Crowdfunding and Seed Funding in African Tech

I’ve written a couple of times about the lack of seed funding in Africa, and how to find the entrepreneurs to fund if you did have seed capital. We’re starting to see a few angel investors like Sean Murphy of Chembe Ventures making their way around the continent, but they are not nearly enough to fulfill the capacity of ideas and individuals who need startup capital.

Crowdfunding

Just this week the CrowdFunding South Africa site was launched (look for them at SXSW this week in Austin), working off the theory that, “South Africa cannot compete in the global online sector if it isn’t funding start-ups at the beginning stage.” Their plan is to do this by getting:

“1000 people get together investing R1,000+ each by pooling the money into the Crowdfund.”

Seed funding is risky, and the idea of Crowdfund is to distribute that risk over a number of people thereby reducing it for everyone. Their goal is to invest 50,000-100,000 Rand in 10-20 “excellent ideas”, and also provide legal advice and contracts, designers, specialized developers, bandwidth, hosting, office space and running costs, mentorship and time saved.

This idea is similar to what Ben White at VC4Africa is thinking about, basically a “Kiva on steroids” as Bill Zimmerman puts it. A way for you to invest in people and projects with larger sums of money and greater risk and returns than on the microfinance investing sites.

Finding the Real Tech Entrepreneurs

Both the Crowdfund and VC4Africa initiatives are excellent steps in the right direction, as they both provide platforms that allow less-knowledgeable investors (of tech in Africa), and deeply involved African tech investors alike, to get involved without too much risk at one time. There remains one issue to be solved though, and that is finding the entrepreneurs to invest in.

Any VC worth their salt will tell you that they invest in the people behind good ideas, not just the product/service that the entrepreneur is trying to create. So, how do you find these individuals? It’s generally through your network, people you trust, that serve as a filter to guide you towards the promising ones. That’s the same in Africa as it is anywhere else, yet here in Africa, there are fewer of these trusted intermediaries who act as filters (especially for international capital), than there are in the US or Europe.

In a meeting this last week of the people behind Limbe Labs (Cameroon), Appfrica Labs (Uganda), the iHub and the iLAB (Kenya) we discussed how these spaces could act as that type of a filter for investors and funds. Each of us sees more young tech entrepreneurs every day, and sees these individuals consistently, than most any other single person could by themselves.

Could these labs, which are now showing up all over Africa, be a way for entrepreneurs to make themselves known, show their stuff, then be introduced to the funds and investors with a greater level of confidence than normal?

8 thoughts on “Crowdfunding and Seed Funding in African Tech

  1. Jimmy Gitonga

    I am hoping that iHub will become a kind of “peer” review space for both developers, entrepreneurs and investors.

    For developers, one will be able to share one’s idea including strategy, source code and goals, while the rest “tear” it to pieces and help to build it. This will happen because there is no fear of “plagarism” of ideas.

    For the entrepreneur, one will be able to get a resource of developer access and investor interest in order for the idea to become a viable business.

    For the investor, it will be a place to actually meet the entrepreneurs and know them, start a relationship and begin a journey that is “like no other”.

    So, with reference to the last paragraph, I look forward to this.

  2. Tawa Moonbloode

    I have been interested in KIVA and I came across this blog. I will definitely do more research on the funding situation in Africa and see how I can help.

    Tawa Moonbloode

  3. Patrick Mwendwa

    I must say, I am really impressed with all the initiatives that my fellow African brothers are showing when it comes to technology and its advancement.

    In my own opinion (I stand to be corrected), I think that its through technology (internet presence) that we shall be able to change Africa. Gone are the days of going to school and becoming a faithfull worker. We are in the information era and its the right information, at the right time, with the right person that will lead to a revolution if not make you filthy rich

    On the other hand, the rest of the world seems to be thinking that Africa is another name for skin wearing people with no shoes. Lets make our presence felt and demand the attention of the world through our technological advances.

    I am living in the US at the moment and together with my friends (2) have come up with a site that will assist businessmen in the Diaspora and Sub-Saharan regions have a presence in the global market and share internet-time with the top dogs.

  4. Rik

    Seems to me that the (old-fashioned?) structure of attaching some kind of a board of highly networked, experienced people to the network would be one way to create both a good filter as well as a portal for the entrepreneurs into the investment world.

    (Re: “Could these labs, which are now showing up all over Africa, be a way for entrepreneurs to make themselves known, show their stuff, then be introduced to the funds and investors with a greater level of confidence than normal?”)

  5. robsalk

    Peer review is a great idea, especially as the incubation centers gain more independent credibility. Perhaps there’s also an opportunity for some kind of third-party juried competition. Each success will reinforce the reputation of the centers and strengthen the trust and social capital in the networks that do the recommending.

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  7. Luci Temple

    Have African entrepreneurs considered hooking up with the team behind http://www.urgentevoke.com? They are effectively crowdsourcing ideas to help “save the world” with a huge amount of people involved – including general public. It would be a good forum to address for crowdfunding.

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