# General Business Category > Business Finance Forum >  Crowd Funding in  SA?

## Cimmerian

Hey all,

I've had an idea that I've developed and worked on for the last three years, and I've slacked off from actually getting anything done about it - and I want to change that. I want to start a (pty) ltd private company by the end of the year, but this is a huge challenge for me, because I don't have any education in business other than a few years of economic and management sciences taught to me during primary and high school. I know I need to gain capital in order to get my business running, but that in itself is also a challenge because I'm only 19 years old and I fear I wouldn't be taken too seriously by investors, and I'm also not comfortable with seeking investors because the principle behind my business is not one of commerce or retail, it involves royalties and advertising income generated through eCommerce, so I cannot accurately project a thorough financial analysis that would be convincing enough to attract investors or even offer the foundations for a solid exit strategy, so I figured my only resort would be crowd funding. 

I've planned to use www.kickstarter.com in hopes to raise funds for my business, but there's a drawback in the sense that one needs to qualify for an Amazon payments account. in other words, I need to be an American citizen. I spent a long time looking for workarounds and came across a company called Bridgestarter, that offers revenue collection services, enabling individuals outside of the United States to use Kickstarter by providing them with a holding account that costs a fixed, set price per procedure. That was my failsafe, but it seems fate has taken a turn for the worst because of a little issue Bridgestarter is having with their revenue collection services:




> PRESS RELEASE
> 
> May 9, 2012
> 
> We have learned that our Revenue Collection Services - which provide individuals outside of the US with the ability to use Kickstarter - have, effectively, been shut down. Amazon Payments sent notice that Bridgestarter's accounts have been suspended.   We are currently trying to rectify the situation with Amazon Payments and hope for a speedy resolution.  In the meantime, we have refunded all fees paid by our customers and have issued letters of explanation and apology. 
> 
> In spite of this setback, we remain committed to helping entrepreneurs raise money for their projects:
> Both our Professional and Distribution services remain available to those wishing to launch projects on other crowdfunding sites (i.e. indiegogo.com, rockethub.com, etc.);
> In the coming weeks, Bridgestarter.com will be redeveloped to enable entrepreneurs to promote their projects on the site for free; and
> ...


I'm running out of funding options here - does anyone have any advice to give me that I could put to use in the quest for financing my dream?

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## adrianh

Do you know how much money you need and exactly how it will be used?

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## Cimmerian

For the most part, yes. R900 000.00 will be needed for the first year's employee wages, around R12200.00 a year for server costs and maintenance, and as for renting an office space, I can't be too sure because I'm only looking to employ 10 people for the first year so I don't need anything too big, but it seems the only thing on the market right now IS big... I can't relocate too far from home and unfortunately I live in Sandton, where when one says they're looking for office space to let, the real estate agents immediately assume "I could probably sell that vacant office in the Michelangelo hotel! yay!" /notaffordable

Purchasing 10 decent computers for work purposes, a printer and fax machine and telephone and internet line wouldn't set me back further than R90000.00 for the first year either, I'd imagine. I just need an accurate estimate for office space rent...

And then a decent R50 000.00 set aside for emergency purposes.

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## adrianh

How did you derive the R900,000 figure for employees?

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## Cimmerian

1 Programmer - R10000 p/m
1 Graphic Designer - R7000 p/m
1 Receptionist - R6000 p/m
1 Systems Administrator - R7000 p/m
1 Network Administrator - R7000 p/m
1 Project Manager - R10000 p/m
1 Bookkeeper - R8000 p/m
1 Founder & CEO - R10000 p/m

R10000 set aside for financial bonuses

Towards the end of that year I want to bring two more programmers and one more graphic designer on to the team. I'm not looking for employees with years of work experience, I'm satisfied with entry-level just to kickstart things a bit.

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## AndyD

I don't see any investors bankrolling your own salary and any financial bonuses paid out would surely be profit related, if the company makes money it will be able to pay these itself so I don't see them funding that either. Why can't the business be grow more organically rather than needing to be so investor dependant to get it off the ground?

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## Cimmerian

> I don't see any investors bankrolling your own salary and any financial bonuses paid out would surely be profit related, if the company makes money it will be able to pay these itself so I don't see them funding that either. Why can't the business be grow more organically rather than needing to be so investor dependant to get it off the ground?


