With the economy being as tight as it is across the globe, it’s no wonder that people are thinking of new ways of coming up with money.
One of the more recent ways of raising cash is crowdsourcing, which has been around for a while but is now capturing the imaginations of many, including tennis star Andy Murray.
Murray, the world’s number 2 tennis player, has made three investments of an undisclosed sum on London-based crowdfunding platform Seedrs, as the sector gains momentum on its way to becoming mainstream.
Murray invested in healthy eating chain Tossed, which has already raised more than its 750 000 pound ($1.17 million) target. He is also investing in 3D virtual reality shop builder Trilennium, which is backed by online fashion retailer ASOS, and in e-commerce investor Fuel Ventures.
Platforms like Kickstarter in the US have found favour from backers such as Sylvester Stallone, Zach Braff and “Family Guy” creator Seth McFarlane. Indiegogo, another platform, has attracted high-profile investors such as Virgin Group founder Richard Branson.
The peer-to-peer lending market - an alternative form of raising capital - is expected to be worth as much as R90 billion globally by the end of this year.
All sorts of people are jumping onto this bandwagon.
One innovative chap, via Kickstarter, asked for $10 to make a potato salad, and ended up with $55 492.
This week, someone else decided to raise money for something arb. ClickHole, the clickbait-mocking spinoff of the Onion, launched a GoFundMe titled “Let's Give Bob Dylan A Nice Bed!”
Some 156 people donated a total of $1 555 – enough to get Dylan his fancy mattress, bed frame and wireless remote control.
Frankly, crowdfunding seems like a really easy way of raising cash for everything from a smart idea to a lark.
Then why isn’t it such hot business in SA?
There are outlets for investors, just a quick Google search will bring up several results. There’s startme.co.za, thundafund.co.za and jumpstarter.co.za.
All of them will provide some sort of a return if - and there’s a big IF here - the company or product that people plug their money into gets off the ground.
If it doesn’t do well, most allow you to plug your cash somewhere else.
I tried it once. I put R100 into a crowdfunding platform and then invested it. The product didn’t get enough investors, so my money was returned to the account I’d had to set up on the platform.
And there it languished because the fund didn’t have any other attractive ventures, and I couldn’t pull my bucks back out.
So, where’s the problem locally?
My guess is it’s two-fold. In the first instance, people have super duper great ideas, but no clue as to how to put a business plan together so the idea stalls in the garage, as it were.
The second issue is that there just are not enough people willing to take the risk and invest. For crowdfunding to work, you need exactly that, a crowd that funds - not five lone people who happen to know the inventor.
South Africans are traditionally risk-adverse, and I can’t say I’m surprised. When the pool of spare cash is dwindling every month, who is going to put any of it into an unknown platform, on an unknown project?
Sure, many of the platforms out there may simply disappear with your head-earned cash, as the one I put my money into did, but many have serious backers and offer the people they raise money for access to business tools so they can succeed.
As with any investment, it’s a case of doing your homework first.
If more people crowd-invested, we could see many more superstars like Mark Shuttleworth being born, and they wouldn’t have to take their ideas overseas to find money either.
Sure, it’s a gamble, but at the moment can we afford to not even ponder what a great way crowdfunding could be to boost the economy?
* Nicola Mawson is the online editor of Business Report. Follow her on Twitter @NicolaMawson
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