Crowdfunding is among the sources for financing a business. Entrepreneurs raise finances through by reaching out to groups of people.
There are several types of crowdfunding, but only two primary types namely;
Rewards Crowdfunding: the entrepreneur pre-sells their product to launch the business without debts being incurred or shares being sacrificed.
Equity Crowdfunding: In exchange for money pledges, the entrepreneur gives shares or equity to the investor.
Apart from money, crowdfunding helps a business increase its market awareness and credibility. These non-monetary advantages could lead to increased sales, partnerships or attract investors. Entrepreneurs also get feedback about their products and services and can help them close gaps that are expressed by potential customers and investors before market launch.
In Kenya some of the crowdfunding communities are:
It is East Africa’s first crowd funding site and it is mainly tailored for social entrepreneurs. At Jamii, they identify organizations and individual entrepreneurs whose products and services will better the community but are facing difficulties financially. They have also incorporated banking practices that are common in Kenya. Jamii Funding Link.
It is a crowdfunding platform which has been built to accept payments from mobile phones. It is the most competitive crowd funder due to its low percentage service fee. For donors outside Kenya, M-changa has partnered with PayPal and equity bank to allow bank customers participate. M-Changa Link.
Money raised through crowd funders is kept secure and the individual raising the funds can elect treasurers who should authorize the withdrawals. After the fundraiser is done, the money can be withdrawn at any time.
These crowdfunding platforms have communication facilities for entrepreneurs that can help them moderate the fundraiser, receive alerts and mobilize more people to the fundraiser.