‘Crowdfunding Helps Many Start-Ups’ – Helen Grange

Thundafund Online Crowdfunding Cafe takes the Cape Argus ‘Life’ front page feature for crowdfunding assisting start-ups.

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(This article was also featured in The Star & Daily News newspaper, IOL and Thundafund had an interview with Jeremy Maggs on PowerFM.)

Without funding, good ideas often remain just that.

And seeking a loan from a financial institution can be fraught with obstacles, not to mention formidable interest rates. So crowdfunding – raising money through contributions from a supportive “crowd” via the internet – is proving to be the answer for a growing number of projects and start-ups, particularly those in the creative industries.

For example, the play about the life of anti-apartheid activist Dulcie September, who was assassinated in Paris, Cold Case: Revisiting Dulcie September, was crowdfunded by Thundafund and is booked for the Baxter Theatre in Cape Town in May.

And a documentary titled Taking Stock, about the history of Benoni Discount Stores, was made possible because of donations through Kickstarter, the world’s biggest crowdfunding platform for creative projects.

“I wanted to see if crowdfunding would work for the Dulcie September play, and we ended up raising R34 000 in 40 days. Our target was R50 000 but the tipping point was R20 000, to get it going and pay the scriptwriter,” says Merle Falken, the play’s marketer.

Thundafund, which was launched in June 2013, is South Africa’s leading crowdfunding platform. It started with six projects, and last September it hit its first “million in a month” milestone, with R1 090 830 raised for 13 ventures spanning the creative, innovative and entrepreneurial spheres.

“For the 105 projects that have been successfully funded since our launch, R3 986 390 has been raised,” says Thundafund co-founder Andrea Morgan.

Seeking funds on Thundafund at the moment is Madam & Eve The Musical, but crowdfunding has also been a great funding vehicle for business start-ups, including Honest Chocolate café in Cape Town, which raised over R66 000, and the “green” Espinaca Bakery in Khayelitsha (R11 200), brainchild of a young entrepreneur, Lufefe Nomjana.

A fledgling publishing company, Book Dash, printing books cheaply for children, raised R79 860, and Capsule Technologies raised R20 200 to develop its solar-powered Android computer for people in underprivileged rural areas.

Thundafund operates on an “all or nothing” model. If you’re seeking funding, you have to reach the “tipping point” or Milestone 1 in order to secure your funds. If you don’t reach this target within the duration of your campaign – 30 to 90 days – the funds are returned to the backers.

“It’s a risk-free model, allowing project creators to raise awareness within their market or audience by pre-selling the product before engaging in significant resources,” explains Morgan.

Since its launch, 71 percent of projects have succeeded on Thundafund. To register, a short summary of the idea or venture is submitted, with the concept for a crowdfunding campaign.

“This is then reviewed by the Thundafund team and feedback is given, either working with our team to create their campaign or looking at alternative avenues better suited to their goal. This process prevents entrepreneurs from spending large amounts of time fleshing out their idea in the wrong direction,” says Morgan.

In other words, not all projects are equal, and it’s not a simple matter of pitching your idea and touting for funds online. The success rate on Kickstarter, for one, stands at just 43 percent. To post a project onto Thundafund is free, but if successful, Thundafund charges a commission, deducting 5 percent from registered NGOs and 7 percent from individuals and organisations.

“Crowdfunding is not a quick gimmick to access easy cash. It’s a marathon, not a sprint,” says Morgan.

Funders of a crowdfunding project are encouraged by incentives, so Thundafund, like other crowdfunding platforms internationally, operates on an “in kind” reward system.

The reward is determined by the project creator, so typical rewards might be a book or CD, VIP access to an event, or a credit on a movie. “For the Dulcie September play we offered a free ticket for an underprivileged person to go and see the play,” says Falken.

Statistics show that only three out of 10 new ventures are successful. Crowdfunding has been shown to increase this to a success rate of close to seven out of 10 businesses becoming successful, according to the World Bank Report.

Why? “Because crowdfunding gives the company time to test the business model and develop a marketing strategy. As a start-up, this is crucial and provides valuable information to show whether the company has the ability and support needed to succeed,” says Morgan.

A look at the projects on other local crowdfunding platforms, like StartMe and FundFind, reveals that charity drives for individuals in need also do well – Tshwane cleaner Nompulelelo Mkhonza made her target of R4 500 on StartMe to study a BSc degree, for instance (minus 5 percent commission for StartMe) – but more pedestrian ventures, like publishing a book, barely get out of the starting blocks before their time is up.

