Africa on Crowdfunding

By Editor
iHub
  Published 16th October 2012
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Startups in a quest for crowd funding.

By Sam Charoz
The Internet has been a resourceful outlet for innovators to network, display and share their talent and ingenuity. In the last five years, Africa has witnessed a surge of unique apps that have demanded international acclaim. Some like Kenya’s M-pesa, and Ushahidi have placed African developers on the global tech map.
Yet, the issue of funding continues to be a challenge.

Pitching to Investors at Pivot East

A funding channel that has gained popularity globally but that is yet to take hold here is crowdsourcing:Organizations putting out an open call to the public, essentially outsourcing tasks to a distributed group of people. This channel of funding business has been successful especially in America, where internet crowdfunding platforms like Kickstarter.com, a funding platform for creative projects, could end up pooling 3.2 billion dollars to its reserves for its list of eligible entrepreneurs by the end of this year according to crowdsourcing.org.

It is from the ideology of crowdsourcing that the crowd funding model is derived. It is raising money from investors or financiers through the internet community and social networks for a particular cause. American based indiegogo.com for example, has been in the forefront of helping filmmakers and artists get capital for their ideas through crowdfunding.

The CrowdFunding Pie
Africa’s not left behind either, innovators can now pitch their ideas online and get a piece of the crowdfunding pie.

“If you thought that we are not shaping the technological landscape of the world you are utterly wrong.” Says Salim Mohamed, a Kenyan IT expert based in Nairobi, Salim believes that next destination for software developments and mobile apps is Africa.

“ India in the past decade was the outsourcing destination for most of the western firms and even the most parts of the world, but now Africa is giving them run for their money, courtesy of efforts by African government to scale up internet and ICT connectivity.” He adds.

On crowdfunding he adds: “ Right now startups have begun to work with local and international likeminded angel investors to set up local SMEs, look at mLab, it’s a practical example that one can link up with financiers and come up with a portal for techies to bring their creativity into fruition”.

The advent of crowdfunding platforms (CFPs) is increasing globally, it is expected that by the end of 2012 there will be more than 500 platforms in the world, a 60% increase since the past year, this is according to crowdsourcing.org

Start Me.co.za Crowdsourcing Platform South Africa has introduced a CFP, known as startme.co.za, it aims at bridging the gap between techies and investors, other African countries are Kenya’s pivot east which works in conjunction with Grow VC Group-an independent, “first global, transparent, community-based platform dedicated to entrepreneurs and investors.” As it defines itself in their website.

Grow VC
According to their website “ Grow VC enables great ideas and great teams to get visibility with the right investing audience, funding and support earlier. Grow VC is more than crowd funding, it’s a nurturing ecosystem where entrepreneurs can connect with experts, funders, team members, new customers and partners to realize their ideas.” They fund startups which need initial funding of up to 1M USD.

America leads the crowdfunding bandwagon with 191 CFPs, with Britain having 44 CFPs and hundreds in other European states

According to John Kieti, Kenya’s m:lab manager, based in Nairobi,  Africa is prepared for crowd funding though there are a number of challenges still.  He notes that low investor interest and limited crowd funding knowhow should be addressed.

“But am optimistic about the role of crowd funding in providing alternative source of capital especially for tech-entrepreneurs and agropreneurs” he says.

But how will techpreneurs avoid scams?
John offers insights “The industry itself and market dynamics should give rise to control mechanisms that build trust between startups, intermediary platforms and the funding crowd.”

He advocates for sound measures that protect both the innovator and the funder. “Regulations should follow innovation, to reinforce existing industry built mechanism otherwise premature regulation can stifle innovation around crowd funding - USA's jobs act could be referred to as guidelines if anything must be legislated”

According to the 2012 Entrepreneurship Index, three out of the four first countries listed to be above average in world rankings on doing business come from Sub-Saharan region.

Country Mean Score (Entrepreneurship Index)
Global Average 2.49
United States 2.80
Nigeria 2.70
Kenya 2.63
Ghana 2.56
Source: Silicon Valleys of the World- The Best Places for Entrepreneurship around the Globe.
CrowdFunding Challenges
It is in such encouraging statistics, that Salim sees the potential that Africa has in influencing world technology, “ We are the future of the world, the end is here, after here it’s here there’s no place else apart from Africa, so if one needs to invest they have to come to Africa, because our economies are accelerating by an average of 6% annually and that is a remarkable fact for interested entrepreneurs both local and international” he says.

Other factors come to play when considering funding for startups, and political instabilities have had a damaging effect on funder confidence in African entrepreneurs.

Countries like Kenya with a notable ethnic indifference which gets scruffy during elections is something to watch out for - Investors are scared away. The rise of militant groups in the western Sub Sahara region is an indicator of poor or complete lack of investor interest in the region.

“ When one hears about Africa and they are in the west, bad things come to mind, they think, corruption, poverty, lack of proper infrastructure, and the list goes on and on” Salim says.

The endless challenges that African entrepreneurs face are not only based on political fears, but also on being sustainable even in tumultuous times. African states are likely to enjoy the returns of their innovative citizens if only proper measures to increase connectivity and access to funding are given sound policy backing.

As startups in Africa embrace crowdfunding, the future of African entrepreneurs appears bright; only time will define the quest for funding and address investor confidence. The techprenuers will need more than a pitch and an idea, to convince the funding crowd.

Sam is tech enthusiast who likes writing about technology and human related features, he writes, he contributes for numerous sites around the world, he's also a producer for Africa Journal a Pan African magazine program that airs in five continents and in more than 33 countries in Africa.
 

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