Have you ever contributed towards a colleague’s send-forth party in the office?
Most offices have a group of staff that put themselves together as a planning committee, when a fellow staff announces an intention to exit.
Members of the committee send emails or go to everyone’s desk saying, ‘We need you to donate towards this upcoming party’
After collecting donations from everyone and making plans, comes the fun part; a great office party.
or perhaps you have donated towards a health care intervention for someone who was critically ill and needed funds urgently?
You don’t know the person in a personal capacity, but you saw a plea for help by a celebrity on social media and compassion compelled you to give towards the cause.
Now think about crowdfunding in relation to investing.
It’s the same concept; A number of people invest small amounts of money, which when collated makes a healthy sum for investing in a project or venture.
The only difference between investment funding and donation-based crowdfunding is, with investment crowdfunding, you get your money back with returns or you become a shareholder in a business.
Now think about investment crowdfunding via the internet. Enter crowdfunding platforms
A platform is a digital business that enables social or business interaction. So, a crowd funding platform enables interactions between two sets of people; those who have money, ‘Investors/Givers‘ and those who need the money ‘ businesses/individuals‘
Bringing it all together; A crowd funding platform is simply a digital business that enables an interaction between two parties; the investor/giver and the business owner/creative individual
Crowdfunding platforms are growing really popular in Africa, especially in the agriculture space in Nigeria
They are an active alternative source of finance in more developed countries for start up companies and creative artists. In Africa, they enable the growth of micro businesses in key sectors.
Some examples of active crowdfunding platforms
Kickstarter is the world’s largest funding platform for creative projects. It is a reward-based crowdfunding platform. With reward-based funding, ‘Funders’ pledge towards a project in return for the product, perks or a gift. For instance, a team of engineers can raise funds to create a drone and in return for your funding, give you a sample drone or a thank you note. (I bet you would prefer a sample drone)
In Nigeria, investment crowdfunding platforms are more popular than donation-based platforms. It’s interesting that most crowdfunding platforms in Nigeria exist in the agriculture space. I guess there is a clear funding gap in that space.
In Ghana, fundingafrica offers an opportunity for anyone to support local projects while growmyhustle provides the creative industry in Kenya a platform to raise funding for projects.
What are the 2 key factors to look out for before you invest in a platform?
I get a lot of questions on what to look out for when investing in a crowdfunding platform. Two of the most fundamental characteristics to look out for when investing in a crowdfunding platform are;
1. Security of your funds
Crowdfunding relies largely on trust. You trust that the money invested or donated will get into the hands of the right party. This is why most crowdfunding platforms go the extra mile to offer a guarantee policy on your donations getting into the hands of the right beneficiary.
In Nigeria, most of the crowdfunding platforms offer insurance cover on capital invested. That’s probably because of the risky nature of investing in the agriculture space.
When checking out a crowdfunding platform, check out the guarantee policy or insurance cover in place before you invest.
And stick with established platforms. Look out for the track record of successful transactions and testimonials from people who have invested in that platform, before you make an investing decision.
2. Credibility of management
Ensure you check out the management’s team’s experience and expertise to see if they fit the bill.
Do they gave technical expertise in that industry? For instance, if it is an crowdfunding platform for agricultural projects, there has to be at least an agricultural expert as a member of management.
You should also review and compare the platform to ensure it is provides a transparent process to invest. If the process is not clear or fairly simple, it may be an indicator of disorganization.1
Customer service. While the crowdfunding industry is built on the foundation of the Internet, customer service in all forms should be timely and professional. Whether you prefer communication via phone, email or online chat, make sure the crowdfunding platform excels in all of these areas to assure that you have the support you need, when you need it.2
Crowdfunding is still at early stage in top cities in Africa, but it holds huge potential to drive economic growth and development.
Have you invested in a crowdfunding platform before? What was your experience like? Comment below
Refrences – 1. https://www.alexisassadi.net/