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Johannesburg - An innovative angel funding initiative has seen investors pledge R360 000 in 48 hours to support start-up businesses in South Africa.
The brainchild of South African entrepreneur Eve Dmochowska, the Crowd Fund has come up with a unique way to raise early-stage funds for entrepreneurs.
The money raised on Thursday and Friday will be used for the development of prototypes which can be presented to more formal investors such as venture capitalists or banks.
"I've been amazed by the interest. We've only really marketed via Twitter so far and are only looking at doing a formal press release next week," Dmochowska told Fin24.com.
Dmochowska said South Africa does not have a culture of "angel investing", which means that many small businesses will battle to find funding to get their ideas off the ground.
"It's a vicious cycle we can't get out of," she said.
While this form of investment is quite new in South Africa, it has been popular in the global music industry where many music artists tap into social networks to raise funds to cover the costs of putting together a CD or concert. If the investment is successful, the artists will then split the profits with their investors.
A similar concept will apply here, with the Crowd Fund operating as a closed-end fund which will have a fixed-end date - any profits made by the fund will then be distributed to investors.
Board members have topnotch credentials
The Crowd Fund allows private investors to pledge R1 000 per unit to invest in the fund. The maximum they may invest is R10 000.
The fund is managed by a board comprising some of South Africa's top technology players. They will allocate money to start-ups, and mentor them to develop their concepts to a point where bigger backers can be approached.
The Crowd Fund board consists of Dmochowska, Vinny Lingham, Heather Ford, Justin Spratt, Brett Haggard, Gareth Knight, Craig Blumenow and Elan Lohman.
Lingham is highly regarded in the South African venture capital and technology scene. He has developed a number of online businesses, including Yola, and also founded Clicks2Customers, which won the Top Technology Company award in South Africa in 2006. He is based in the US and regularly interacts with global leaders in technology investment.
The others on the board all have high-level entrepreneurial and technology credentials, having launched or assisted in developing a number of leading tech businesses.
Dmochowska said: "They are all exceptional at what they do and with somebody like Vinny [Lingham], who sits in the heart of Silicon Valley, we are able to introduce our people to a global audience."
Interestingly, many investors said profit was not the main driver for taking part, but that they saw the initiative as a long-term contribution to a start-up culture and entrepreneurship in the country.
Apart from some concerns about where suitable projects with a global appeal will be found, most entrepreneurs and venture capitalists who spoke to Fin24.com said Dmochowska had done well in putting together the fund and that they would be eagerly watching its progress.
- Fin24.com