I'm very new to the idea of owning a business, that's why I joined these forums. So forgive me if I come across as ill-educated in that regard. However, I do not want that to cripple my ability to turn a world-changing idea into reality. I want to get this started as soon as I can and learn along the way. What do you mean by "organically"? If you're asking me to chip in my own money, that's not a possibility - I'm 19. I don't have the funds necessary to employ even just one person. I can't ask family for money either - if they did offer me a loan, I'd think them insane (financial troubles). But my idea could revolutionize an entire industry and improve it for the better - 3 years of research into the matter proves it'll make an impact, and once the business has enough reputation, investors will be coming to me. But I don't have the funding necessary to start the business, and that's all I need to get it set in motion.

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## AndyD

I admire your vision, and I wasn't thinking you came across as uneducated but it's a tall order to persuade any investor to back a start up business especially as you have no track record and aren't investing in it yourself.




> 1 Founder & CEO - R10000 p/m


Plus you're asking they pay you a salary




> I want to get this started as soon as I can and learn along the way.


And possibly your 'school fees' as well.

By 'grown organically' I meant started on a smaller scale with less overheads and less risk to an investor. As the business suceeds it would then fund its own expansion at a natural rate.

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## adrianh

The thing with investors is that they don't give you R900K and you give them nothing in return. For anybody to investing a business they have to be assured that they can make more than just leaving the money in the bank or buying a house and renting it out, etc. That would be on a close to zero risk investment. So, lets say for example that they could make R50,000 over five years, this means that in 5 years time they would get R950,000 back.

Now lets look at risk. You have an idea and zero experience, zero track record and you are very very young. What sort of a risk do you think this poses to an investor. I think that the investor would be looking at worst case which means that he stands to lose R900K. Now, the investor would say OK, this is no longer an investment, it has now changed into a pure gamble with odds of say 100:1 of success. I think that the investor would then reason that if he is going to take such a gamble that he would want to make his money back ten fold.

It all goes to risk vs reward. This is the reason why banks want collateral, they try to mitigate their risk against a tangible asset that they can sell to recover their "investment" if the project fails.

Very, very, very few people would provide unsecured (no collateral) loans because the risk is too high. What you are looking for is an Angel Investor - somebody that believes in you and trusts you....but remember, there is always a high price to pay.

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## Cimmerian

I know all of this... I'm not looking for investment opportunities because I know it isn't going to pan out. I'm looking for crowd funding as a means of gaining venture capital - and was wondering if anyone here knew of any alternatives to Kickstarter that aren't all too limiting. The reason I can't really go for the angel investor option is because angel investors usually consider if the individual has invested financially into his/her own business and has a decent management team. I have neither of that to show a potential angel investor. And the premise behind my startup is essentially a website - how would one offer a decent exit strategy with that in mind? I can't really start it by my own means - I'm a qualified internet developer, not a network administrator, and this kind of website will need a dedicated server to start - From then on it would have to open it's own data centers. I have the know-how to code and run the website with a little help, but when it comes to the hardware side of things - I'm going to need an employee who can.

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## CLIVE-TRIANGLE

Right now on the kickstarter home page, there are two South African projects featured...

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## Just Gone

If you come across "crowd funding" let me know ......... I would also be interested  :Wink:

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## Cimmerian

> Right now on the kickstarter home page, there are two South African projects featured...


Those projects are not owned by current residents of South Africa. The projects might involve a visit to South Africa, such as this one: Life and Art in South Africa



> The goal of this project is to travel to South Africa for a month to observe, interview and interact with artisans who create dance, music and theatre to answer a poignant question, how is art created in a diverse land?


There is no possible means of using Kickstarter as a South African unless you can get your hands on a working and trusted revenue collection service that permits you to use a holding account. Kickstarter's eligibility guidelines are as follows:




> Eligibility Requirements Top ↑
> Am I eligible to start a Kickstarter project?
> 
> To be eligible to start a Kickstarter project, you need to satisfy the requirements of Amazon Payments:
> 
> —You are 18 years of age or older.
> —You are a permanent US resident with a Social Security Number (or EIN).
> —You have a US address, US bank account, and US state-issued ID (driver’s license).
> —You have a major US credit or debit card.
> ...


If Bridgestarter could sort out it's Amazon Payment's account soon, then I won't have to worry about raising capital.

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## Bizfact

Do you have any income at all?

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## thinusmj

Have a look at https://www.crowdinvest.co.za/

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## Cimmerian

> Do you have any income at all?


