8 Innovative Ways to Fund Your Startup
Dear Motherland Mogul, anyone who said starting a business is fun and easy told a fat lie and worst still, have never started a business. One of the biggest hurdles an entrepreneur in Africa (or anywhere in the world) has to cross is the hurdle of financing their business. It’s the reason why many fabulous and potential million dollar ideas die every day or remain mere ideas. Like it or not, money is everything in an entrepreneurs world. Without it, ideas are buried and passions are watered down while frustrations set in, making even the strongest of personalities call it quits and go back to their corporate jobs. I’ve come up with 8 innovative ideas you can use to fund your startup without necessarily borrowing money. Depending on your situation and kind of business, you’ll find at least one or two you can apply immediately to get your business running. 1. Sell your valuables Yes! You saw that right. If you’ve been struggling with acquiring funds to finance your startup and nothing seem to be working, maybe it’s time then to look inwards. Search your house thoroughly for any valuable item that could fetch you a fortune when you sell…that gold wristwatch, expensive jewelry, MacBook, or iPod, whatever. It’s time to let them go for the bigger stuff. If you aren’t ready to get rid of these precious items to make your ideas work, then it doesn’t matter what you say, you are not ready for business! Or better still, you are not convinced about your ideas. Entrepreneurs are people that can give everything including their lives for something they believe in. That is one skill you need to survive in this overcrowded business space. 2. Dip into your savings This is what your savings are meant for: to invest in opportunities and ideas that can transform your life and change your world. Your savings are not meant for spending, fixing urgent situations or paying debts. You can have separate savings for that but primarily we save to invest. Just in case you don’t have any savings, you might want to take some time making some money at first. So try to get a job where you could work for some time and save before starting your business. 3. Your Rich Friends What big money is to you is nothing to some of your rich friends. You know this is true. Instead of dying in silence and wondering if they will be willing to help you, swallow your ego, take the bold step and pitch your ideas to them. You’ll never know if they’ll support you unless you ask. If one rich friend says no, walk up to another until all of them have said no and at that point, you know something else is wrong. Maybe something that has to do with your approach or the feasibility of your ideas. Your friends should be willing to help you make your dreams come true especially when they can. After all, what are friends for? 4. Crowdfunding from family and close relatives Crowdfunding is a good fundraising alternative for entrepreneurs. It involves raising a small amount of money from a large number of people. Crowdfunding can be done through online platforms. The best people to start fundraising from are your family and relatives. You can start by listing down all those who can potentially fund you and write down how much you think they can conveniently donate. Once you’ve located your potential donors, go reach out to them. Pitch your ideas so that they know what you’re capable of doing. For some other family members, you can ask to instead borrow money and then pay as your business yields profits. 5. Leverage on funding opportunities Governments, NGOs and other private and public bodies are providing support to entrepreneurs all over Africa. Since more people are participating in entrepreneurship, these bodies come up with initiatives and CSR projects to provide financial support to budding entrepreneurs. Be sure to leverage these opportunities when they show up. Other funding opportunities include idea-pitching events. For example, the upcoming SLA Accelerator gives entrepreneurs an opportunity to pitch their ideas. Then the top selected ideas get to win large sums of money, partnerships, and mentorship. Such events provide you an opportunity to not just fund your business when you win, but also learn from your mistakes if you lose. In the end, it’s a win-win situation where you get to build on your ideas either way. 6. Partnerships Regardless of the kind business you run, a partnership is a smart way of funding your startup. Strategic partnerships will not only afford you funds, but also help you leverage the experience, expertise, resources, and network of the other party. Just make sure you go about it the right away and involve a legal personnel in all your dealings and agreements. 7. Microloans and peer-to-peer lending While I always discourage small businesses from starting up with loans, at times, that might appear to be the wisest step to take. Microloans are small business loans offered by microlenders to help small or relatively new businesses finance their business. As a new business, you might not qualify for a bank loan because of the collateral requirements and others. But with microloans, you can get your business started without acquiring too many debts or paying high-interest charges. Similarly, peer-to-peer lending is a new debt financing method that provides a platform where lenders are connected to borrowers. You don’t need a financial institution for a p2p lending. The interest rates are also at an all-time low and less risky and safer than other methods. 8. Angel and seed investors Angel/seed investors are wealthy and affluent individuals who provide a business startup with capital or funds usually for a convertible debt or ownership equity in return. Most small business owners don’t buy into this idea of business funding. This is because it involves sharing their business ownership with another business even if it’s a small percentage. However, you
