SME South Africa has been running for over 7 years. This week we are looking back at some of our favourite, and most popular, posts from the past.
This article was originally published on 8 February, 2018 and updated 10th Feb 2020.
UPDATE: Due to the popularity of this article, it has been updated to include additional three crowdfunding platforms, namely Livestock Wealth, Angel Investment Network and Jumpstarter. This article was originally published in February 2018.
“In five years time people will see crowdfunding as a no-brainer when it comes to launching a new idea or project.
“Why would you spend your time and cash on an idea without first asking your future customers if they would buy it? Crowdfunding is the ultimate in the democratisation of finance,” wrote Patrick Schofield in 2013.
Schofield is behind the country’s oldest and newest crowdfunding platforms – ThundaFund, which launched in 2011, and Uprise Africa, launched in 2017.
More platforms have come into the market – each offering a diverse range of benefits. To find out which one may be ideal for your fundraising needs we take a look at six platforms – Uprise.Africa, Thundafund, The People’s Fund, Livestock Wealth, Angel Investment Network and Jumpstarter.
1. UPRISE.AFRICA (Equity Based)
Uprise.Africa launched in 2017 and is the first equity crowdfunding platform in South Africa. It allows private individuals to invest in early-stage businesses in exchange for equity.
The goal of the platform, according to a SME South Africa article, is to enable everyone to invest in startups, not just professional investors.
Any business can register on the platform to receive funding, however in an interview with SME South Africa, Inge Prins, CMO of Uprise.Africa said that they are looking closely at the food and drinks sector for their first few campaigns.
The Uprise.Africa team announced in January that they had launched their first campaign, Storied SA, an initiative by independent South African publisher Jacana Media. The focus of the initiative is on publishing local fiction and creative writing. They have already raised R10,800 and aim to raise a total of R3 million.
To start with, project creators must have FICA documentation. The platform also allows both non-South African and South African citizens to invest.
According to their website, entrepreneurs behind each campaign will need to be available every day to answer questions from investors and select media appearances.
The platform allows users to set their own funding goal, the maximum is R50 million.
In addition to linking investors with startups, the platform also serves as a space for small business owners to receive feedback from investors, get help reaching their target market, and to test the viability of their offering, according to a SME South Africa article.
2. THE PEOPLE’S FUND (Royalty based)
The People’s Fund is the first black-owned crowdfunding platform in South Africa. The platform launched in 2017 and is a collaboration between one of SA’s largest networking communities for black entrepreneurs, Brownsense, networking community, The HookUp Dinner and Paybook, a digital marketing company.
The platform allows individuals, stokvels and corporates to buy an asset for a business and then be paid a royalty by the entrepreneur for the lifespan of that asset.
The platform is exclusive to black-owned and innovative businesses.
An example of a campaign is Buy-A-Beehive by entrepreneur, Mokgadi Mabela. The campaign asked investors to contribute towards the acquisition of new beehives. The royalty for those backing Mabela is R32.40 for every kilogram of honey harvested from the hives they have funded for the next six years.
Every one of the entrepreneurs with a campaign have pitched at one of The Hook Up Dinners and won their respective nights against four other entrepreneurs. Each business is also vetted for business viability and whether their raise requirement is realistic.
Amounts have ranged from R240,000 all the way to R20 million.
According to the website, the platform exposes startups to potential customers and ‘evangelists’.
3. THUNDAFUND (Rewards based)
Thundafund, is one of the best known crowdfunding platforms in the country. The fund, which launched in 2011, operates on a ‘rewards-based’, ‘All-or-Nothing’ crowdfunding model, meaning the project creators essentially ‘presell’ project-related items, known as rewards, to backers in return for their financial contribution. These rewards include retail items, recognition and experience.
According to their website, ThandaFund targets creative and innovative projects that must fit into any of the following 13 categories: art and photography, community, crafts, design, events, fashion, film and video, food and beverages, media and publishing, music, performance; sport, and technology and games.
One of big fundraisers on ThundaFund includes a wine bar, Proof, located in Somerset West which was launched by entrepreneurs, Dan Crowe and Wayne Mongie.
The two entrepreneurs raised over R200 000 in 2017 towards achieving their dream of opening a wine bar, according to a SME South Africa article.
The fund is strictly for serious projects. The platform has turned down about 1400 applications from individuals attempting to raise money to pay off their debts.
Other requirements for a campaign, according to the website, include, but are not limited to: a campaign pitch, a South African bank account, unique rewards for backers, an active social media presence, a PR ‘campaign plan’ covering pre-launch, launch, mid-campaign, pre-closure and closure and finally, an understanding of the target audience.
Project creators also have to be over the age of 18. If applicants are under 18, they will need a project collaborator to register for them, be the payment account holder and take responsibility for the project roll-out.
According to the website, project creators can ask for any amount from R5,000 to R50,000, however, they can also ask for millions depending on what the creators are looking to fund and the profile of the investors/backers.
Pledges average between R100 and R1000 and can range upwards substantially.
ThundaFund offers free marketing. Campaign creators are also able to test the viability of their product and target market based on whether anyone invests, and also who invests.
