Equity Crowdfunding : Disrupting the funding landscape

by | Aug 31, 2017

Over the past couple of years we’ve seen so many different industries in South Africa undergoing disruptive innovation. Need a ride? Uber, Need a place to stay? AirBnB, Need a outfit? Superbalist, Looking for a restaurant? Zomato, Need to contact someone? Whatsapp. There are so many of these tech solutions completely changing the daily lives of South Africans, and now there is a new player in town. Uprise.Africa is the platform for Equity Crowdfunding in South Africa.  The platform will serve as a FinTech solution to SME funding and local business investment.

Questioning the traditional model

Equity Crowdfunding will disrupt the country’s traditional funding landscape by providing an alternative method for small businesses to raise capital in the country. Currently in South Africa, Entrepreneurs have to look to traditional funding models like bank loans, venture capital, private equity and government grants to access the funding they need for their business.  Building on a statement recently made by the International Business times “FinTech providers are best-placed to lead in SME lending because they are more capable of looking at people in the context of their transactions” Because of the “funding criteria” of traditional funding models, they are not meeting the needs of SME’s and the funding gap just keeps growing. Traditionally Entrepreneurs would need to approach investors on a one on one basis.  Equity Crowdfunding will allow Entrepreneurs the opportunity to raise capital from multiple sources.

Disrupting ownership models

Equity Crowdfunding will also change the investment landscape of the country. Crowdfunding democratises startup financing by allowing many more people to own equity. Giving a broader spectrum of South Africans the opportunity to invest into SMEs.  The model opens up a whole new pool of enterprises and Entrepreneurs that would ordinarily have been restricted to VC firms. By doing so, the revolutionary funding model levels the playing field for Investors. According to the World Bank, businesses in the UK raised more money from Crowdfunding than Venture Capital in 2016. Equity Crowdfunding has completely disrupted Venture Capital in other countries. In the US “Equity Crowdfunding is projected to surpass Venture Capital as the leading source of start-up funding reaching a projected $36 billion by 2020 versus venture capital funding and angel investor funding at around $30 billion and $20 billion per year, respectively.” (Deal Scout, 2017).

The rise of Equity Crowdfunding has been an exciting thing to witness. With South Africa’s very own Equity Crowdfunding platform launching in October we can be certain in saying that the current funding landscape will undergo disruptive innovation that will not only benefit the SME sector but the country’s economy as a whole.

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