How to beat the rewards system
As someone who has been working in this crowdfunding space for quite some time, I have had the opportunity to have incredible conversations with people who run crowdfunding platforms and people who run campaigns on crowdfunding platforms. As you can imagine, the information you gain from both sides of the coin, while different, is necessary for a complete understanding of the crowdfunding scene. Before I decided on exactly what I wanted Do it Now Now to be, and the kind of support we would need to offer our campaigns, I did a lot of research into what it takes to run a successful campaign and what support campaign founders need. Let’s talk about perks/rewards Yes! You got the money, congratulations! But now, you have to deal with sending everyone that pledged an amount of money to you, the things you promised you would give them. If you have raised $23K and you have 380 backers who have each donated between $10 and $1000, you are going to have to gift 380 people a gift corresponding to the amount they donated. That means, you are going to have to design or purchase the gift and send it to their individual addresses. To some of us, this seems pretty straightforward. However, for people like myself who need to break stuff down, consider this. What is your donation percentage? The first thing to consider when deciding which perks you are going provide to your donors, is how much of the donation is going to go to perks. Most platforms offer a 5% (or more) commission on the amount raised. After that, they add the transaction fees (usually between 3 and 4%). The problem with pledges, is that not everyone has the money in their account when it is time to collect. Factor in the cost of failed pledges. We suggest you factor in another 2% to cover this. So, before you factor in perks at all, you have just paid out 10% of the amount raised on each donation. So far, on each $100, you are making $90. Not bad. What is your attraction percentage? Now, how much money do you want to spend to attract someone to donate to your campaign? This includes any kind of advertising (Facebook, twitter, Instagram etc.) you want to use. We don’t actually suggest you pay a ridiculous amount for advertising a campaign. Say you spend 50c on each $10 donation, that isn’t too bad. So far, on each $100, you are making $85. Not bad. What is your perk percentage? How much do you value your donor, in each donation bracket? Think about this purely monetarily. Your perk percentage reflects how much of the donation you want to spend on the physical or non-physical perks, the shipping of the physical perks, the design costs, etc. We suggest as an individual campaign, you spend no more than 15% of your raised amount on perks. There are different rules, depending on the type of campaign you are running. If you already have a product you are trying to sell, and you have a RRP, then by all means use your existing merchandise! You have already paid for it, and if you are making a small mark-up on the cost-price of your merchandise you are doing well. However, if you do not have existing merchandise and you actually need to make some money to create merchandise, this 15% maximum budget is for you. The 15% includes the physical items, and the packaging and shipping of those items. Note that with the state of most platforms, people expect a lot as a reward. We suggest you get really creative so that you don’t end up spending 50% of your raised amount on perks (trust me, it happens!). You are now at $70 for every $100. Not bad. Keep on budget and you will get a good amount back! Make sure you factor in the quantity of each perk you want to offer. What will your community actually donate? Are you surrounded by $10 givers, or $100 givers? What do you think your $100 will want to receive? Try talking to your community. If you make them a part of your decision making process, they are much more likely to respond to your campaign. What is your administration cost? Think about your opportunity cost. How much time are you going to spend on the post-campaign administration? How much time are you going to spend on marketing and organising your campaign? Most campaigns take 10 hours a week to run, and most campaigns run for 8 weeks. Post-campaign administration is about 3 hours each workday for a month (approx. 60 hours). Factor in a salary that makes sense for whoever is going to be dealing with this part of your campaign. You are looking at 140 hours at an average wage of $5/hour; $700. Factor in 3% of your fundraising amount as a guide, if you don’t want to have strict time/cost constraints. These estimations depend on the number of backers and the type of perks you have —the more personalised the perks, the longer it is going to take to organise properly. It is not impossible to do this well. There are actually a number of print and ship on demand platforms that you can look up. There are also a number of crowdfunding support companies that handle all of this for you. They usually charge between $3-5 per physical item for shipping and handling post-campaign. If you plan and budget carefully, and you do as much of the work yourself and try to use as much readily available merchandise as possible you could be at $67 for each $100 donation post-campaign. Not bad at all. There are benefits to donation/reward based crowdfunding, and there are obvious benefits to no-reward donation based crowdfunding. You need to think about what type of crowdfunding best suits what you are trying to do. Merchandise based campaigns with ready merchandise should go for
6 top tips you need to crowd fund well!
