When investing in startups, are Malaysians following the crowd?

When considering investments in startups, Malaysian investors should not be swayed by the number of other people involved, despite research suggesting social proof plays a significant role in campaign success. While the presence of numerous investors can be an attractive signal, it does not guarantee the investment's soundness. A recent study conducted by Xiamen University Malaysia's assistant professor, You Hui Wei, analyzed 335 campaigns across three licensed Malaysian equity crowdfunding platforms.

The research found that social proof, especially the number of investors, is the most telling factor when predicting a campaign's success. Valuation disclosures also played a crucial role, while younger firms were associated with a higher likelihood of reaching their fundraising targets.

Equity crowdfunding allows startups and smaller businesses to raise money from multiple investors, who receive shares in the company in return for their investment. In Malaysia, over 22,000 investors have participated since the introduction of equity crowdfunding in 2025. However, smaller investors should be cautious, as the risk of losing the entire investment is high, and there is no guarantee that the company will grow, pay dividends, or deliver profitable exits for shareholders.

The Securities Commission Malaysia advises investors to study the company, its finances, and risks before committing funds, emphasizing that startup investing involves significant risks. While the crowd can provide insight into where money is going, it should not replace a thorough understanding of the venture before investing.