Yes, I do. I'm a freelance web developer and I work a full time job at a Market Research company called Marketbase -I do interviews and prepare questionnaires. I'm also the co-founder of a theme development team that makes themes for forum software and I take 10% of the income as community manager and another 10% as the lead developer, which is an amount agreed on by our entire management staff. I average about R26k p/m in total.

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## Goodfirm

For me, I think there is a legal factor here.

To suit crowd funding, your venture must be of social initiation nature, not for profit. 

If you could find a way around that, SARS and Hawks wont trouble you!

That's my take.

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## Bizfact

You are doing quite well for yourself there buddy. Will you have partners in your business?

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## Dave A

> To suit crowd funding, your venture must be of social initiation nature, not for profit. 
> 
> If you could find a way around that, SARS and Hawks wont trouble you!


 :Confused: 

If it's not for profit, why would the investors invest?
And why would SARS and the Hawks have an issue?

Granted, it falls in the "high risk investment" category... but ultimately it's what Silicone Valley runs on - everyone hoping they're getting into the next Amazon, Google, or Facebook on the ground floor. Some work out, many don't. But you know that going in.

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## Goodfirm

@Dave, its because of our South African Company Law. 

Crowd funding, the way I understand it, is a mass funding. It existed decades ago for charity purpose. Not for profit motivated businesses. 
I know that only Section 21 organization, should ask/or receive donations/charity. 

We use the word, "crowd funding", and not offering shares, equity, or asking for business loan, instead we offer discounts on started business, free memberships, gifts even free service of some sort. Crowd funding have no direct rewards on profits. Does anyone remember that movie producer, who raised his millions on the upmarket street corners? That was crowd funding, about 10 years ago. Even in that way, he attracted SARS attention. 

Hey, things change! Online village compelled the Mercantile Law to change too! 

@Cimmerian, my advise seek legal grounds for South African environment.

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## Just Gone

Goodfirm ...... you sound and type like someone else on this forum ...  :Confused:

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## Goodfirm

> Goodfirm ...... you sound and type like someone else on this forum ...


@Kevinb, How can I help you?

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## Just Gone

> @Kevinb, How can I help you?


Nope .... no-where thanks.

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## adrianh

@Goodfirm - you gotta catch up with the times....when us skollies here in Mitchells Plein get together to buy a borrel then we all put in 50 cents and us crowd who fund the borrel drink it stukkend.

http://en.wikipedia.org/wiki/Crowd_funding

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Dave A (14-Jun-12)

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## Dave A

The legal hurdle is a prospectus (which is surmountable and frankly something I had assumed would be in place if you used a reputable crowd funding site). The ones linked to so far seem to have a well structured concept...

To my mind the biggest hurdle is you have to go public with your big idea. Properly protecting IP is a PITA at the best of times - even tougher if you end up not being the first to market with a finished product.

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## Cimmerian

Sorry I haven't replied to this thread in such a long time. I've been busy. I didn't find much help with the crowd funding options, but I took a longer approach - I started up a small cost-per-action content locking website (https://shrinkonce.com) with a business partner, and we have registered it as a business in California (since he lives there, we found it best to register there to avoid extra tax). All the profits after payment plus my salary from it are being fed into an account which I will use to study at StarterLeague for the duration of 3 months in Chicago during 2014. They have an investor programme. If that doesn't pan out - I will be approaching http://labs.quirk.biz for advice, considering one of their employees contacted me after reading this thread.

One thing I want to add - if you're interested in starting up a business in the United States, expect to be taxed up your rear. $800 minimum annual tax fee for the Franchise Tax Board in California (the Franchise Tax Board is not the same as the IRS, so there's those fees too).

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## Just Gone

> we have registered it as a business in California (since he lives there, we found it best to register there to avoid extra tax)


 :Confused:  .................... A bit of a contradiction here or what ........





> if you're interested in starting up a business in the United States, expect to be taxed up your rear.

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## Citizen X

> I'm very new to the idea of owning a business, that's why I joined these forums. So forgive me if I come across as ill-educated in that regard. However, I do not want that to cripple my ability to turn a world-changing idea into reality. I want to get this started as soon as I can and learn along the way. What do you mean by "organically"? If you're asking me to chip in my own money, that's not a possibility - I'm 19. I don't have the funds necessary to employ even just one person. I can't ask family for money either - if they did offer me a loan, I'd think them insane (financial troubles). But my idea could revolutionize an entire industry and improve it for the better - 3 years of research into the matter proves it'll make an impact, and once the business has enough reputation, investors will be coming to me. But I don't have the funding necessary to start the business, and that's all I need to get it set in motion.


