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In’s and out’s of investing on equity crowdfunding site Uprise.Africa [Q&A]
SA equity crowdfunding platform Uprise.Africa last week launched its third campaign, with SA mobility startup Lüla seeking to raise R2.5-million by late May, in return for giving up an 8.5% equity stake. Who then can take part in this and other Uprise.Africa campaigns?
So far Lüla has raised R254 000 with 82 days left of the campaign (see this story).
The platform has so far helped Drifter Brewery to raise almost R3.9-million from 196 investors at the campaign’s close in August last year (see this story). Another campaign, to raise R3-million to fund the publication of more African literature flopped after the campaign failed to meet its fund-raising target (see this story).
Via email Uprise.Africa CEO Tabassum Qadir explained more about who should consider becoming an investor on the equity crowdfunding platform and what investing involves and what fees and risks are attached to doing so (see this Q&A with Qadir on what entrepreneurs and managers should know about seeking investment for their startups or projects via the platform).
Should you have some experience as an investor or as someone who has run a business before?
Anyone can invest in the offerings listed under the Uprise.Africa platform, as we encourage everyday investors and individuals who know the basics of investing.
People who are new to investing can also invest as well, but should educate themselves about some of the risks involved with investing in general.
On our website we have an informative quiz (see here) that serves as a basic guide to understanding how to invest in an equity crowdfunding platform.
What kind of time and money do you need to put in when it comes to due diligence, or does the platform handle this?
The ethos around crowdfunding upholds a crowd-validation process.
As an investor, an individual can follow the entrepreneur’s story, view the company’s financials on the Uprise.Africa website, keep up with their performance and ensure that they support them post-investment.
There is no money involved in conducting your own form of due diligence, but it always pays off to do extra research and spend time on validating and understanding your investment. A successful investment can yield profitable returns.
As a verified Financial Service Provider (FSP), we conduct a due diligence procedure on campaigns before they are launched on our platform. The due diligence procedure involves legal due diligence, financial due diligence and a valuation to ensure the entrepreneur’s investment ask is correct.
The platform carries out the bare minimum requirements to validate a campaign. In order for us to scale and conduct these, we have partnered with organisations who are experts in the field and are open to more affiliations of this kind.
What paperwork do you need to fill in and what are the costs?
An investor must be over 18. They must also submit their FICA documentation, have their ID on hand and complete an investor’s pledge in order to invest.
The minimum investment amount is handled on a case-by-case basis depending on the entrepreneurs, but the usual minimum investment amount is R1000.
Transaction fees are charged on investments. The electronic transfer (EFT) fee is R10, and a fee for an instant EFT is charged at 1.5% of the transaction value, credit or debit card is charged at 2.5% of the transaction value, while fees of 5.5% of the transaction value are charged on Paypal transactions.
What is the minimum you should invest and for how long? What kind of return on investment can investors expect?
The minimum an investor can invest is usually R1000. Uprise.Africa allows for a case-by-case basis in which entrepreneurs can set the minimum investment amount for their campaign. The Return on Investment (ROI) varies from deal to deal.
The success of the entrepreneur is dependent on their pitch, the potential of their business and crowd support.
What kind of risks should investors be aware of when investing?
Investing in early-stage businesses and startups can be very rewarding but comes with its risks and challenges. These risks include dilution, illiquidity, rarity of dividends and loss of investment. These are the risks which investors who are investing in the companies need to be aware of.
Read more: SA startup Lula launches R2.5m Uprise.Africa crowdfunding campaign
Read more: SA financial sector authority drafts another paper on equity crowdfunding
Read more: Uprise.Africa mulling 159 deals worth almost R1-billion’ [Updated]
Read more: Uprise.Africa appoints former GEPF man to chair crowdfunding platform board
Read more: Uprise.Africa crowdfunding platform nets investment from Silicon Valley VC
Read more: Uprise.Africa mulls 80 projects for equity crowdfunding, as Drifter raise hits R3m [Updated]
Read more: Uprise.Africa opens Storied to investors in possible first for crowdfunding in SA
Read more: What startups should know about listing their investment on Uprise.Africa [Q&A]
Featured image: Efraimstochter via Pixabay