helps convert the ideas into workable prototypes, in exchange for equity.
funding, and the Crowdfund most probably cashes out.
1. To kick off tell us a bit about crowdfunding.co.za and the story behind how it came to be.
I was working with various government organisations to help online startups get off the ground, and could see that the big problem was that if there was no money on the table, it was almost always a deal killer. And it was obvious that the government was far too risk averse to take a bet on these start ups, so they were pretty much left out in the cold. There is no strong culture of angel investing in South Africa.
2. Your model revolves around the funding of certain business ideas from a pool of money that is pledged by 'investors' - but unlike other crowdfunding platforms like growvc.com a board will decide where and who the money goes to and not 'the crowd' as it were. Why did you choose to take this route?
It was never an option to go any other route. I don't want to fund "the coolest" startups - I would rather fund those with the best business model, and the best chance of success. Since there is so little past experience to draw on, I would be scared that the crowd would not understand the difference. Also, the board is made up of some very, very smart people. The developers will benefit from their insight and advice.
3. One of the very important elements in social projects like this, and this goes for crowdsourcing too, is the need for the whole process to be as transparent as possible in order to keep by in and faith with your community. What steps are you going to take to achieve this?
I am not sure I agree. The transparency here is that I have been very upfront that there will *not* be "transparency". The fund is a financial vehicle, and it will observe the rules of NDAs and those set out by various regulations. There will be a blog for the crowdfund, and I intend to post to it often. But I cannot be transparent about boardroom discussions, if they would jeopardize negotiations. My stance is this: As a potential investor, you should investigate the concept of the crowdfund, and investigate the credibility of the board. If you trust us to do a good job with your R1,000, then please invest. Otherwise, please don't. We can't have 1000 people all expecting to have a voice that will be heard and reacted to. On the other hand, there will be *a lot* of opportunity for teh investors to get involved in the mentor network etc, so nobody should feel left out.
4. Transparency also brings up other problems - for instance one of the initial criticism of crowdfunding projects is that there is a requirement for the idea for which funding is being sought is in a public space at an early stage. This exposes the idea to the risk of being copied or developed by better financed competitors. Do you see this as a problem that you might have to deal with in your model?
No, since I have no intention of discussing the ideas beyond the boundaries of the boardroom table. I have been very clear that this is a crowdsourced *fund*. Once the money is collected, the crowdsourcing input stops (except with, like I mentioned before, mentorship etc).
5. Tell us a bit more about the board of crowdfunding.co.za - who they are and how they got involved.
There are 8 board members, including myself, and we each bring a very honed set of unique skills to the table. I have worked with each board member before, and have come to admire their work ethics, and their insight into the online industry. I was very fortunate in that nobody declined my request to join the board, which means I have my dream team with me!
6. How did you come up with the minimum outlines for what you are attempting to raise on your first round? Why 1000 people investing R1,000 + each?
I like round numbers, and it seemed to make sense at the time. I didn't want too much money, since that can be a problem too. I think a lot can be done with a million, and part of the fun of the challenge is to apply the bootstrap mentality all the way. I didn't want people investing more than R10,000 because I don't want to set the expectation that someone will be paying for their kid's college from the dividends. As it turns out, the average investment so far is about R3,300.
7. One of the things I found very interesting about your model is that its not only money that you are providing but a network to help grow the idea too. Can you tell us a bit more about what a team with an idea will get apart from R50,000 to start with?
Quite a bit. They will have a funky co-working space, that will put the correct ecosystem in place. They will get advice, mentorship from *key* people in their sector. They will get open doors. Credibility. Hosting, bandwidth. Access to next round financing, both local and overseas. A network of developers with skills the founders of the idea might be lacking. Benefits of economies of scale, reduced fees for designers, lawyers etc
8. On your site you state that ideas will get R50,000 to begin with that they must be able to complete stage 1 of development with. Will there be a opportunity to secure more funding from the pool after stage 1 or is the idea to widen the net and secure funding from elsewhere?
The latter, I think, unless we see wisdom in a different strategy. I think the initial investment will probably be in the R50 - 100K range.
9. One of the striking things about the ideas which you are going to support is that they have to be online or digital ideas - is there any particular reason for this focus?
That's my specialty, and the online space is the space I know very, very well. I am confident I myself can add a lot of value, and the board is equally well honed in it.
10. From the way I understand it those people looking for funding are going to have to submit or apply for it - one of the things they need to supply is a fully developed business plan/model. Are you going to provide any guidance in this application process and will these applications be public?
Actually, I don't ever want to see a business plan. I have seen hundreds in the past 18 months or so, and not one was an even close model of what the business should be. I think people get too caught up in "the right way" to write a business plan, and it all becomes hogwash. I want a one page outline, and a lot of passion. Guidelines will be posted on the site shortly.
11. One of the toughest things about open social platforms that engage in crowdsourcing or crowdfunding are the legal niggles that come with playing in the space. How have you dealt with this so far and will there be ongoing legal support on crowdfunding.co.za for those who do secure funding.
I dealt with it the best way possible..I hired a kickass legal team. It is important to get it right, from the start. And yes, there will be ongoing legal support.
12. Personally I think it is amazing to see that in 25 days there has been over R1,000,000 pledge from 309 people - firstly congratulations on this, was this achieved purely through word of mouth?
Yep. It is pretty amazing. No press release, or any conventional marketing. Just twitter, actually. And a lot of accepted request for interviews.
13. I know its early days and we have to wait and see how the first bunch of beneficiaries will fair but do you have a 5 year vision for crowdfunding.co.za?
Not really. I think of it as a 12 month project, although this can of course change. There are no fast rules here...I am willing to adapt with the mood. But I certainly have a 5 year vision for how this will impact the South African online development sector...that's the whole point of why I did this in the first place :-)
Thanks for your time Eve and good luck!
We will be keeping a close eye on
Crowdfunding.co.za and will report back on what comes out of it!
Mukwevho Mawela Robert on 08/02/2011
How could we as NPOs fit within the programmes of your institution?