When you’re ready to crowd fund, at first, it might seem like a lot of math and very little reward, but that is not always the case. After you read this, you will be one step closer to creating a campaign that will achieve great things. In this article, I will help you pin down some key tips you need to do well in this often techy, jargon-wrapped industry. 1. First, break it down! “What are you doing and who is doing what?” What exactly is your product? Many of us tend to think of the beautiful things we want to create but have no idea how to put pen to paper. And certainly, no idea on how to make it work in a format that fits the crowdfunding world. My suggestion is to break it down into bite size pieces. If you want to be the next JK Rowling, remember she started with just one book. Start with a bite-sized chunk and make sure it is something you are able to do. You have the knowledge and the connections to make it happen! That goes for the campaign as well. Make sure you have the right team around you; everyone has to know exactly what their job is and how that fits into the big picture. For the basic team structure, I recommend as follows: The administrative lead ensures that you get the most out of the chosen crowdfunding platform and keeping with their regulations. The creative director, depending on the platform, may need a campaign video, or snazzy graphics to make campaigns stand out). The logistics lead handles all the costing and shipping of rewards (more on this later). The marketing and communications lead should be two. One for press and influencer marketing, another for social media and community marketing. Yes, you should already have a supportive community of “fans” before you crowdfund. Successful campaigns are coordinated by successful teams. Remember that. 2. “Will your second favourite Aunty support your campaign?” This may seem like a no-brainer because you are passionate about this thing. But don’t forget, only your friends and family can primarily support your campaign. The first 30% of money raised will come from your close, first degree connections. The rest will come from second and third degree connections. If you are even remotely shy/embarrassed about talking about this to the people closest to you, or you know they will disapprove of your efforts, I suggest you save some money and start smaller than you planned to with crowd funding. Crowd funding isn’t for everyone. There isn’t an imaginary crowd living in the cloud somewhere. It is the people you see everyday —your work colleagues, your friends and your family that are going to make or break your campaign. 3. “Build it and they will come” doesn’t work here No matter how much people like you, they tend to like their money just a little bit more. Remember that friendliness counts. We live in a heavily-networked society, so you are going to have to go even further to encourage people to part with their money. Make phone calls, meet people for coffee, drop your product idea into these conversations. Make sure they can hear your voice and they can feel your passion when you are talking about what you want to do. Asking someone out of the blue to support your campaign to create a line of high quality stationery, when they haven’t spoken to you for three months is not smart. If someone did that to you, how likely would you be to support them? P articularly when they have never mentioned stationery in the history of your friendship? 4. Making your rewards count Depending on the type of crowd fund you are aiming for (donations with or without rewards, investment and equity based or debt based), and the platform you are have settled on, you may or may not need to think about rewards. If you are listing your campaign on a reward-based platform, please do your homework. There is a good amount of math involved in this so if that isn’t your strong suit, ask someone for help. There are number of things to consider —shipping costs, printing/manufacture costs, the admin and follow-up time, and whether or not what you are offering is what people want and are willing to part with their money for. Every type of product requires a type of reward that is unique. Try to keep your rewards cost under 15% of your fundraising amount —especially if you are shipping items (check the weight, plan your packaging, know your postage cost). At Do it Now Now, we have a universal perk system. That means we handle all the perks for all of our campaigns. We realised this was a major pitfall for members of the Diaspora in the UK when in came to crowd funding, so we decided to take it off their hands, releasing them to do what they are truly passionate about. 5. Have an open evening. Share your ideas! When we were starting on our journey with Do it Now Now, we had a mini-party that has turned into monthly open evenings. We invite potential advisors who have shown an interest in what we do to join us for coffee. They ask as many questions as they want about our plans, ideals and practices. I suggest you start doing this as early as possible. Invite people who are going to be a benefit to you on your business. Tell them what you are doing and what you think the pros and cons are. Invite them to have their say. Invite them on the journey. Make sure to invite people who have crowd funded before; their insight will be priceless. If you don’t know anyone who has been on this journey before, contact campaigns that are similar to what you want to do and ask to meet them for a coffee separately —most people will oblige you, especially if you are buying! 6. Identify your Mariahs in advance
Webinar with Archel Bernard: How I raised $65,000 using crowdfunding (Sept 23)
