Financial Management 3
Cape peninsula university of technology
Lecturer: Mr. Trollip
Student number: 215248120
Date: 30 July 2018
Table of content
Contributing factors and how it plays a role
How to run a successful campaign
What it takes to create a successful campaign
Findings about crowdfunding
The big benefits of crowdfunding and advantages
How does Crowdfunding affect south Africa?
What I have learned in the assignments about crowdfunding
A significant blockade to commercializing innovations is the accessibility of early-stage funding. Given the hitches that new projects face in obtaining funding from banks, angel investors and project capital funds, some entrepreneurs are going into large, online groups of consumer-investors. Called “crowdfunding,” this fairly new form of relaxed project funding permits entrepreneurs to directly appeal to the general public (i.e., the “crowd”) for assistance in accomplishment their innovative ideas off the ground. Due to the fast-growing interest in this online form of project funding, academic research is starting to explore the drivers behind fruitfully crowdfunded projects in this assignment that I was given in class we look behind the scene of crowdfunding, we look behind the what and how of crowdfunding. And focus on how I can alert south African young individuals that has been sleeping their innovative ideas because of not having capital to fund their ideas, we look on how it affects south Africa as an economy and what international crowdfunding campaign have on south Africa. We look at the requirements are needed to have a successful campaign on the crowdfunding platforms. Dig in the assignment and I hope you learn a lot about the crowdfunding and all the key elements associated the topic.
Before we get into crowdfunding lets first break it down what is crowdfunding? In my understanding as a cape peninsula university of technology student, I understand crowdfunding as a way of raising fund or capital through family or friends, shareholders. The approach of crowdfunding is a unit effort, or should I say collective effort of individuals working together to raise capital. The best way to use crowdfunding is by getting exposure through the power of social media and other crowdfunding platforms.
Now that you know what crowdfunding is or have a little understanding or idea of what crowdfunding is. Allow me to tell you more about “crowdfunding”. It differs from the traditionally when individuals or entrepreneurs want to start a business and raise capital, develop products. You had to put your business plan forward, do research about the market and convince wealthy business individuals to invest in your business idea.
And with crowdfunding it is a different tactic it does not bound you in terms of numeral of individuals that can capitalize in your corporate idea. I would say it’s a extensive or far-reaching approach of getting individuals that are attracted in your corporate idea to have a piece of the cake.
The crowdfunding platforms function by permitting those seeking for funds to make a 1-3 minutes video pitch and posted it on the site explaining how much funds they need, what they need it for and why, if anything, you get in return for contributing. funders can then view your 1-3 minutes video pitches of business ideas on the platform, network and communicate with both those seeking for funds and other potential funders and then agree whether they want to support the idea or campaign. Most crowdfunding platforms operate or function the all–or–nothing model where, if the goal amount is not raised within a given timeframe, funds or the capital are returned to funders and no financing goes ahead. Crowdfunding simplifies the raising of funds for a variety of purposes, using several differences of the model.
Contributing factors and how it plays a role
As we know by now that crowdfunding is the exercise of backing on idea, venture or corporate by funding money through input of resources from huge number of individuals such as friends, family etc. It has democratized or change entree to money by decrease the block to financing prospects for charities, creatives and entrepreneurs in a inspiring way we have never seen before.
How to run a successful campaign The platform is well suited for businesspersons, it permits them to raise accountable funding in a way that does not lead them with liability or force them to be part with equity in the early stage.The procedure is self- sign up, with leadership from crowdfunding platforms along the way. There are three features to our model: rewards- based, a startup must be able bid a return at different pledge points. And all or nothing, this means you must reach your goal line, dream goal and tipping point. If you don’t achieve your tipping all capital raised are refunded to the backers. You also need to need south African bank account.
It roles as an advertising campaign for your start up to get your start up funded. You have network, market and promote your campaign.
You must set length of your campaign either 30, 45 and 60 days. Its then up you to promote your campaign and get the capital you need.
The achievement of a campaign depends on deeply on your network.What it takes to create a successful campaign
Set time- limit to your crowdfunding goal and campaign mission.
A campaign pitch that clarifies the “who, what, where, how, and why” of the campaign mission.Truthful, appropriate and clear crowdfunding Goal line.
Maximum of 1-3-minute pitch video.
Between 4-8 unique development related rewards, of cumulative value and cost for backers that are in the form of retail, recognition or experience.
An active, update and engaged social media presence.
A marketing and PR “campaign plan” covering the pre- launch, launch, mid- campaign, pre-closure and closure.
A thorough understanding of your campaign.
A campaign pitch that clarifies the “who, what, where, how, and why” of the campaign mission.
Findings about crowdfunding Types of funding
Donation – based crowdfunding
Refers to the type of funding that do not have any financial return to individual that backed your campaign or idea or even better that contributed to your venture. Example of this type of funding it is like a donation-based crowdfunding can be raising capital for charities, disaster relief, medical bills and nonprofit ventures.
Rewards- based crowdfunding
This kind of funding is sometimes referred as seed type of funding. It Includes entrepreneurs contributing to your business idea exchange of some kind of rewards.
Equity- based crowdfunding
This the type of funding where your backers want something in return for the capital their have invest in your venture this include equity type of return. Example shares.
The innovative idea or business plan of crowdfunding campaign have to be advanced, specific and moving to appeal to big guns that have finances to back your business idea. This can revenue time and effort from the industry and the platform, so it’s value putting together a great campaign to give the project the best chance of achievement.
putting your commercial strategy on a website and sit back and expect for capitals to roll in wont for do the job you have to go an extra mile and you know what their say hard work pays off. the prospect of developing an exciting campaign to tell your story and sell your idea including a video and rewards and promoting it via social media is a lot of fun.
