In the world of fundraising, the new hot topic is crowdfunding, where entrepreneurs fund a project or venture by raising small amounts of money from a large number of people online, most notably using platforms such as Indiegogo and Kickstarter. It has become a particularly attractive option for those unable to access finance from more traditional sources, such as banks.
In theory, crowdfunding is simple. Pick your platform, list your idea, and offer rewards dependent on the amount donated by an investor. Hopefully, your project will go viral and get funded. But there are preparations that should be undertaken if funding is to be obtained and used effectively.
Make sure your product is ready. Build it, get feedback and rebuild it as many times as it takes. Speak with potential customers, find out what they need, and give it to them. Make sure the campaign is as detailed and exciting as possible, as you only have a limited amount of time to raise the money.
Protect yourself, protect the investor
Make sure you are legally protected. Protect your intellectual property before you reveal it online, learn the conditions of use of the crowdfunding platform, and make sure personal and business assets are separated to safeguard yourself in case of failure. There are also a number of business insurance companies in South Africa, such as Budget Insurance, at which you could source the necessary business insurance information. Money may be tight in the first few months/years in terms of business operations, but it’s a small price to pay to secure your business interests and quite possibly the one thing that you’ve invested the most in.
Keep your promises
Anyone that invests through crowdfunding is an early consumer, so make sure you provide the promised rewards on time. These first individuals that interact with your brand must have a good experience. Investors are also taking on a higher level of risk than normal, so will expect higher returns.
Crowdfunding platforms are growing in South Africa, with the likes of StartMe, Thundafund and Crowdinvest offering their own spin on the Indiegogo/Kickstarter model. But when plugging in to this exciting new avenue of fundraising, make sure you are offering investors a tangible product, while protecting yourself from any future repercussions.
Crowdfunding has been a trending topic for the past year now and more initiatives and platforms are finally running in South Africa. Entrepreneurs and business leaders of the world are encouraged to fine tune those big ideas and make their dreams a reality.
It’s not all moon shine and roses or glitter and gold, taking a big idea and making it a reality will require some serious leg work and business acumen. Attaining the necessary capital to fund your project is only the start – but if you think you have what it takes, we hope these tips help you on your ventures to transforming your big ideas into realities.
This article was written by How we made it in Africa in collaboration with Budget Insurance.