Hi Cimmerian,
You have got entrepreneurial spirit, thats for sure! I think youve got a good business idea and actually have form of forecasting in place. Another solution to your problem of finance is to attempt to get partners who will be willing to invest in the business.
I wish you every thing of the best with your business! Please keep us posted, especially successful results etc

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## cyppok

> For me, I think there is a legal factor here.
> 
> To suit crowd funding, your venture must be of social initiation nature, not for profit. 
> 
> If you could find a way around that, SARS and Hawks wont trouble you!
> 
> That's my take.


Fortunately you are wrong. Kickstarter does take a 10% or so (commission on your 'grant' donation).
The problem with international for it is they could say its' revenue and whatnot which is it is not but capital for free in essence. *You can and most are for profit, it doesn't have to be non-profit.
*
I tried developing a site or two but gave up midway through it. Its still up there hosted on kodingen, the free host but I gave upon any direction for it. My development skills are stuck at basic html using dreamweaver and poping in widgets for effects. I can curve corners, lol. [*border radius: 15px;*]

Cimmerian I still do not understand what your focus or idea revolves around. Also do remember the most important thing is not the idea but the execution of it in a way that entices customers to use your product. 

The other thing is there are probably better developers than you, and cheaper available in Ukraine for probably 5000Rand or 600-800 dollars a month or so, just throwing it out there fyi.

My site was first a blog then I figured the name was good for chocolate, now I am thinking hard candy. Looked for hard candy equipment for small batch scale, gave up. Now I pontificate here for a while.

Cimmerian yes you get taxed here in the states on the whole its about the same as in SA. In reality once you spend money and depreciate, write off lots of things its more convenient especially with an accountant for a few hundred a quarter/per filing. 
The wonderful thing about the U.S. is that there is no BEE(for now and future hopefully) and if you are successful you don't have to be robbed twice once by taxes second by someone demanding a piece.

P.S. 900k is over $100k seems like a bit much.

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## Cimmerian

> .................... A bit of a contradiction here or what ........


Yes, it may seem so, but that's a simple case of misunderstanding because I was not clear enough in that post. My business partner, who is integral to the success of this small business because he is the only capable developer I know in the United States willing to work for a small amount, is my business partner because our transactions are handled via Paypal, and because he has a U.S. Bank account, there is less chance of his Paypal account being limited. I have had many Paypal account limitations in the past, so I didn't want to risk it. My initial idea was to register ShrinkOnce here in SA as a Pty Ltd, but I learned that the Federal Tax Board (the Tax Authority of California) doesn't cater too well to local owners of businesses outside of California, and demand that the company be registered as a foreign LLC in the state of California. If I had taken that approach, it is likely I will have been paying taxes for both the Pty Ltd and the LLC. Much easier just to register the LLC there and be done with it.




> Hi Cimmerian,
> You have got entrepreneurial spirit, thats for sure! I think youve got a good business idea and actually have form of forecasting in place. Another solution to your problem of finance is to attempt to get partners who will be willing to invest in the business.
> I wish you every thing of the best with your business! Please keep us posted, especially successful results etc


Thank you very much for the compliment Vanash! I appreciate it. I have slightly changed the business model of my idea after doing some market research (I'm so dedicated to this that I actually got a job as a market research analyst for some hands-on experience), I found out key factors and weaknesses in my old business model that needed to be sorted out. I'm going to be running several SWOT analyses on my business plan, before I take an investment approach. It's very likely the money from ShrinkOnce won't be enough to cover everything, but it'll give me some capital of my own to invest. Outside of that, I will be approaching the Angel Investment Network website and organizing a pitch. I'll have to trade equity, but I really do believe it's worth it, because this idea is, for the most part, world changing.




> Fortunately you are wrong. Kickstarter does take a 10% or so (commission on your 'grant' donation).
> The problem with international for it is they could say its' revenue and whatnot which is it is not but capital for free in essence. *You can and most are for profit, it doesn't have to be non-profit.
> *
> I tried developing a site or two but gave up midway through it. Its still up there hosted on kodingen, the free host but I gave upon any direction for it. My development skills are stuck at basic html using dreamweaver and poping in widgets for effects. I can curve corners, lol. [*border radius: 15px;*]
> 
> Cimmerian I still do not understand what your focus or idea revolves around. Also do remember the most important thing is not the idea but the execution of it in a way that entices customers to use your product. 
> 
> The other thing is there are probably better developers than you, and cheaper available in Ukraine for probably 5000Rand or 600-800 dollars a month or so, just throwing it out there fyi.
> 
> ...