From a marketing and exposure view crowdfunding offers a great opportunity to test your ideas, build a strong foundation potential customer base with controversial connections to the business or product before launch, and generate some great PR.
A successful crowdfunding campaign means that the market respect your craft and loves the idea because they have invested in it, and that’s a great indicator of future success. The company brewDog is a fantastic example of a global success story, and I reckon their annual general meeting and Equity Punk Brew Day will be an absolute blast!
The big benefits of crowdfunding
it is a Place to rebuild traction and validation.
It Doubles as marketing and media exposure
An Opportunity to refine your idea
It is more efficient than traditional fundraising.
Get Most loyal customers.
It is Fast to raise finance.
Feedback and expert guidance.
A Valuable form of marketing.
It Test public reaction.
You can Track your progress
Starting up startups the African way
Out of all the sites we can discover, here are as numerous as three in South Africa namely StartMe, FundFind and the most current ThundaFund to assist with micro financing platforms. In Nigeria there is StartCrunch while Kenya has M-Changa. In Ghana there is SlizeBiz that emphases on angel investments as well as finding micro finances through the general population. All these platforms share the popular values borrowed from crowdsourcing that grips the idea of obtaining resources, services, ideas, or content from a large group of individuals to support one single venture or purpose. The innovation of crowdfunding mostly grew in 2011 and through 2012 as online platforms such as Kickstarter moved far beyond the point of a US$1.5-billion industry. The idea has since progressed and has been very much experimented with. In Africa, crowdfunding could still be carefully considered being in its beta phase but has the possible to grow the startup financing culture of the continent. It’s also being adapted to create a new and interesting chapter for platforms to fit Africa’s unique environment.
Drawbacks of Crowdfunding
For all its benefits, there are certain disadvantages to running a campaign, not least of which is the fact that all your effort may very well be for naught. About 60% of campaigns don’t get funded at all. And many that do never succeed in shipping their product because they’ve underestimated the complexity or cost in realizing their product.
Most campaigns fail
It’s a LOT of work
Funds are allocated with little room for growth
You pay out 8-12% of your raise
How does Crowdfunding affect south Africa?
The Crowdfunding and fundraising platform BackaBuddy has turn out to be the first website of its kind in South Africa to fund more than R50 Million for its charities and campaigns.
The Famous charitable website achieved the milestone on Thursday with the assistance of more than 70‚000 backers who have increased the money for 2‚651 causes all over the country since 2005.
Most of those causes have become a part of the South African story and numerous will recall drives such as the one to raise capital for Darryn August‚ who was paralysed after he was knifed and fearfully thrown off a moving train in Cape Town while trying to save a expecting woman’s life.There are More than R500,000 capital that has been raised for August, who now has faiths of contending in the Paralympics.
The horse who was burnt in the fires that ravaged Knysna in June‚ is another popular recipient of aids collected by BackaBuddy who have also raised capital for several cancer and other ill patients‚ while also sponsoring life-changing operations.
BackaBuddy chief operating officer Catherine Du Plooy said crowdfunding had the possible to make a very huge social influence.
“We have realized that by offering the service of handling donations directly‚ people are more open to supporting charitable causes‚” she said.
The platform’s marketing officer, Zane Groenewald, believed the model could bring out meaningful social change.
“It creates an opportunity for individuals to support their passions and to spread kindness that is often lacking in our fast-paced world‚” said Groenewald.
“Crowdfunding has shown phenomenal growth in SA. Individuals are becoming more aware of alternative financing to support causes they resonate with.”
The website’s most popular crowdfunding campaign types are health and medical‚ sporting trips and school fees
Crowdfunding Creative Ideas: The Dynamics of Project Backers in Kickstarter
Small business and young business minded individuals change to crowdfunding to backing their creative ideas. Crowdfunding includes small contributions from individuals that are backing your idea.The drive of this paper is to increase to our practical understanding of backer dynamics over the venture funding cycle. Two years of publicly accessible information on projects listed on Kickstarter is used to launch that the typical pattern of project backing is U-shaped — in general, backers are more likely to donate to a project in the first and last week as compared to the middle period of the funding cycle. We further found that this U-shape pattern of support is persistent across projects, as well as both successfully and unsuccessfully funded projects, those with large and small goal line, and projects in different groups. We then empirically discover the dynamics related with several factors, including collective attention effects from platform sorting choices, the role of family and friends in supporting projects, the effects of social influence, and the role of project updates over the project funding cycle.
What I have learned in the assignments about crowdfunding
What I have learned as an young management student which might find himself in a condition of needing fund or capital to funds my idea. I have that there are many ways that an individual can be assisted in obtain funds without going to banks and make loans that drag us far away of reaching our goals. We must open ourselves to learning and reading everyday so that we can know about things like the crowdfunding platforms. But to be funded it goes with responsibility of researching the market we going in and all other factors that are needed to be taken into consideration so that we can have a successful campaign and this will lead in creation of employment which will benefit the country or economy. I have realized that there are many people that are willing to help funding small businesses out there, we must take such opportunities lightly but grab them with both hands. with crowdfunding developing in south Africa or Africa as whole we will most definitely go far and bank will lose out.
We only need to rectify small elements in crowdfunding platform, that the reason why need to get in depth and ask ourselves or research why are most of individuals failing, and maybe find a way to decrease the amount of admin. And open more such platform because in the end it will benefit the country as whole. But further I a happy as a student of cape peninsula university of technology.
Busenitz et al., 2003, Entrepreneurship research in emergence: past trends and future directions, Journal of Management, 29 (2003)
C. Espositi, Crowdfunding Industry Report, (2012)
M. Kenney, Industrial and Corporate Change, 8 (1) (1999), pp. 67-103
Marlyne S, 2016, page 19, Strategic Approaches to Successful Crowdfunding