SA Crowdfunding Blog

Wednesday, 29 August 2012 15:43

Why Crowdfunding is the New Form for Investing

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Although the concept is somewhat new to South Africa, crowdfunding has been around for a while. For many years, people have been willing to invest their money for worthy causes, including disaster relief and political support. The concept is the same today; there are just many more venues that are being scrutinized for alternate funding in this manner.

Venture capital works successfully when enough private investors support and believe in an idea, person, or organization. The reason why crowdfunding in South Africa is gaining popularity now is because of the internet connection of investors. A cause is much easier to publish to the masses through social media networking.

Proven Successful for Many Years

In 1997, the fans of a rock band were able to underwrite a U.S. tour by way of crowdfunding, and this was without the knowledge of the band members. A concerted effort by the principals in any given venture provides a much better opportunity for success through crowdfunding SA, but without experienced leadership results may only meet with limited funding.

Seeking the Right Professionals

Not every investment organization has embraced crowdfunding SA wholeheartedly, preferring the approach of equity based financing. While this may offer some solace to investors, it doesn't necessarily have much bearing on the success of a project or idea. Many business owners at start up have personal investment in the company before outside funding takes place, and some still do not become viable or profitable.

As we have seen in recent history, investment schemes do not always work out based on the reasoning of the professional hired to manage other people's money. There is no standard that guarantees any "sure thing" in investing. When a person feels strongly about a concept, person, or organization, that is what should lead them to put money into the till.

One thing that crowdfunding SA indicates is that if enough people are willing to invest in anything, the consensus of the general public is likely to be supportive also. Personal investing is, after all, the final decision of the person supplying the funds.

Two Concepts of Crowdfunding

There are two varying ideas as to how crowdfunding should be organized, and it bears understanding both concepts before any investment is made. Under most auspices, a goal is set for funding that is based on the need for a business to have enough startup capital, a candidate to be able to begin a campaign, a set number of items to be produced, or other known levels of accomplishment.

In one scenario, no matter how much crowdfunding is raised, the recipient gets the money. This leaves a void that must be filled by other sourcing, which can be through conventional loans based on use of crowdfunding as equity. Other crowdfunding SA can be strictly based on reaching the goal and if that mark is not obtained, all funds are returned to the investors.

Keep in mind that whether the goal is obtained or not does not necessarily mean that an idea is bad. There are so many factors that come into play that the best ideas in the world might not reach the projected funding in a stipulated timeframe. As an investor, you have the right to decide what feels best for you, and that decision should be based on your own thoughts and ideas as well as the advice of a trusted investment professional.

As many of the established vehicles of investing have proven to be ineffectual, crowdfunding SA is certainly an option to consider. The collective cooperation of the many has been instrumental in changing the face of the world, and it is no different today. The support of you and your internet neighborhood can be why important matters proceed or die at the planning stage.

Read 2331 times Last modified on Wednesday, 29 August 2012 17:51

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