The idea of raising thousands or even millions in monetary donations from complete strangers is not new. However, in many respects, the days where entrepreneurs think that their financial networks are limited to either friends, families (“Daddy, I promise that I will make enough money to pay you back”) or venture capitals, organized investors and other financial institutions may be slowly fading away.
In a world where exceptional ideas and novel innovations come with potentially high rewards, crowd funding, the latest way of raising capital is an entrepreneur’s dream come true. On a continent that has been in many ways stifled by the aid agenda, crowd funding may actually have its perks, provided that it is done the correctly. It has proven to be a viable option, allowing early stage entrepreneurs to garner the seed money they need to move their ideas to fruition. Although crowd funding is a relatively new and quite honestly, a fairly unknown concept across the continent, the potential for it to thrive and grow can make a world of difference between realizing the latest and greatest innovations on the continent, and a continuous dependence on the status quo. There may be a few bumps along the way that are worth noting including suspicions over on-line scamming, lack of established legal frameworks around crowd funding and a potential for a lack of follow through on ideas or products. Never the less, the rise of new and emerging platforms such as Slicebiz, Jumpstart Africa and Jamii Funding show that there might be benefits to crowd funding for entrepreneurs on the continent.
It provides an alternative access to capital. While many approach banks to take out loans, the chances of rejection are higher, particularly without proof of collateral and/or evidence of meeting standard minimum income levels. With eighty percent of the working population on the continent engaged in the private informal sector, the chances of excluding potentially high ROI products or services is well, pretty high. With crowd funding, entrepreneurs have an alternative way of raising money without giving up equity or accumulating debt; all that he or she will owe their community is simply their tangible products or services.
It increases the chances of being heard. Awesome platform? check. Great idea? check. Solid pitch? check. With the basics in place, an entrepreneur has the opportunity to introduce their proposed venture’s mission, vision and purpose to an audience of unique users and potential investors.
It offers free publicity. Successful campaigns attract potential sources of traditional or alternative forms of investments and receive media attention. Success stories like those of Cameroon’s Jacques Georges Badjangs have gotten great exposure, one that makes for interesting reading (fodder for reporters) and also reinforces the impact that crowd funding can make on the continent.
It is everyone’s gain. It is no news that the African continent is gradually becoming a hotbed of new and innovative startups. From Nairobi to Lagos and Johannesburg, exciting technologies are constantly being produced. With the rise of technology hubs across the continent, investors at home and on foreign shores are clamoring for their stake in high growth markets on the continent. For investors, the streamlined online process offers the opportunity to select from a platform of fully vetted companies as quickly as possible.
It helps to create a buzz around your product. The type of buzz necessary to attract early adopters – those who believe enough in your idea to invest in it. These types of investors are more than likely in it for the long run and will actively help spread the word about their selected entrepreneur’s product or service.
It offers a source of credibility. As companies continue to grow and seek angel or institutional investment, having a strong proof of concept is critical, as it implies that one’s product or service has received the market validation necessary to attract venture funding. A successful crowd funding campaign can offer this type of credibility.