Missed this event? Make sure you don’t miss the next one by joining our community today. Archel Bernard had a vision for a high quality manufacturing facility that could upgrade the production of her fashion company and provide sustainable jobs to women and Ebola survivors in her native Liberia. While she had experience running her business over the past couple of years and a passion for helping her community, what she didn’t have was lots of cash to invest in the brand new factory. That’s when Archel turned to crowdfunding over a two month campaign, raised $65,000 to create the Bombchel Factory. Archel is going to share the strategy she used to turn her crowdfunding campaign into a project even the Kickstarter team loved by having it on the front page of their site! She’ll share the dos and the don’ts so you can create a crowdfunding campaign that gets you closer to your business goals. Some of the topics we’ll cover: The best way to develop a story that will really sell your campaign How to build early support for your crowdfunding campaign Creative ways to get media coverage and have people pay attention How to develop prizes and rewards that won’t have you suffer after the campaign is finished Webinar Details: Date: Friday September 23, 2016 Time: 3:00pm Monrovia // 4:00pm Lagos // 6:00pm Nairobi Watch this webinar: About Archel: Archel Bernard is owner of The Bombchel Factory and Mango Rags boutique in Monrovia, Liberia. She moved to the West African country after graduating from Georgia Tech in Atlanta. She now specializes in dreaming up contemporary African womenswear, training disadvantaged women to sew her designs, and helping the women to become self-sufficient. Archel’s mission in life took a significant turn amid the deadly Ebola outbreak in Liberia. She saw the devastation in the country she loved; a country still struggling to overcome civil war. Archel decided to open a factory to help the people of her ancestral homeland to rebuild. She named it The Bombchel Factory and herself, the Head Bombchel in Charge. Bombchel Factory has been featured in The New York Times, CNN, Forbes Women Africa and other major news outlets. She is also a Richard Branson Scholar. Her designs have been worn by actresses in the online drama “An African City” and models in several international magazines. Archel’s successful Kickstarter campaign almost doubled its goal! She is a force. A visionary. A fashionista. But more than anything, Archel is a savvy and relentless business woman, determined to use her business to build lives. She’s come along way from selling dresses in her pick up truck, but there’s still so much more to do!
Need capital to grow your business? UnoEth’s crowdfunding story
Hey there budding entrepreneur, are you finding yourself looking for ways to grow your business?Are you telling yourself, “If I just had more inventory or more capital, my business could…?” Me too! The search for ways to fund your business can be overwhelming and intimidating. There is a wide selection of grants and loans that can leave a business owner confused and unsure of which path to take. Yet, the number of grants that your business qualifies for may be limited and applying for a traditional small business loan may have you jumping through more hoops than you can qualify for. Pitching my business to an investor was another thought, I considered. But was I really willing to give up part of my business so early in the game? No. As a co-owner of a year-and-a-half old leather goods business, UnoEth, I found myself at a crossroads, weighing out our options for funding our young business. Scrolling through the Oakland Small Business Assistance Center’s website one day, I stumbled upon information about a non-profit organization called Kiva. Kiva is the first and largest micro-lending service in the world that has distributed $709 million over 10 years, in 85 different countries (almost 30 countries in Africa), among 1.5 million small businesses. I was delighted to find that many philanthropic foundations, Fortune 500 CEOs, small business owners like myself, and giving individuals contribute to many loans on Kiva. I was also inspired by the giving community on Kiva where lenders and entrepreneurs support one another to reach their goals. After reviewing the terms and qualifications, I thought, “Hey, I think this may be the right path for my business.” I applied immediately. Several days later, I received a call informing me that we had been approved and our private funding round started immediately! In the private funding round, each entrepreneur needs to have a certain amount of lenders contribute to their loan in 15 days in order to qualify to the next round. After reaching out to close friends and family, we reached our goal before the deadline. We are currently in the public round of our crowdfund and are over 20% funded—woo hoo! Reaching out personally in our network and social media has helped us gain momentum in raising funds. In addition, contributions from the Kiva network has greatly helped as well. With less than 3 weeks left, we are confident in reaching our goal so that we can support our artisans and vendors in Ethiopia, increase our inventory, and market our business. Click here to contribute to our Kiva loan! Should you wish to follow our example and start your own crowdfund, take some time to research. There are crowdfunds that can help take your business to the next level such as Kiva, Indiegogo or Fundable. Find out which is the best fit for your business and go with it. Don’t underestimate the power of word of mouth, social media, and the giving personalities of those who may be moved by your business’ mission as well. If you don’t take the risk, you’ll never know what amazing opportunities the adventure may lead!
