“Crowdfunding, also known as Crowdinvesting, is a digital alternative finance innovation that enables small contributions (funding) to be pooled from a large audience (crowd) to achieve a funding goal.”
So instead of a Project Maker going to 1 person to raise $1,000 for their project, they can leverage the immense power of networking and the tremendous reach of social media and the internet to get as little as $1 from 1,000 people, but still achieving the funding goal. What this essentially does is reduce the risk exposure associated with being a single investor, benefit for the funder, and still enable the project to be capacitated, benefit for the Project Maker.
Crowdfunding is a viable solution for projects and ideas that are ‘crowded out’ of formal financial services as they are perceived to be ‘high risk’. Crowdfunding empowers:
1) SOCIAL ENTREPRENEURS – these include non-profit project initiators like Charities (e.g. SOS Children), Churches, Schools, Community Groups, and Associations (e.g. Lions, Rotary, and Junior Chamber International (JCI).
2) ECONOMIC ENTREPRENEURS – these are Start-Up or Early-Stage profit making projects in various industries from Agriculture, to Mining, to Retail, and so forth; and
3) REAL-ESTATE ENTREPRENEURS – these are construction activities that range from residential, to academic, to industrial real-estate projects that aren’t able to be financed by mainstream institutions or that are looking for low cost capital to initiate their venture.
HOW DOES CROWDFUNDING WORK?
To recap, Crowdfunding is an alternative finance platform that enables a project to harness small contributions (funding) from a large number of people (crowd) to achieve a funding goal leveraging the immense impact of networking and the phenomenal power of social media and the internet.
Crowdfunding has 5 distinct business models:
Donations
Rewards
Pre-sale
Debt & Equity
Real-Estate
Crowdfunding enables funders reduce their risk and exposure, while enabling the project to achieve its funding goal. A Project Maker simply creates a campaign detailing their project, shares this using Social Media e.g. Facebook, Twitter, Instagram, Email or Whatsapp to harness small contributions from their network.
So instead of going to one person to get $1,000, you can effectively reach out to 1,000 people and harness $1 each, but still achieving the $1,000 funding goal for the project. SIMPLE AS THAT!
Crowdfunding enables participation from micro-investors to enable pooling of micro-investments that aggregate into the funding target, this model has been transforming the economic landscape of Africa, and it is one of the innovations that Start-Up Nation (SUN) is using to unlock capital and invest in the businesses of the future.
Start-Up Nation (SUN) is using crowdfunding to fuel the Coin of Africa (CoA) Initial Coin Offering (ICO).
For more information, Connect With Us via social media or Visit Us @ Global Business Innovations (GBI) Hub, 336 Hebert Chitepo, Harare.
