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.
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 PieAfrica’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 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 VCAccording 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.
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