4. LIVESTOCK WEALTH (Equity based)
Livestock Wealth is a “crowdfarming” platform. Crowdfarming is the crowdfunding of farming by members of the public.
Livestock Wealth facilitates the connection between farmers who need working capital and investors who want to invest in growing assets, but don’t have the means to do so themselves. They set the agreements in place.
Livestock Wealth was founded in November 2014.
Livestock Wealth enables everyone to be a farmer by investing in high value agricultural products over a fixed term, you can therefore own an organic beef farm or Macadamia Nut Trees and share in the profits of the farm.
You can register on the Livestock Wealth app, buy your product and keep track of your investment.
The different investments available are as following:
– Invest in a Macadamia Nut Tree for R2000 and then earn between R3 947.65 and R4 163.95 after six years.
– Invest in a pregnant cow for R18,730.00, taking the 12 Months option. Earn between R20,603.00 and R21,352.00 after 12 months.
– Invest in a Connected Garden, which is a fully-stocked organic vegetable garden that is leased out to farmers and managed on your behalf. It costs R8200. You will earn R220.00 per month which is your portion of income earned from the sale of vegetables to local farmer’s markets, restaurants and other off-takers. This equates to a total income of R13,200.00 over five years.
– Invest in a free-range calf for the costs of R11,529. This calf is between the ages 12 to 18 months old, it is raised to produce premium free-range beef over a period of six months. You can earn between R12,105.00 and R12,336.00 after six months.
5. SOUTH AFRICAN ANGEL INVESTMENT NETWORK (Membership model)
The South African Investment Network is a paid membership platform. As part of their membership, entrepreneurs get the opportunity to pitch and get connected with angel investors, both locally and internationally.
Currently, the network has 231,108 investors who are made up of angel investors, family offices and venture funds.
The rates per membership range from the 30-day Novice package which costs R799, for R999 you’ll get the 90-day Pro package, the 90-day Global Pro costs R1,999 and the Executive package is a 120-day package which costs R20, 000. Each package has different offers and benefits.
According to the website, the network has raised R4 billion for their members.
To raise capital, each entrepreneur is given the opportunity to pitch their business, set their capital requirements and the minimum amount that an investor can give.
The investors look at all stages of business and across all sectors.
Visionwork Capital is an asset rental finance management company based in the KwaZulu-Natal, they provide equipment rental finance.
The business has assisted more than 90 businesses in with rental finance transactions, they have empowered around 100 SME businesses. Their target funding amount is R50 million.
Entrepreneurs first register and are then able to pitch using the online form.
Must haves include the company’s registered name and a link to the business’ website.
To see what each paid package offers, download the Pitch Walkthrough.
According to the other website, part of a successful campaign is providing a full picture of your business, including “a brief introduction to the people helping to drive your business … Give us a concise insight into the highlights of their CV: where and what they studied, what they have worked on.”
Entrepreneurs can share their maximum amount of funding needed and also, the minimum each investor can give. You are also able to view different investors’ investment range.
According to the website, you can accept funds from investors at any time – you do not have to reach any funding target. “Investors transfer to you directly so there is no commission fee from us.”
The network’s system will match an entrepreneur’s pitch with the right investors based on investment amount, region and sector(s). Pitches can be edited at any time. Entrepreneurs are also allowed to give “nudges” which is a way to draw investors’ attention to their pitch.
6. JUMPSTARTER (Rewards based)
Jumpstarter is a South Africa non-profitable organisation (NPO) that is a rewards-based crowdfunding platform.
The NPO which was founded in 2011, offers a way to fund creative projects for individuals, businesses and charities. According to the website, Jumpstarter has done 18 projects and funded R520920,00.
Project creators (entrepreneurs) receive donations in exchange for tangible rewards like products, benefits, and experiences.
Jumpstarter has an “all-or-nothing” crowdfunding approach which means that every Jumpstarter project must be 100% funded before its time expires or no money changes hands. Every project creator has to set their project’s funding goal, donation rewards and deadline.
Jumpstarter allows creative projects which can range from art, design and fashion to film, food and technology. Creators of the projects, whether it is filmmakers, musicians, artists or designers have complete control and responsibility over their projects.
Sister craft brewers, Melanie and Tania Nieuwoudt who hail from Cederberg sought funding for a legal battle on the Jumpstarter platfrom. Their funding goal was R50,000. They successfully secured 61 backers pledging a total of R52,000.
Every project must have a clear goal, like producing an album, publishing a book, or a work of art. Other requirements include:
— A funding goal
— A project deadline
— Jumpstarter profile name
— Rewards tiers that have already been selected by a backer
— Project description
— Project video and image
— Project FAQs
According to the website, these are the platforms fees:
- For-Profit project, successfully funded – Jumpstarter applies a 7% fee to the funds collected. Payments pledged exceeding R250, are refundable.
- Registered Non-Profit Organisation project, successfully funded – Jumpstarter applies a 3.5% fee to the funds collected. Payments pledged exceeding R250, are refundable.
- ISASA or RSA Public School’s project, successfully funded – Jumpstarter applies a 3.5% fee to the funds collected. Payments pledged exceeding R250, are refundable.
The Jumpstarter team is able to a Staff Pick, this is for projects that stand out. These projects benefit from greater awareness on the platform.