Ready to crowdfund using social media? Read this first
Crowdfunding is no longer the buzzword it was in 2006. Social media has undeniably taken over and changed the way we interact and connect online. Gone are the days when discussion forums were the go to tool for getting numerous opinions. Crowdfunding by definition is, “the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.” This is basically asking strangers around the world to help you get your project or campaign off the ground by financing it as a collective. Not only does this mean you’ll have the necessary capital to get going, but you will also have peace of mind. Through the indirect market research crowdfunding provides, you’ll know that a community of backers believe in your service or product. The average person has 5 social media accounts, this means you have a few options on how to get your message across. Sometimes, all you need is a quick update on any platform and you will be flooded with an array of responses from your followers, catapulting your crowdfunding plans into the stratosphere. The next step is knowing how to harness the power of those platforms to bolster your crowd funding efforts. However, there are dos and don’ts when it comes to crowdfunding. You’ll need to ensure that people don’t view your suspiciously while ensuring long term success beyond the initial campaign. Build a good foundation before the launch 30% of your donations will come from people you know. With this in mind, you need a solid network of people you have already been connecting and engaging with online before launching your campaign. This could take months so make sure you are ready to put in the work. There is no shortcut to a strong social following of engaged users. Even more important is to ensure that you have the ‘right’ kind of followers. Through a great social media strategy, you can discover people who have shared interests. These are those will be more likely to support your cause. Don’t rely on one platform It’s very easily to rely on one platform. You may think your Facebook friends know you well and will support you but avoid putting all your eggs in one basket. Pick the right platform based on where your audience is, where you receive the most engagement and where you will be able to monitor things easily. Rather than using your personal profile (which could get spam-like towards your friends and family), start a separate page for your campaign and get people to like and follow it for updates. You can also have a separate page for yourself. This way people can see the woman behind the campaign, you never know, it will probably be one of many projects you undertake. Content is king You need consistent and engaging content in order to stay current and pull in the crowds. Your copy should be punchy, to the point and shareable in order for the word to spread. Use rich imagery where you can, as well as other content types such as infographics, videos, podcasts etc. Share updates and milestones in order to keep the excitement going among your backers. Keeping content consistent and frequently updating will ensure you stay on top of people’s minds. Don’t jump the gun Asking for money right away makes you seem greedy and desperate. These two words can taint your campaign. How you frame your requests also matters, no one wants to feel like you are begging them to send money your way. Refrain from, “Please give 30 dollars to my campaign.” Instead go for subtle ways of encouraging support such as, “Could you be my next backer?” Listing the amount of money you require in your update might seem daunting to someone who only has a little to give. Rather, post a link to your landing page where people can decide for themselves how much to give. At the end of the day, even if you don’t reach your required amount through crowdfunding, you will still have a great community of people who believe in your ideas. Don’t ditch them. Instead, thank everyone for their efforts and keep doing what hooked them in the first place (consistency, remember?). You never know when your next bright idea might come and you need them again. Have you run a successful crowd funding campaign? Let us know in the comments section below.
