia (SC).

ECF is a method of raising capital often used by start-ups, where a company’s securities are offered to potential investors in return for financing. Investors are entitled to a stake in the company proportional to their investment.

Through ECF, investors can diversify their investments beyond traditional asset classes.
To date, 10 ECF platforms have been registered with the SC.

So why did DAAS opt to raise funds via an ECF campaign compared to more conventional financing methods?

Liew told FMT Business that widening their target market and creating greater brand awareness lay at the centre of their decision.

“In Malaysia, awareness of agarwood is not too present. People do not know about the industry as much,” he said.

He said the interest generated from their ECF campaign would bring greater investment potential into agarwood down the line.

“Through our campaign, we are beginning to overcome the issue of awareness, widening our target audience and luring potential investors to venture into the industry,” he said.

A faster and more efficient option

Moreover, the company also views the ECF approach as a more assured and hassle-free way of raising financing.

“The reason we did not opt for traditional bank loans was due to the uncertain outcomes of high interest rates and complicated procedures involved in securing such loans,” Liew said.

“Hence, DAAS chose Alta’s platform for our crowdfunding campaign as it was a much faster and efficient option.”

The requirement for fewer documents during the ECF process and reduced amount of time it takes to secure funding compared to a bank loan are some of the procedural reasons businesses are moving towards crowdfunding to raise finance.

A spokesman from Singapore-headquartered Alta told FMT Business that DAAS is the first agarwood company in Malaysia to carry out an ECF campaign through its platform.

Alta has facilitated more than 600 transactions to date for companies including unicorns such as Grab and Gojek, and rare whisky producers. In Malaysia, it has successfully funded notable firms like CapBay, Ecosys, and Fish Club, and the first-ever micro-VC fund with Emissary Capital.

Expanding its reach

DAAS are using the funds raised to scale up production at their Ayer Keroh factory in Melaka. By increasing the number of distillation machines, DAAS predicts production output will increase by 500% a month, or up to 30 litres of agarwood oil.

Liew notes that key to the company’s expansion plans was increasing resin yields. “We are constantly striving to perfect our vaccine tech for higher resin yields through setting a new standard in the synthesis period from 18 months to 24 months, and to further elevate Malaysia’s standing as an agarwood producer.”

DAAS recently inked an MoU with Tropical Extracts Sdn Bhd, an agarwood oil supplier, which will give them exclusive distribution rights on behalf of the company in Europe. This is especially lucrative as Tropical Extracts seeks to grow their annual output from 30kg in 2023 to 100kg in 2025.

The company also has various other collaborations in the pipeline. Their vanguard agriculture 4.0 project with Huawei Technologies on a 150,000-acre agarwood plantation in Temerloh, Pahang, aims to use capacitive sensors and other intelligent hardware to enhance data collection through the production process.

DAAS is also in the early stages of exploring the possibility of launching an agarwood wellness centre, through collaboration alongside their upcoming business partners.

The unconventional move by DAAS – a primary industry company – towards alternative methods of securing financing for expansion, can serve as an example for others.

In an environment where interest rates are expected to continue climbing owing to inflation, there remains room for business growth off the beaten path. - FMT

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