Crowd Funding in SA?

[Cimmerian]

Do you have any income at all?

Yes, I do. I'm a freelance web developer and I work a full time job at a Market Research company called Marketbase -I do interviews and prepare questionnaires. I'm also the co-founder of a theme development team that makes themes for forum software and I take 10% of the income as community manager and another 10% as the lead developer, which is an amount agreed on by our entire management staff. I average about R26k p/m in total.

[Goodfirm]

For me, I think there is a legal factor here.

To suit crowd funding, your venture must be of social initiation nature, not for profit.

If you could find a way around that, SARS and Hawks wont trouble you!

That's my take.

[Bizfact]

You are doing quite well for yourself there buddy. Will you have partners in your business?

[Dave A]

To suit crowd funding, your venture must be of social initiation nature, not for profit.

If you could find a way around that, SARS and Hawks wont trouble you!

If it's not for profit, why would the investors invest?
And why would SARS and the Hawks have an issue?

Granted, it falls in the "high risk investment" category... but ultimately it's what Silicone Valley runs on - everyone hoping they're getting into the next Amazon, Google, or Facebook on the ground floor. Some work out, many don't. But you know that going in.

[Goodfirm]

@Dave, its because of our South African Company Law.

Crowd funding, the way I understand it, is a mass funding. It existed decades ago for charity purpose. Not for profit motivated businesses.
I know that only Section 21 organization, should ask/or receive donations/charity.

We use the word, "crowd funding", and not offering shares, equity, or asking for business loan, instead we offer discounts on started business, free memberships, gifts even free service of some sort. Crowd funding have no direct rewards on profits. Does anyone remember that movie producer, who raised his millions on the upmarket street corners? That was crowd funding, about 10 years ago. Even in that way, he attracted SARS attention.

Hey, things change! Online village compelled the Mercantile Law to change too!

@Cimmerian, my advise seek legal grounds for South African environment.

[Just Gone]

Goodfirm ...... you sound and type like someone else on this forum ...

[Goodfirm]

Goodfirm ...... you sound and type like someone else on this forum ...

@Kevinb, How can I help you?

[Just Gone]

@Kevinb, How can I help you?

Nope .... no-where thanks.

[adrianh]

@Goodfirm - you gotta catch up with the times....when us skollies here in Mitchells Plein get together to buy a borrel then we all put in 50 cents and us crowd who fund the borrel drink it stukkend.

http://en.wikipedia.org/wiki/Crowd_funding

[Dave A]

The legal hurdle is a prospectus (which is surmountable and frankly something I had assumed would be in place if you used a reputable crowd funding site). The ones linked to so far seem to have a well structured concept...

To my mind the biggest hurdle is you have to go public with your big idea. Properly protecting IP is a PITA at the best of times - even tougher if you end up not being the first to market with a finished product.

[Cimmerian]

Sorry I haven't replied to this thread in such a long time. I've been busy. I didn't find much help with the crowd funding options, but I took a longer approach - I started up a small cost-per-action content locking website (https://shrinkonce.com) with a business partner, and we have registered it as a business in California (since he lives there, we found it best to register there to avoid extra tax). All the profits after payment plus my salary from it are being fed into an account which I will use to study at StarterLeague for the duration of 3 months in Chicago during 2014. They have an investor programme. If that doesn't pan out - I will be approaching http://labs.quirk.biz for advice, considering one of their employees contacted me after reading this thread.

One thing I want to add - if you're interested in starting up a business in the United States, expect to be taxed up your rear. $800 minimum annual tax fee for the Franchise Tax Board in California (the Franchise Tax Board is not the same as the IRS, so there's those fees too).

[Just Gone]

we have registered it as a business in California (since he lives there, we found it best to register there to avoid extra tax)

.................... A bit of a contradiction here or what ........

if you're interested in starting up a business in the United States, expect to be taxed up your rear.

[Citizen X]

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.

Hi Cimmerian,
You have got entrepreneurial spirit, that’s for sure! I think you’ve got a good business idea and actually have form of forecasting in place. Another solution to your problem of finance is to attempt to get partners who will be willing to invest in the business.
I wish you every thing of the best with your business! Please keep us posted, especially successful results etc

[cyppok]

For me, I think there is a legal factor here.

To suit crowd funding, your venture must be of social initiation nature, not for profit.

If you could find a way around that, SARS and Hawks wont trouble you!

That's my take.

Fortunately you are wrong. Kickstarter does take a 10% or so (commission on your 'grant' donation).
The problem with international for it is they could say its' revenue and whatnot which is it is not but capital for free in essence. You can and most are for profit, it doesn't have to be non-profit.

I tried developing a site or two but gave up midway through it. Its still up there hosted on kodingen, the free host but I gave upon any direction for it. My development skills are stuck at basic html using dreamweaver and poping in widgets for effects. I can curve corners, lol. [border radius: 15px;]

Cimmerian I still do not understand what your focus or idea revolves around. Also do remember the most important thing is not the idea but the execution of it in a way that entices customers to use your product.

The other thing is there are probably better developers than you, and cheaper available in Ukraine for probably 5000Rand or 600-800 dollars a month or so, just throwing it out there fyi.

My site was first a blog then I figured the name was good for chocolate, now I am thinking hard candy. Looked for hard candy equipment for small batch scale, gave up. Now I pontificate here for a while.

Cimmerian yes you get taxed here in the states on the whole its about the same as in SA. In reality once you spend money and depreciate, write off lots of things its more convenient especially with an accountant for a few hundred a quarter/per filing.
The wonderful thing about the U.S. is that there is no BEE(for now and future hopefully) and if you are successful you don't have to be robbed twice once by taxes second by someone demanding a piece.

