Equity crowdfunding, or the process of companies finding investors by advertising their offerings online, is quickly gaining popularity across the African continent, thanks to platforms such as Emerging Crowd and Afrikwity. According to Afrikwity, Africa is a prime location for development and opportunities for investing, with 5% structural growth compared to 1.5% for developed countries, and over the next 15 years there is a huge projected need for financing. At the end of 2015, there were 57 crowdfunding platforms headquartered in Africa, of which 21 were based in South Africa.
Government entities are recognizing these trends as well; for example, South Africa’s Financial Services Board plans to decide by the end of June whether or not to craft specific rules for equity crowdfunding. Currently, there are no equity crowdfunding regulations in place in any African countries, so all African crowdfunding platforms operate under European jurisdictions that have regulations already in place.
Crowdfunding is an excellent way for African entrepreneurs to get their business ideas off the ground, because their access to traditional funding is often very limited since banks are likely risk-averse. Crowdfunding allows these entrepreneurs to raise funds based on the merits of their business plans and ideas instead of their networths and credit histories.
However, once a company in Africa decides that equity crowdfunding is the right option for them, a whole new set of challenges arises, one being how best to reach potential investors.
Equity Crowdfunding Marketing Tips
We’ve compiled some of our top tips for marketing an equity crowdfunding campaign in Africa:
- Have a business plan in place well before you launch. Consult with an accountant and an attorney early so that you are sure your venture is prepared for an equity campaign. Not only is a business plan integral to the success of your venture, it’s also a great way to recruit investors. They want to be sure that your business has a high chance of success before investing their own funds. It’s also a smart idea to have some sort of audience and email list ready to go before you launch that you can tap into for the campaign.
- Launching on the right platform is key – choose wisely. Many of the popular platforms in Africa allow entrepreneurs to launch for free, which is an advantage for smaller and newer businesses. Using a platform with a well-connected network is a great way to broaden your audience and find both potential investors and customers.
- Make sure your promotional video is compelling. Think of it as an elevator pitch; it’s a brief opportunity to tell potential investors why they should care about your business.
- Don’t overlook the importance of traditional public relations and marketing. Press releases, media events and advertising are all important parts of making your campaign work.
Remember, each country’s regulations vary, and most have rules regarding what types of communications are and are not allowed. Always do your research and consult with an attorney throughout an equity crowdfunding campaign to ensure you’re abiding by all rules and regulations.