On August 4th 2015, a crowd funding campaign was launched in Kenya for Emmanuel Otieno to go for medical treatment in India. He urgently needed surgery for brain cancer but could not afford the medical expenses. Through a campaign called #MilliForJadudi, Kenyans were able to raise funds for Emmanuel through social media platforms.
The #MilliForJajudi campaign was an indicator of the effectiveness of crowd funding to raise funds, with KES 6.4 Million raised in only 48 hours. There have been other campaigns such as the #IStandWithJanet and #ISupportAnjilee where many Kenyans have come together to raise funds for medical expenses.
However, this raises the question, can crowd funding also be applied to fund and develop SMEs (Small and medium sized enterprises) in Kenya? The good news is yes, crowd funding can help by providing a strategy for SMEs who require finances and are ready to roll out their product or service.
What is Crowd Funding?
Crowd funding is the practice of funding projects or ventures by raising money from a large group of people in small amounts, typically through the internet.
How does it Work?
There are a variety of crowd funding platforms where entrepreneurs can safely source for capital to meet their needs. Each platform has its own unique style but the general concept remains the same across the board.
You create a profile with a brief introduction of your business together with some audio visual aids to help expound on the concept further. You also need to indicate a fund raising goal and a break down of how you intend to use the finances raised to make you accountable.
Most of the time, for your crowd funding project to be a success you will require to have an engaging story. This story is what will set out your business idea from the rest. This story helps you engage with the public more. It also enables them to see how their contribution can be a significant part of your journey.
So, until the campaign is over, you need to be prepared to spend most of your day online, monitoring the progress of the campaign, addressing concerns and comments from the public.
Other than this, here are some more tips to make your crowd funding campaign a success:
- Rally your friends and loved ones to start giving towards the campaign, this can be a great boost to start it off.
- Sometimes, giving away a reward for donations can help get you more support.
- Make sure you have carefully thought out and shown how the money received shall be distributed and utilized. Remember that people now will be watching to make sure your business actually delivers on what it promised.
- In addition to this, it would be beneficial to also show how you have thus far invested your own funds into the business venture.
What Are Some Crowd Funding Options for Businesses?
- Assemble Loans: Some crowd funding sites seek to remove banks from the loan equation, by allowing participants to borrow and invest from each other.
- Royalty financing: The idea here is to link enterprise owners with investors who provide money for a guaranteed fraction of revenues of the business products.
- Direct contributions: The money is sent directly to an account of choice and this mostly utilizes mobile money transfers such as M-Pesa.
Benefits of Crowd Funding
- Provides access to capital.
Crowd funding is the perfect alternative for entrepreneurs to raise money without accumulating debt or giving up equity. Reward based platforms allow business owners to raise money from the community in exchange for tangible gifts or services.
- Protects against risk.
An entrepreneur is able to test a concept by watching how people are receptive towards their business campaign. This way they can determine the viability of a product or idea.
- It helps in product development.
A crowd funding platform can be used by an entrepreneur to interact with potential clients to receive ideas, feedback and comments. The information can be used to improve on products and processes.
- It is an effective marketing tool.
Crowd funding offers a perfect platform to showcase your products and business to a wider audience.
Crowd Funding Platforms in Kenya
Some examples of fund raising management platforms that help people set up crowd funding campaigns are:
- M-Changa
- Babandu
- Jamii funding
It is important to note that even though the most successful crowd funding campaigns in Kenya have been medical campaigns, there is still an opportunity for businesses to maximize on. An entrepreneur seeking to use these platforms must be ready to spend time generating interest in their campaign.
You will need to keenly ensure that your unique value proposition is able to come out clearly in the campaign so as to generate public interest.
Using social media to boost your crowd funding campaign can give your business even further access to more customers. If implemented correctly, crowd funding can bring remarkable success to your business.
Have you ever thought of crowd funding for your business? Please comment below and let us know your thoughts? All the best!
Learn More:
- How to prepare an effective crowd funding pitch
- Why mobile micro loans are becoming more popular among entrepreneurs
