There are numerous ways that African tech businesses can try to access funding, however equity crowdfunding has untapped potential.
“Despite its slow adoption in developing economies, crowdfunding has been heralded as an opportunity to expand access to capital for entrepreneurs. In 2013, the World Bank published a report, Crowdfunding’s Potential for the Developing World, which estimated a $96 billion crowdfunding market in the developing world by 2025”.
With the momentum around Equity Crowdfunding growing on a global scale, there has been an emerging interest in its potential to boost economic growth in Africa. Uprise.Africa a tech driven startup has acknowledged this need and brought Equity Crowdfunding to South Africa with future plans for pan-African expansion.
Equity Crowdfunding is the process whereby Entrepreneurs pitch for investment through an online platform like Uprise.Africa and the crowd (investors) fund their business pitches in exchange for equity. To ensure the financial interests of the investors are protected, businesses are put through a thorough financial and legal due diligence process.
Previously Emerging Crowd a London-based platform launched in 2015 offered equity and debt investors the opportunity to invest in pre-screened businesses in emerging markets but campaigns in Africa proved difficult to fund.
A big stumbling block for crowdfunded ventures registered on the continent is that they currently lack the same tax efficiencies for investors. Campaigns run on European platforms such as Seedrs and Crowdcube provide tax benefits to the crowd on approved campaigns, driving bigger pools of investors to get involved.
Uprise.Africa recently launched the first public Equity Crowdfunding round in South Africa. At the time of writing, the Drifter campaign has raised a total of R 1 920 000 from 109 investors within the first two weeks of their launch.
If the same tax benefits can be unlocked for crowdfunding investors in Africa, the tide may turn for tech ventures looking to raise investment from African investors.