Also, some projects succeed better on one crowdfunding site than on another. Allison Botha, who sought crowdfunding for her initiative, Lydenrust Rural Farm School, made R3 200 on FundFind but did not succeed at all on StartMe. Like other project creators, she has also tried international crowdfunding sites, but found the registration and commission fees prohibitive due to being in euros or dollars.

Perhaps surprisingly, no known fraudsters have made any inroads on local platforms like Thundafund, and globally, only 0.01 percent of those launched on Kickstarter have been identified as charlatans.

To potential crowdfunders, Morgan advises: “Keep a keen sense of savvy about your backing. Look at the project creator’s planning, their updates, the links they include – such as their social media and their video.

“Don’t be shy to contact them directly and ask for further information.”

“Crowdfunding is still in its infancy in South Africa, but as more people engage it and successful projects are realised, so more entrepreneurs will consider turning to it,” says Morgan.

“Ultimately, crowdfunding is a new way of thinking which allows entrepreneurs to create something independently, retain 100 percent ownership of their work and grow a community during the process.

“Eventually, we foresee ventures going ‘How did we ever raise funds without crowdfunding?’”

LOCAL CROWDFUNDING SITES:


CASE STUDIES –


PROJECTS ON THUNDAFUND:

MADAM & EVE THE MUSICAL: www.thundafund.com/madamandeve

The team is trying to raise R4m needed to put on a musical based on the cartoon strip characters – and travel the country with it.

At last check, it had raised just R14 300 with only 45 days to reach its tipping point of R2m – when it can keep all funds raised.

It is asking fans to contribute between R100 and R100 000 in exchange for Madam & Eve merchandise and VIP access to the musical.

It seems unlikely that it will reach its target and become “the first ever crowdfunded South African musical!”

SAFE TOWNSHIP LIGHTING: www.thundafund.com/shaktienergy

Shakti Energy is trying to offer a solution to communities with no access to electricity – while creating employment.

It works this way. Residents will pay R80 for a recharged LED light that will provide enough light for up to 30 hours.

Each week they take the light back to the township sellers, who will, for a fee, recharge them by pedalling on a PowerCycle generator. They can recharge five lights in 20 minutes.

The scheme easily managed to reach its first funding milestone of R10 000.


PROJECTS ON FUNDFIND

THE AMY LARTERBAND’S DEBUT ALBUM

Amy Larter has been working for two years on her debut CD. Having already recorded it, she needed to raise R10 000 for other costs involved with its release.

Fans were asked to contribute R50 to R2 500 in exchange for downloads and a performance by The Amy Larter Band.

Fifty-seven people contributed R14 750, making it a successful appeal for this Cape Town band, active on social media and with a presence on YouTube.

KIDSPARK

Liezl is trying to raise R250 000 to launch Kidspark, consisting of “various play areas such as jungle gyms, swings, a maze, a smaller play area for toddlers aged 4 and under, an interactive sensory wall, an art studio, a skate rink, a coffee shop, and a gift and souvenir shop”.

There is no information on the location of this proposed indoor park.

In exchange for contributions from R50 to R5 000, Liezl is promising rewards such as your name on a bench and on a founders’ wall, and lifetime membership for your biological children.

At last check it had not received a single contribution with 12 days to go.


PROJECTS ON STARTME

YOGA GEAR FOR GUYS

A male yoga teacher, Aidan John Walsh, said he was frustrated at the lack of proper yoga clothing for men and wanted to bring out a range.

He sourced 100 percent cotton from a Cape Town manufacturer and needed R2 500 to have master patterns drawn up for small, medium and large sizes in eight designs.

He planned to bring out a rangein black, grey and navy, and said the clothing would have no buttons, zips or sewn-on labels. But silkscreening would add interest to the designs.

In exchange for contributions, he offered incentives of men’s yoga tops (R300), pants (R500) or both (R1 000).

He managed to raise the full amount from a single contributor.

HELP GET ME TO MY BEST FRIEND’S WEDDING!

Carla is on a semester abroad in Finland for her master’s degree in education. She is there until May. Her best friend, Theo, is getting married in Cape Town next month, and she needs R20 000 to pay for the flight to SA and accommodation. She had raised R335 at last check.

Her incentives are unique: For R250, she will do 10 push-ups in the snow, while for R1 000 she will go ice-hole fishing and sing any song you ask for. She promises video proof.

Via Helen Grange for Independent Online.

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