Six key lessons on crowdfunding in Africa

Word Cloud "Crowd Funding"

In developing countries, the crowdfunding market is expected to reach $327 million this year—about 2 percent of the global total. Despite this slow adoption, crowdfunding has been heralded as an opportunity to expand access to capital for entrepreneurs.

Crowdfunding is the practice of raising monetary contributions from a large number of people, typically online, to fund a project or venture. The past 10 years, crowdfunding has evolved into a $16 billion market, initially concentrated in North America and Europe. African Crowdfunding is now a major focus with companies such as  Thundafund, LelapaFund, Emerging Crowd and Afrikstart now focusing on African opportunities.

Others platforms inlcude M-Changa which allows its 28,000 users to create crowdfunding campaigns and collect donations via SMS or online. The platform mostly dedicated to social impact and personal fundraising has donated over $300,000 to date in Kenya.

A new report, Crowdfunding in Emerging Markets: Lessons from East African Startups, captures lessons learned from East African entrepreneurs who were among the earliest adopters of crowdfunding in the developing world.

To better understand the challenges of crowdfunding in emerging markets, the World Bank Group conducted interviews with a number of East African technology entrepreneurs who ran crowdfunding campaigns, both successful and unsuccessful. From the interviews emerged six lessons about when, why, and how to launch crowdfunding campaigns:

  1. Crowdfunding is more difficult than most entrepreneurs anticipate and is not for everyone.
  2. Business needs should dictate platform choice.
  3. Payment systems impact platform choice.
  4. Quality and quantity of contributor networks are key.
  5. Entrepreneurs should tap into complementary resources and organizations to increase their likelihood of success.
  6. Crowdfunding can have non-monetary benefits.

Download the report here.