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Ventureburn has highlighted five crowdfunding platforms that aim to assist startups with funding.
The Covid-19 pandemic has highlighted the importance of supporting local businesses in generating local revenue and increasing employment opportunities for locals.
According to Investopedia, crowdfunding can be understood as the “use of small amounts of capital from a large number of individuals to finance a new business venture.”
Traditional methods of funding a startup such as applying for a loan at a bank with an applied interest rate can become a costly option for many local entrepreneurs. Crowdfunding allows entrepreneurs to connect and network with potential investors beyond private funding and venture capitalist firms.
It offers the opportunity for potential investors or groups of individuals to donate or invest funds into a business that they support through the use of an online crowdfunding platform.
Five crowdfunding platforms
Founded in 2014 Thundafund has grown to be one of Africa’s leading crowdfunding platforms. The platform was created “by Africans for Africans” and allows entrepreneurs to raise the capital needed for their business.
The co-founder of Thundafund, Patrick Schofield, described crowdfunding as the “ultimate in the democratization of finance”.
“The many, coming together to back people who create products that they would like to see materialized in the world,” said Schofield.
Thundafund allows entrepreneurs to raise capital by creating a rewards-based crowdfunding system. This means that in exchange for cash, the entrepreneur is expected to give something back.
While allowing entrepreneurs to fundraise through their platform, Thundafund also provides a business mentorship. This is seen as a key part of creating a successful business.
The People’s Fund
Launched in 2017, the People’s Fund is a primarily black-owned crowdfunding platform and has partnered with some of South Africa’s networking communities to black entrepreneurs such as The Hook Up Dinner and Playbook and Brownsense.
For entrepreneurs to be eligible to use the platform, they have to be innovative and black-owned businesses. The entrepreneurs are also required to pitch their business model to one of The Hook Up Dinners.
The platform allows investors such as individuals, corporations, and even stokvels to purchase an asset for a business. The investors are then paid back a royalty for as long as the asset lasts.
This non-profit crowdfunding platform was founded in 2011 as a way for creatives to fund their businesses. Through Jump Starter, entrepreneurs receive funding (donations) in exchange for rewards.
Unlike other crowdfunding platforms, Jump Starter makes use of the 100%-or-nothing funding. This means that the businesses need to be fully funded or no money will be exchanged.
According to their website, the platform has helped 18 projects raise R520920,00. Qualifying businesses have included technology businesses, food, film, fashion and design, and art.
The other requirements for businesses include:
- A deadline for the business (project)
- Business description and a FAQ section
- A business image and video
- A funding goal
- The entrepreneur must also choose rewards for those who donate.
Launched in 2017, Uprise.Africa is an equity-based crowdfunding platform in South Africa. The platform allows private individuals to invest early in businesses in exchange for shares in the company.
Entrepreneurs who want to their platform to raise capital must have FICA documentation and must be available to answer questions that investors may have. Users are also able to set their own funding goal but it must not exceed R50-million.
Uprise.Africa also provides a space where entrepreneurs can receive feedback from investors and reach their target market. Entrepreneurs can also test the viability of their service or product.
South African Angel Investment Network
Entrepreneurs can join the South African Angel Investment Network through a paid membership. The network allows entrepreneurs to pitch the business model to local and international angel investors.
The network allows entrepreneurs to set their capital needs and the minimum amount an investor can give. The entrepreneurs are required to register and pitch through their online platform. The entrepreneurs must give a concise introduction to the business and who they are as a professional. The pitch must include a registered name and a website.
Entrepreneurs can benefit from the network by being introduced to the correct investors and are able to accept funds from investors at any time. At the moment, the network has more than 200 000 investors.
Feature image: Christina Morillo via Pexels