#Africa Are we finally entering the age of African crowdfunding?

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The potential for crowdfunding has been much discussed in Africa over the past few years, but the space got a real shot in the arm last month with a notable funding round for South Africa’s Uprise.Africa.

Launched in October last year, equity crowdfunding platform Uprise.Africa aims to help innovative local businesses raise capital while gaining market validation. Two campaigns have been hosted on the platform so far – one failing to gain any traction; the other exceeding its raising target.

Last month it secured an undisclosed amount of funding from Silicon Valley-based VC firm Nexxus Ventures, based on a ZAR60 million (US$4.2 million) valuation of the company, to enable it to launch new deals on its platform in the coming months. Uprise.Africa and Nexxus will partner on identifying high-potential South African businesses seeking funding for expansion.

From the team behind project-based crowdfunding platform Thundafund, Uprise.Africa is a leader in the equity crowdfunding space in South Africa, but crowdfunding in general is also taking off across the continent. There have been recent launches in countries like Rwanda, Libya and Angola as platforms look to provide funding-starved entrepreneurs with alternative ways of financing their businesses.

Patrick Schofield is the founder of Thundafund and Uprise.Africa. He agrees crowdfunding is on the move on the continent, but says it is becoming established in ways that are locally appropriate.

“Where your traditional models of of equity, debt, rewards and donations crowdfunding lead the fields internationally, what we are seeing Africa is variants of these being established more linked to existing funding structures. In all countries in Africa that have reasonable internet penetration, local crowdfunding platforms have been launched,” he said.

Some barriers still remain to be overcome, however. Schofield says the concept of crowdfunding is still often misunderstood by people who know the term but not the detail.

“Trust, however, is more difficult to establish and takes time and some good examples of success, regardless of whether it has been shown as a reputable business model on the international stage. People want to see it work in practice, in the local context,” he said.

“On the donations crowdfunding front, it is quickly gaining traction. On the investment front, regulatory frameworks and exchange control structure are still a barrier to growth.”

Regulation, moreover,varies hugely from country to country. In South Africa, the Financial Sector Conduct Authority (FSCA) has established a formal licencing structure, while in Rwanda the regulator is open to work with pioneers in the industry to build the regulatory structure as they develop. Other countries, however, are further behind.

Yet the concept of crowdfunding is not new to Africa. The community funding of causes is an age-old format. In Kenya, the tradition of “harambee” sees communities club together to hold events such as weddings and funerals, and M-Pesa is bringing tech to this concept by setting up a wallet that allows people to collectively contribute.

Kenyan startup M-Changa is taking this a step further with its online platform that allows people to post campaigns, raising for things like events, school fees and medical treatment, and fundraise from wider networks.

“Crowdfunding in the sense of community fundraising has existed in Africa for centuries. M-Changa can be described as a digital harambee for instant understanding of the concept in Kenya,” said general manager Matt Roberts-Davies.

“Crowdfunding makes it possible for someone to raise funds in a secure, transparent and convenient way. This makes crowdfunding incredibly valuable where trust is rare, such as in East Africa. It might take some time for the concept to go mainstream as it has globally.”

He agrees with Schofield, however, that challenges are still prevalent in terms of encouraging uptake.

“The need to use such a platform can be difficult since people are used to raising funds in their own way and are reluctant to switch,” said Roberts-Davies.

“The idea of using a technology platform is new. It is picked up easily by those who are well educated and exposed. This digital form of crowdfunding is important because of the transparency, it has been very slow to catch on in Africa however.”

The future is bright, however.

“I see different types of platforms emerging to include rewards, real estate, peer-to-peer lending and equity,” he said.

“As payments become more digital, all forms of crowdfunding are likely to improve.”

The post Are we finally entering the age of African crowdfunding? appeared first on Disrupt Africa.

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