Start-up finance/crowdfunding

Crowdfunding in the own community amongst family and friends. Their donation will be a loan; repaid when business started off (with a risk that the business won’t be profitable).

Experience with crowdfunding in Bolgatanga, Ghana: Crowdfunding is not a popular way to raise money for a business start-up compared to other sources like grants, bank loans and family wealth. However, the kind of crowd funding popular in Ghana is called Silver Collection where a group or individual makes appeals to individuals or groups for donations of any amount to support their project (usually not business ventures but mostly charity). What I tried to do when I needed money to publish my book was to talk to people for silver collection which will be paid back with interest because it is was not for a charitable purpose but business. Usually people in Bolgatanga and Ghana for that matter think that anything business should be dealt with at the bank and this is a major barrier to crowdfunding for business start-ups.

Three things I noticed are important for successful crowdfunding for business start-ups in Ghana:

  1. Your (the entrepreneur) track record or how the people you approach perceive/trust you.
  2. The interest of the people you talk to in your business venture.
  3. How much you ask for from each person (asking little from many people works than asking much from few people).

Learning Tasks edit

Try to answer the following questions for yourself and explaing why these are challenges for donors and project initiator:

  • How can the donor of the money check if the provided money is used in the proposed way?
  • Is the proposed project based on scientific evidence? Are rationals and the sources for the scientific evidence visible to the donor?
  • Does the major donor unconditionally donate monay to project or does the donor add requirements and constraints to the funding (e.g. "you will get the money, if and only if project initiator uses the commercial products produced by the donor)?
  • Can the results of the proposed project unconditionally be published or does the donor have a certain "veto" right, if the results of the project could have negative impact on the donor?
  • Is the political, commercial and institutional background project initiator transparently documented to the donor, that creates a hidden bias?

See also edit