Herman Singh explains how nearly $2.5 million in equity was crowdfunded on the Intergreatme platform.
By now you are probably aware of the record-breaking almost $2.5 million equity crowdfunding that was achieved by a South African startup on a South African crowdfunding platform.
This record achievement by Intergreatme in partnership with Uprise Africa was a massive surprise to the local market and seemed to come out of leftfield. It also greatly exceeded the next closest raise by an order of magnitude and startled many pundits in the industry.
The journey to this point and the lessons learned are important for any startup looking to raise funds in an alternative manner.
Firstly what is crowdfunding? There are four types: Donations, rewards, P2P lending and equity. This initiative falls into the last category. The first two types are often social-media-driven to raise funds for social causes such as a child’s education, a charity or even a trip to gain more experience at a conference. P2P lending is about a platform that allows deposits and loans to be processed without banks being involved – very disruptive indeed.
Equity fundraising has been an answer to the unwillingness of VC funds to engage on early-stage startups. These entities often start by bootstrapping – paying from their own savings – then move to friends and families before they get to angel funders including myself. The challenge is the valley of death right after this and before VC funders get interested in a later stage asset.
The situation in Africa is worsened by the very small size of the VC and private equity markets and the fact that these are very broadly split across industries and countries and therefore very shallow. VC funds in Africa have tended to do very few deals up to $5 million and almost all are concentrated in three countries: South Africa, Nigeria and Kenya.
South Africa is characterised by conservative fund pools clustered in geographical areas, specific industries or communities making it even more difficult.
Intergreatme was a startup that had reached the angel funding stage after a number of strategic pivots to finally focus on a digital self-RICA and self-FICA solution. It has also closed desks with a number of blue-chip clients in the process. Uprise Africa, the equity crowdfunding platform used, similarly, is a founder-run platform fully approved by the FSB, with a sponsoring large financial institution and having already at the time of the launch successfully completed two fundraises.
The launch event was an amazing high energy with a number of high-profile speakers including myself. The original target of R24 milliion was exceeded within 48 hours with pledges of over R32 million from over 400 investors.
The key lessons learned were:
- the importance in the choice of platform,
- the use of a compelling launch video,
- the simplification of business and financials,
- the considered design of the launch event,
- the inclusion of a few “whale” investors, and
- the reinforcement of the message that successful investors were also joining the round.
This augurs well for the local startup market and for individual investors who would like to get in on the next big thing but in a structured and managed way. It’s early days but it’s already clear that this is going to be an important t part of the overall funding market in the future and will also open up a new challenger to more traditional ways of doing things.