No, the real problem with international dealings on Kickstarter is that Kickstarter requires you to be a U.S. citizen in order to use their service. The only other way around that is to approach a U.S. citizen who can offer you a holding account, or if you own a business in the United States and that business has a U.S. Bank account. I actually considered this option while registering ShrinkOnce, but because there's two owners and one of us is South African, the tax declarations will be extremely complicated. It's just too much unnecessary work, when there are other, faster options. Besides, I'd have to pitch the idea using ShrinkOnce branding, and that is a completely different industry to my idea.

Fortunately, my development skills are adequate for the product (or rather service) I'm trying to offer. I've been very interested in programming, so much so that I completed an online exam and was awarded a Zend Certification in PHP at the age of 13. I studied a Mastered Learning Methodology (self-paced) 2 year long course on Internet Development using XML, Java, JSP, JavaScript, HTML, C#, .NET, MySQL, Windows SQL Server, Advanced Linux and so on. Since the course I was put in was self-paced, I was able to finish this course within 6 months, and was awarded my Higher National Diploma (BTec HND Information Systems Internet Development) and completed my third and final year studying Artificial Intelligence (C++), Advanced Software Engineering, and Neuropsychoanalysis in the following 12 months, before achieving my Bachelor of Computer Science Degree. Since then, I have tought myself Node.js, Ruby, Scala and even LOLCode for the fun of it. I'd say the only thing I'd bother to challenge myself to learn about any further would be Assembly Language.

Also, my idea is pretty solid. It's much larger than just what I'm about to describe, but basically, I have come up with a researched and prototyped solution that can end music piracy once and for all, as long as musicians use my service and my service alone (other services won't be able to offer the same security for a long while, so spreading will be counter-intuitive). As for my service as a whole, think Spotify, but more enthusiastic about bringing underrated artists to surface rather than just enthusiastic about streaming music, and all driven by the people. Cutting out the recording studio, if you will. It's huge. We are going to be the Apple of the music industry if not even better, and that's a promise. That's the only information I'm sharing on a public discussion forum.

As for hiring developers abroad, I am a firm believer that you get what you pay for, so I would rather pay a higher price for quality than a smaller price for a bargain. There are numerous other ways to cut costs.

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## wynn

Cimmerian
It seems you have a rather deep knowledge of programming, so use that knowledge to set up lots of small websites that attract a lot of hits add the relevant google ads, build up a war chest from these while you perfect the main business, when the time is right move on it.
You have time on your side and the world is your oyster.

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## Cimmerian

> Cimmerian
> It seems you have a rather deep knowledge of programming, so use that knowledge to set up lots of small websites that attract a lot of hits add the relevant google ads, build up a war chest from these while you perfect the main business, when the time is right move on it.
> You have time on your side and the world is your oyster.


I've done that before, and it's not really good money. First of all, one has to find a niche and then get a top ranking domain - which takes about 6 months of work for each "small" website. Second, everyone else is doing this. Third, it's not the type of programming I enjoy. It is boring, tedious work. The programming that I know and love involves solving problems. Real problems that other people are facing. I would much rather take the investment approach.

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## cyppok

Well, you are very bright or at least seem to be, you are driven and enthusiastic, you even make money right now which I am not doing at all.

However, it is very very very hard to get funding for any startup that want's to deal with the music industry at large. Kickstarter seems like the best bet for your co-founder on your two behalfs. Second any equity you get without traction will be very dilutive.

I am sure you know angel.co and http://venturehacks.com/ and others that are similar in nature. My feeling is that taking money is usually not a good thing because you become beholden to others.
I liked watching you tubes of David Heinemeier Hanson (DHH) on the subject.



Also the founder of duckduckgo.com has good thoughts on starting up ye.gg (his blog)

and I am back to my old cynical self.
any suggestions on learning Ruby? because thus far all I thought about was making a simple site one of those traffic seeking semi-blogs with a store outlet. 

*Been trying to find an easy way to have/make a semi-automated archive for blog posts without going to 3rd party* like wordpress or anything like that. Any suggestions? (other than learning php)

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## vieome

great site for venture capital info http://www.paulgraham.com/

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