[Translated from a contribution by Nanda Seye]
During the month of August, I was helping out the TechOfAfrica team with the organization of an afropreneur afterwork event in Abidjan. So I was talking with a friend about that session, I was explaining that the purpose was to present the Afropreneur project and to promote the related crowdfunding campaign. But, as soon as I mentioned the word "Crowdfunding", my friend immediately shifted to a shocked face.
"Huh? What's that, Nanda? Some of your geeky stuff again?", she asked.
And then, I realised that what may seem obvious for some of us is not always that clear for others. This situation is amplified by the fact that many are not particularly comfortable with the language of Shakespeare. So I wrote this little article just to clear things up for everyone. Happy reading.
So what is crowdfunding?
Crowdfunding is a collective financing practice that is executed via the Internet to help start-up projects. It connects project leaders and Internet users who want to invest in these projects.
Oh, is it? But how does it work?
It's simple, the operation can be summarized in three entities:
Project Managers <-> Web Platforms <-> Internet Users (Investors)
A. Project leader or startup:
You may have a project that is important to you, that you want to achieve. Instead of turning to the banks for funding, you can opt for a platform dedicated to this matter, where you would submit all the project details. This allows you to:
- Give visibility to your project
- Receive donations/loans
- Find potential partners/sponsors
B. Web Platforms:
These are websites dedicated to this purpose, on which one can run a fundraising campaign for their project. There are 4 types of platforms:
Donation platforms: the user (i.e. the investor) provides financial support to the project without receiving any reward.
Platforms with counterpart in kind: the user receives a consideration in kind
Loan platforms: Internet users grant a loan to project leaders
Direct investment platforms: Internet users invest directly in the capital of a company by acquiring a stake in the project or by becoming co-producers. In exchange, they earn the right to acquire financial counterparties in case of commercial success of the project.
In order to sustain themselves, the platforms keep a commission of 5 to 10% on the amounts collected.
Hey, that's interesting, but what are the platforms?
There are quite a few platforms, some of the most popular are:
C. The Web user:
This is the one who is interested in the project and decides to offer you some donations or loans, you may refer to him as your "Angel" investor (no pun intended lol).
That's all folks, I hope the concept of crowdfunding is now clear for you, and that you too can impress your friends lol and use it for your own projects.
One last piece of advice: a successful crowdfunding campaign involves choosing a platform that is in line with your project, a good presentation of the project and, above all, an excellent marketing strategy. Good luck.