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Thread: Crowd Funding in SA?

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    Junior Member Cimmerian's Avatar
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    Crowd Funding in SA?

    Hey all,

    I've had an idea that I've developed and worked on for the last three years, and I've slacked off from actually getting anything done about it - and I want to change that. I want to start a (pty) ltd private company by the end of the year, but this is a huge challenge for me, because I don't have any education in business other than a few years of economic and management sciences taught to me during primary and high school. I know I need to gain capital in order to get my business running, but that in itself is also a challenge because I'm only 19 years old and I fear I wouldn't be taken too seriously by investors, and I'm also not comfortable with seeking investors because the principle behind my business is not one of commerce or retail, it involves royalties and advertising income generated through eCommerce, so I cannot accurately project a thorough financial analysis that would be convincing enough to attract investors or even offer the foundations for a solid exit strategy, so I figured my only resort would be crowd funding.

    I've planned to use www.kickstarter.com in hopes to raise funds for my business, but there's a drawback in the sense that one needs to qualify for an Amazon payments account. in other words, I need to be an American citizen. I spent a long time looking for workarounds and came across a company called Bridgestarter, that offers revenue collection services, enabling individuals outside of the United States to use Kickstarter by providing them with a holding account that costs a fixed, set price per procedure. That was my failsafe, but it seems fate has taken a turn for the worst because of a little issue Bridgestarter is having with their revenue collection services:

    PRESS RELEASE

    May 9, 2012

    We have learned that our Revenue Collection Services - which provide individuals outside of the US with the ability to use Kickstarter - have, effectively, been shut down. Amazon Payments sent notice that Bridgestarter's accounts have been suspended. We are currently trying to rectify the situation with Amazon Payments and hope for a speedy resolution. In the meantime, we have refunded all fees paid by our customers and have issued letters of explanation and apology.

    In spite of this setback, we remain committed to helping entrepreneurs raise money for their projects:
    Both our Professional and Distribution services remain available to those wishing to launch projects on other crowdfunding sites (i.e. indiegogo.com, rockethub.com, etc.);
    In the coming weeks, Bridgestarter.com will be redeveloped to enable entrepreneurs to promote their projects on the site for free; and
    We are watching the CROWDFUND Act legislation in the United States, as there may be an opportunity to use Bridgestarter as either a vehicle for crowdfunding or as an investment fund.
    We hope to resolve the situation with Amazon Payments and enable the world to access Kickstarter once again. This is because Kickstarter remains the deepest market for the funding of creative projects in the world. The founders of the site were innovators, just like Bridgestarter's customers. They inspired the world to create and support creators in a way no one else had ever imagined. This is an example of financial innovation that has come from the people and not from banks or governments. Everyone deserves access to the benefits and freedoms this offers.

    Please reach us with any questions at info@imaginationunleashed.ca.

    Alex Cruder
    Founder of Bridgestarter.com
    I'm running out of funding options here - does anyone have any advice to give me that I could put to use in the quest for financing my dream?

  2. #2
    Diamond Member adrianh's Avatar
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    Do you know how much money you need and exactly how it will be used?
    How easily someone is offended is directly proportional to how stupid they are.
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    Junior Member Cimmerian's Avatar
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    For the most part, yes. R900 000.00 will be needed for the first year's employee wages, around R12200.00 a year for server costs and maintenance, and as for renting an office space, I can't be too sure because I'm only looking to employ 10 people for the first year so I don't need anything too big, but it seems the only thing on the market right now IS big... I can't relocate too far from home and unfortunately I live in Sandton, where when one says they're looking for office space to let, the real estate agents immediately assume "I could probably sell that vacant office in the Michelangelo hotel! yay!" /notaffordable

    Purchasing 10 decent computers for work purposes, a printer and fax machine and telephone and internet line wouldn't set me back further than R90000.00 for the first year either, I'd imagine. I just need an accurate estimate for office space rent...

    And then a decent R50 000.00 set aside for emergency purposes.