P.S. 900k is over $100k seems like a bit much.

[Cimmerian]

.................... A bit of a contradiction here or what ........

Yes, it may seem so, but that's a simple case of misunderstanding because I was not clear enough in that post. My business partner, who is integral to the success of this small business because he is the only capable developer I know in the United States willing to work for a small amount, is my business partner because our transactions are handled via Paypal, and because he has a U.S. Bank account, there is less chance of his Paypal account being limited. I have had many Paypal account limitations in the past, so I didn't want to risk it. My initial idea was to register ShrinkOnce here in SA as a Pty Ltd, but I learned that the Federal Tax Board (the Tax Authority of California) doesn't cater too well to local owners of businesses outside of California, and demand that the company be registered as a foreign LLC in the state of California. If I had taken that approach, it is likely I will have been paying taxes for both the Pty Ltd and the LLC. Much easier just to register the LLC there and be done with it.

Hi Cimmerian,
You have got entrepreneurial spirit, that’s for sure! I think you’ve got a good business idea and actually have form of forecasting in place. Another solution to your problem of finance is to attempt to get partners who will be willing to invest in the business.
I wish you every thing of the best with your business! Please keep us posted, especially successful results etc

Thank you very much for the compliment Vanash! I appreciate it. I have slightly changed the business model of my idea after doing some market research (I'm so dedicated to this that I actually got a job as a market research analyst for some hands-on experience), I found out key factors and weaknesses in my old business model that needed to be sorted out. I'm going to be running several SWOT analyses on my business plan, before I take an investment approach. It's very likely the money from ShrinkOnce won't be enough to cover everything, but it'll give me some capital of my own to invest. Outside of that, I will be approaching the Angel Investment Network website and organizing a pitch. I'll have to trade equity, but I really do believe it's worth it, because this idea is, for the most part, world changing.

Fortunately you are wrong. Kickstarter does take a 10% or so (commission on your 'grant' donation).
The problem with international for it is they could say its' revenue and whatnot which is it is not but capital for free in essence. You can and most are for profit, it doesn't have to be non-profit.

I tried developing a site or two but gave up midway through it. Its still up there hosted on kodingen, the free host but I gave upon any direction for it. My development skills are stuck at basic html using dreamweaver and poping in widgets for effects. I can curve corners, lol. [border radius: 15px;]

Cimmerian I still do not understand what your focus or idea revolves around. Also do remember the most important thing is not the idea but the execution of it in a way that entices customers to use your product.

The other thing is there are probably better developers than you, and cheaper available in Ukraine for probably 5000Rand or 600-800 dollars a month or so, just throwing it out there fyi.

My site was first a blog then I figured the name was good for chocolate, now I am thinking hard candy. Looked for hard candy equipment for small batch scale, gave up. Now I pontificate here for a while.

Cimmerian yes you get taxed here in the states on the whole its about the same as in SA. In reality once you spend money and depreciate, write off lots of things its more convenient especially with an accountant for a few hundred a quarter/per filing.
The wonderful thing about the U.S. is that there is no BEE(for now and future hopefully) and if you are successful you don't have to be robbed twice once by taxes second by someone demanding a piece.

P.S. 900k is over $100k seems like a bit much.

No, the real problem with international dealings on Kickstarter is that Kickstarter requires you to be a U.S. citizen in order to use their service. The only other way around that is to approach a U.S. citizen who can offer you a holding account, or if you own a business in the United States and that business has a U.S. Bank account. I actually considered this option while registering ShrinkOnce, but because there's two owners and one of us is South African, the tax declarations will be extremely complicated. It's just too much unnecessary work, when there are other, faster options. Besides, I'd have to pitch the idea using ShrinkOnce branding, and that is a completely different industry to my idea.

Fortunately, my development skills are adequate for the product (or rather service) I'm trying to offer. I've been very interested in programming, so much so that I completed an online exam and was awarded a Zend Certification in PHP at the age of 13. I studied a Mastered Learning Methodology (self-paced) 2 year long course on Internet Development using XML, Java, JSP, JavaScript, HTML, C#, .NET, MySQL, Windows SQL Server, Advanced Linux and so on. Since the course I was put in was self-paced, I was able to finish this course within 6 months, and was awarded my Higher National Diploma (BTec HND Information Systems Internet Development) and completed my third and final year studying Artificial Intelligence (C++), Advanced Software Engineering, and Neuropsychoanalysis in the following 12 months, before achieving my Bachelor of Computer Science Degree. Since then, I have tought myself Node.js, Ruby, Scala and even LOLCode for the fun of it. I'd say the only thing I'd bother to challenge myself to learn about any further would be Assembly Language.

Also, my idea is pretty solid. It's much larger than just what I'm about to describe, but basically, I have come up with a researched and prototyped solution that can end music piracy once and for all, as long as musicians use my service and my service alone (other services won't be able to offer the same security for a long while, so spreading will be counter-intuitive). As for my service as a whole, think Spotify, but more enthusiastic about bringing underrated artists to surface rather than just enthusiastic about streaming music, and all driven by the people. Cutting out the recording studio, if you will. It's huge. We are going to be the Apple of the music industry if not even better, and that's a promise. That's the only information I'm sharing on a public discussion forum.

As for hiring developers abroad, I am a firm believer that you get what you pay for, so I would rather pay a higher price for quality than a smaller price for a bargain. There are numerous other ways to cut costs.