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Understanding the Crowdfunding phenomenon

2 Mins read

Crowdfunding is a method of raising capital through the collective effort of a large pool of individuals. This approach taps into the collective efforts of friends, family, customers, and individual investors—primarily online via social media and crowdfunding platforms—and leverages their networks for greater reach and exposure.

Now, to better bring a deeper understanding of crowdfunding to our readers we consulted and interviewed the author of Understanding Motshelo Stokvel Crowdfunding, Kago Keotswaetse. As a Botswana Qualifications Authority accredited Financial trainer and consultant by profession, Mr. Keotswaetse took us on a deep dive about his book and he explained what crowdfunding is and what it isn’t.

Understanding Motshelo Stokvel Crowdfunding by Kago Keotswaetse
Understanding Motshelo Stovel Crowdfunding book

According to Mr. Keotshwaetse, the crowdfunding and motshelo market is worth P1.2 billion in Botswana. He further estimates South Africa’s at P50 billion pula. In his book, he talks about the best banks in Botswana to work with for your crowdfunding initiatives.

Kago Keotshwaetse
Mr. Kago Keotshwaetse, BQA accredited Financial trainer and consultant

Types of Crowdfunding

Just like there are many different kinds of capital round raises for businesses in all stages of growth, there are a variety of crowdfunding types. Which crowdfunding method you select depends on the type of product or service you offer and your goals for growth.

Donation-Based Crowdfunding

Donation crowdfunding is where the campaign-maker asks people to give money. Contributors are, therefore, driven by altruistic motives or a personal connection. This type of crowdfunding can work for someone who wants a small amount of money to build and/or test a product. Raising funds of this sort from the crowd involves a lot of effort but has been successfully used by start-ups.

The first step is to come up with a compelling and well thought out story about your innovation. Identify the issue you will be addressing and how you will positively affect those you are aiming to benefit from. Next, identify how much you want to raise. Keep in mind, campaigns with lower targets generally experience higher success, so set a realistic goal. Reaching out to your network of family, friends, and acquaintances, as well as media outlets and other relevant organizations, requires a thorough outreach strategy that is well planned and executed. Try to get some donations lined up before the launch of the crowdfunding campaign.

Rewards-Based Crowdfunding

Rewards-based crowdfunding involves individuals contributing to your business in exchange for a “reward,” typically a form of the product or service your company offers. Even though this method offers backers a reward, it’s still generally considered a subset of donation-based crowdfunding since there is no financial or equity return. This approach is a popular option here on Fundable, as well other popular crowdfunding platforms like Kickstarter and Indiegogo, because it lets business-owners incentivize their contributor without incurring much extra expense or selling ownership stake.

Equity-Based Crowdfunding

Equity crowdfunding is the process whereby people (i.e. the ‘crowd’) invest in an early-stage unlisted company (a company that is not listed on a stock market) in exchange for shares in that company. A shareholder has partial ownership of a company and stands to profit should the company do well.

📚Understanding Motshelo Stovel Crowdfunding book is sold at Bala Books and Exclusive Books

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