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    Diamond Member adrianh's Avatar
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    How did you derive the R900,000 figure for employees?
    How easily someone is offended is directly proportional to how stupid they are.
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    Junior Member Cimmerian's Avatar
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    1 Programmer - R10000 p/m
    1 Graphic Designer - R7000 p/m
    1 Receptionist - R6000 p/m
    1 Systems Administrator - R7000 p/m
    1 Network Administrator - R7000 p/m
    1 Project Manager - R10000 p/m
    1 Bookkeeper - R8000 p/m
    1 Founder & CEO - R10000 p/m

    R10000 set aside for financial bonuses

    Towards the end of that year I want to bring two more programmers and one more graphic designer on to the team. I'm not looking for employees with years of work experience, I'm satisfied with entry-level just to kickstart things a bit.

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    Diamond Member AndyD's Avatar
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    I don't see any investors bankrolling your own salary and any financial bonuses paid out would surely be profit related, if the company makes money it will be able to pay these itself so I don't see them funding that either. Why can't the business be grow more organically rather than needing to be so investor dependant to get it off the ground?
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    Junior Member Cimmerian's Avatar
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    Quote Originally Posted by AndyD View Post
    I don't see any investors bankrolling your own salary and any financial bonuses paid out would surely be profit related, if the company makes money it will be able to pay these itself so I don't see them funding that either. Why can't the business be grow more organically rather than needing to be so investor dependant to get it off the ground?
    I'm very new to the idea of owning a business, that's why I joined these forums. So forgive me if I come across as ill-educated in that regard. However, I do not want that to cripple my ability to turn a world-changing idea into reality. I want to get this started as soon as I can and learn along the way. What do you mean by "organically"? If you're asking me to chip in my own money, that's not a possibility - I'm 19. I don't have the funds necessary to employ even just one person. I can't ask family for money either - if they did offer me a loan, I'd think them insane (financial troubles). But my idea could revolutionize an entire industry and improve it for the better - 3 years of research into the matter proves it'll make an impact, and once the business has enough reputation, investors will be coming to me. But I don't have the funding necessary to start the business, and that's all I need to get it set in motion.

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    Diamond Member AndyD's Avatar
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    I admire your vision, and I wasn't thinking you came across as uneducated but it's a tall order to persuade any investor to back a start up business especially as you have no track record and aren't investing in it yourself.

    1 Founder & CEO - R10000 p/m
    Plus you're asking they pay you a salary

    I want to get this started as soon as I can and learn along the way.
    And possibly your 'school fees' as well.

    By 'grown organically' I meant started on a smaller scale with less overheads and less risk to an investor. As the business suceeds it would then fund its own expansion at a natural rate.
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    Diamond Member adrianh's Avatar
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    The thing with investors is that they don't give you R900K and you give them nothing in return. For anybody to investing a business they have to be assured that they can make more than just leaving the money in the bank or buying a house and renting it out, etc. That would be on a close to zero risk investment. So, lets say for example that they could make R50,000 over five years, this means that in 5 years time they would get R950,000 back.

    Now lets look at risk. You have an idea and zero experience, zero track record and you are very very young. What sort of a risk do you think this poses to an investor. I think that the investor would be looking at worst case which means that he stands to lose R900K. Now, the investor would say OK, this is no longer an investment, it has now changed into a pure gamble with odds of say 100:1 of success. I think that the investor would then reason that if he is going to take such a gamble that he would want to make his money back ten fold.

    It all goes to risk vs reward. This is the reason why banks want collateral, they try to mitigate their risk against a tangible asset that they can sell to recover their "investment" if the project fails.

    Very, very, very few people would provide unsecured (no collateral) loans because the risk is too high. What you are looking for is an Angel Investor - somebody that believes in you and trusts you....but remember, there is always a high price to pay.
    How easily someone is offended is directly proportional to how stupid they are.
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    Junior Member Cimmerian's Avatar
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    I know all of this... I'm not looking for investment opportunities because I know it isn't going to pan out. I'm looking for crowd funding as a means of gaining venture capital - and was wondering if anyone here knew of any alternatives to Kickstarter that aren't all too limiting. The reason I can't really go for the angel investor option is because angel investors usually consider if the individual has invested financially into his/her own business and has a decent management team. I have neither of that to show a potential angel investor. And the premise behind my startup is essentially a website - how would one offer a decent exit strategy with that in mind? I can't really start it by my own means - I'm a qualified internet developer, not a network administrator, and this kind of website will need a dedicated server to start - From then on it would have to open it's own data centers. I have the know-how to code and run the website with a little help, but when it comes to the hardware side of things - I'm going to need an employee who can.
    Last edited by Cimmerian; 07-Jun-12 at 11:53 AM.

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