Crowdfunding in SA is helping developers seek faster funding thanks to StartMe.co.za, a startup launched last year by two South African Internet entrepreneurs, Lourie Nel and Ben Botes.
The portal is user-friendly. A startup signs up and fills in the details of the project it is involved in. The network of investors on StartMe would then review the info. If the idea is viable, the network of investors pool resources in return of gifts, complementary products or shares.
According to Ben, crowdfunding helps startups access funding in circumstances where banks cannot give loans as long as the firm has a portal and the idea is viable. He adds that crowdfunding helps bring together a large number of investors willing to give amounts they are able. They pull together efforts and at the end of the day raise capital for ideas, projects and even established business ventures.
Ben says a project can run a month long capital campaign to raise a specified sum of money. The startup however has to have a URL address so that the funders can survey its credibility and the viability of the business.
StartMe acts as a platform for the startups to do their campaigns in a bid to raise their needed capital. The firm only takes 5 percent if a firm reaches its target, and 9 percent if it falls short of the target. Excess funds are retained by the startups.
Ben says for crowdfunding to be effective, a startup has to put the following into considerations. The firm ought to know how much it needs, how it will compensate the investors, how valuable is the idea and its target market or end user.
According to Ben, crowdfunding can be used for raising funds as capital for small businesses or large companies, can be used to fund research, creative and art projects. Crowdfunding too can be used to finance community development projects.
There are several crowdfunding platforms globally but Kickstarter, which recently went worldwide, has taken the top slot in helping startups access funds. Kickstarter has had more than 60,000 projects launched successfully raising over $290 million dollars.
According Dave Lavinsky, co-founder and President Growthink, the crowdfunding industry just experienced a 259 percent annual growth. The industry is getting popular by the day as individuals and organisations shift from banks.
Lavinsky said: “I have followed the success of crowdfunding from the beginning because I knew its potential to entrepreneurs and it has become so big.”
He adds that the dollars given to entrepreneurs increased by 259 percent. A survey shows the funds grew from $27.6 million in 2010 to $99.3 million in 2011.Crowdfunding is therefore getting popular by the day.
Issues still remain at hand however, many of the entrepreneurs still do not understand how crowdfunding works. Legal issues also stand as impediment.
