One of the words that has been making a buzz in the technology, business and alternate finance space is crowdfunding. Crowdfunding basically has to do with the concept where people who have ideas for products and services pitch to a wide range of people often on the internet. Those who believe in the idea or service go ahead a pledge funds to support the product. A typical crowdfunding round usually have participants or stakeholders which include the initiator of the idea, product or service, the backers and supporters who pledge to support the product and finally the crowdfunding platform where the project will be executed. Popular crowdfunding sites include Kickstater, indieGoGo and GoFundMe, these sites are ostensibly the platforms that brings the parties together to fund the idea. It must be noted that crowdfunding is not meant only for the internet. There are certain projects and business ideas that can be crowdfunded offline, majority of crowdfunding projects exists online just so that a lot more people will be able to see it and contribute to its growth and development. Crowdfunding is an alternative form of financing which is different from the traditional forms of financing we have. Certain key principles that underline traditional finance can also be detected in crowdfunding in that people can buy debt or equity in a startup just like traditional financing. It is the source of the funds the differentiate crowdfunding as a finance tool from other forms of financing.
The benefits of crowdfunding are numerous, the most important benefit being access to much needed capital. Traditional finance houses view startups or new ideas as a risk. Therefore investment in fresh startups is often minimal. Crowdfunding provides capital to entrepreneurs without entrepreneurs necessarily giving up equity or accruing debt. Entrepreneurs and startup founders can use crowdfunding to also hedge risk associated with launching a new product. This is because introducing a new product onto the market is costly therefore crowdfunding such a product reduces the risk and spreads it amongst a wider pool of investors and supporters. Other associated benefits of crowdfunding are the opportunities for a wide audience to appreciate and/or criticize a product. Backers on a crowdfunding platform can serve as a focus group for new and untested ideas varied feedback from a huge number of people can help the originator of an idea or a startup founder tweak his business model to satisfy potential profitable areas which the entrepreneur had not previously taught of. Another important benefit the crowdfunding initiator gets to enjoy includes the free marketing and Public relations that various startups can gain by making their presence and their products known to a wide range of people over the internet, this is because crowdfunding brings about an increase in awareness of the existence of a startup or a proposed product. An entrepreneur can use crowdfunding to score her first loyal customers and committed users of the product and even in the event that his/her idea or product does not receive support, at least people get to know about the startup and what is in the works for them.
Crowdfunding efforts in Africa has been a bit sparse and on the low. One key challenge cited by crowdfunding enthusiasts is the lack of a unified financial system on the continent, this makes it difficult for interested participants to put real value on products and services that has been initiated. Bitcoin presents a good opportunity for African crowdfunding sites and ideas to receive donations and investments from all over the world. Crowdfunding sites mostly use credit card companies for their operations. It is a known fact that credit card usage in Africa is not very popular. Therefore contributions and donations via bitcoin is a perfect payment setup for crowdfunding efforts in Africa. When bitcoin is used as a crowdfunding tool, a lot more Africans and indeed backers from all over the world can invest in art, movies, music, tech gadgets etc. coming from Africa. The global nature of bitcoin usage makes it an ideal option for African crowdfunding sites to consider when dealing with payments and contributions to projects.
There are lots of young Africans with great ideas who cannot partake in this burgeoning way of financing because they are not able to access credit and debit cards. If we are not able to unearth the talents and gifts of young Africans by providing avenues through which their ideas can see the limelight, then we are failing a whole new generation of African inventors.
Ideas of the past by visionaries and inventors are being enjoyed today, when we look around us, everything we see was initially an idea, computers, cars, mobile phones etc were all ideas wedged in someone else’s brain. It took commitment, support and hard work for the products and services we are enjoying now to advance from ideas into tangible products and services.
A lot of young Africans have spectacular ideas for products and services but they face certain financial and technical constraints that prevent their ideas from coming into reality. Crowdfunding presents an alternative for such people to be backed in the form of financial and technical support to also produce something that is beneficial to the African society as a whole. When bitcoin usage is better integrated into crowdfunding efforts on the African continent, we are paving ways for more young Africans to dream and do the unimaginable.
Kwaku Abedi is a freelance writer/editor based in Accra-Ghana. He has an interest in bitcoin and writes on bitcoin integration in Africa.