Archel Bernard kickstarts her Liberian ethical fashion factory
Archel Bernard is a Liberian fashion designer and entrepreneur. She successfully raised more than $40,000 on Kickstarter for her company’s growth and shares with us how someone stealing her ideas got her started in fashion, her ambitions to build a global brand and why crowdfunding was the way to go to raise much needed cash. Why did you choose fashion as your avenue to make a difference in Liberia and how has your business made an impact on the local community? I wanted to be the West African Oprah Winfrey when I moved to Liberia. I would go to communities and shoot and edit videos of exciting things happening around Monrovia, and of course the West African Oprah had to wear West African clothing! I made my dresses at a trendy boutique in town, and the seamstress would take FOREVER to get my clothes to me. I was doing my own designing because traditional African clothes aren’t typically my taste. One time I went to pick up a dress the boutique had been working on for about a month, and when I saw her, she was wearing a copy she made for herself, another customer was wearing a copy she just purchased, and another tailor was sewing one for her to sell on her racks! I still had to pay top dollar for a dress she was taking credit for designing. At that point I realized I could figure out a way to do everything I was paying her to do for me, AND possibly make a profit from it if people liked my styles. I made 8 different styles, found two tailors, and paid them a small fee to make my first line. I didn’t even know I was creating a line, much less a company. I just thought I could make a little money around Christmas. I sold out of everything and used the feedback (and money) to make more styles. Two of those same looks are still our top sellers today! I was never inspired to create until I came to Liberia. I loved the bold colors and patterns. The chaos in the markets and streets, and always the women wore bright lappa to navigate it. Seeing and wearing African cloth made me feel at home. I was thrilled by the design possibilities because from where I sat, we could do much more than tie lappa around our waist. Two months after selling my first dress, my government contract ended and I was unemployed. My mom hired me to be her driver on a visit to Liberia, and my dad gave me his pick up truck, so I bought cloth with the money and sold dresses from the back of the truck. Slowly, I saved enough money to open a shop. I’ve worked all kinds of jobs to make this happen. Now our business has grown so much, our tailors get sad when I leave town, not because they will miss me but because when I’m in town there’s always a ton of money to be made! What are your ambitions for your company and The Bombchel Factory? I want to build a large factory that staffs and trains hundreds of Liberian women, and offers classes on the side for literacy and business skills. This is about community building and industry changing. I want our factory to rival not only rival China for quality, but be the best in the world for human development. I want clothes made in The Bombchel Factory to be sold everywhere from Nasty Gal to Bergdorf on Fifth Ave soon, to prove that there is space for quality, ethical fashion in the most exciting shopping districts of the world. Why did you choose crowdfunding as a fundraising strategy for your business? I chose to crowd fund our company because we had hit a point where we couldn’t grow anymore doing the same thing we were doing: small custom orders for under $100 a client. We wanted to reach the everyday girl, but customer acquisition was expensive and there wasn’t much profit in a few custom orders a month. I’m incredibly scared of loans, after having already signed my life over to Sallie Mae years ago, and I don’t think we are big enough to start including investors with equity. Since all we needed was a strong following to preorder our goods, crowdfunding was perfect for people like us. Everyone who backs our campaign knows to expect a wait before receiving their goods, so that gives us a chance to perfect our items and plan our website and New York Fashion Week launch party. We are using Kickstarter to literally explode onto the market, and Kickstarter is good for helping you build a loyal following. What factors did you take into consideration before starting the crowdfunding campaign and how did you prepare to make sure it was a success? I had a friend, Chid Liberty of Liberty & Justice factory, also do a Kickstarter for his t-shirt line. He was actually the person who recommended crowdfunding to me. When his campaign launched it was flawlessly executed. They met their goal in a few hours and even got endorsements from several celebrities. I knew I didn’t have that kind of reach, but I also knew I had a lot of things going for me that I could package. I read every article and watched every video on having a successful crowdfunding campaign and applied what I could. My best friend in Atlanta offered a great photo shoot deal, and my sisters have been known to work long hours for clothes, so I knew my packaging would be spot on. I had a ton of people interested in ordering my designs, but I needed to streamline the ordering process and show the need for my product would gain the same results as having a large network. Crowdfunding has proven I have a market, not just cousins and friends who want to support me. What message would you share with other young African