The problem:
- South Africa has a very limited “Angel Funding” network to help online start ups develop prototypes of their products.
. - Venture capitalists are mostly interested in investing large amounts of money, for proven ideas that generate revenue.
. - But there are very few “proven ideas” to choose from, because none, or very few, are being funded by angel investors.
. - South Africa cannot compete in the global online sector if it isn’t funding start-ups at the beginning stage.
.
How does the Crowdfund work?
- 1000 people get together and invest R1,000+ each by pooling the money into the Crowdfund.
. - The Crowdfund board approves to use the fund to finance between 10 – 20 teams with excellent ideas, and helps convert the ideas into workable prototypes, in exchange for equity
. - Economies of scale play a huge role in getting maximum bang for each Rand
. - Once a workable prototype is developed, the formal Venture Capital network is approached for further funding, and the Crowdfund most probably cashes out
