Crowdfunding expands to global and emerging markets

The nature of money and capital is changing as quickly as everything else. Cryptocurrencies, business funding, banking and coinage are blurring into one big accelerated charge across the Rubicon.

Financial phenomena such as M-Pesa’s mobile banking platform in Kenya where 42 per cent of GNP is conducted, Bitcoin’s digital peer-to-peer currency and even ‘old’ platforms such as PayPal mean money is now something else. The currencies we now deal in can range from ‘favour economies’ to microlending and even using a (Apple) watch to buy products.

Not only is it confusing, it is also opening new opportunities for businesses to trade in. One such well-known platform is crowdfunding where companies raise money from many small investors, instead of relying on the, frankly, unreliable largesse and blockbuster model of venture capitalists and banks.

There have been notable crowdfunding successes such as the oft-mentioned Pebble Watch, but umpteen fails such as those investing in games development. However, crowdfunding seems to have hit critical mass and looks as if it’s here to stay.

^{Above: the Pebble Watch was a crowdfunding success}

Like anything new, crowdsourcing is beginning to fracture into different shapes from its initial rewards-based model. Equity crowdfunding where companies offer equity stakes in exchange for investment, instead of prizes, have been highly successful in the UK, spearheaded by companies such as Seedrs and Crowdcube.

Two months ago, there was further fragmentation when Eureeca (terrible name, interesting business), self-described as the ‘first global equity crowdfunding platform’ received regulatory approval from the UK’s Financial Conduct Authority. This means UK-based SMEs looking to enter the Dubai market can access to capital and expertise from local investors.

Founded in Dubai by former investment bankers, Eureeca’s FCA approval offers new geographical opportunities for crowdfunding; a market the company expects to reach $90 billion by 2025.

“UK- and Europe-based SMEs with ambitions of entering the Gulf can now access capital and expertise from investors in the region. In the same vein, businesses in the Middle East seeking to expand into the UK will be able to secure capital through investors there,” said Eureeca Managing Director, Sam Quawasmi.

Another interesting crowdfunding company in this space takes Eureeca’s example further. Launched last month, Emerging Crowd is a UK-based investment crowdfunding platform that offers users equity (and debt) investments in unlisted emerging and frontier market companies. The platform enables growth-stage businesses to raise up to a maximum of £4 million in a 12-month period.

One of the earliest companies to crowdfund on its platform is Cape Town-based company Bozza, a digital distribution platform where artists can connect with fans who want locally relevant content via their mobile device and desktop.

^{Above: Bozza is using Emerging Crowd to crowdfund on its platform}

“We chose Emerging Crowd because they are the first platform that focuses on companies that operate out of emerging frontier markets. They are an exciting platform that links ambitious, well-run companies seeking finance with international investors pursuing the potential higher returns from frontier and emerging markets,” said Emma Kaye, CEO Bozza Media.

Crowdfunding, however, in whatever form it comes now or is likely to transmute in, is not a panacea to growing and funding a company. As previously mentioned, for every Pebble Watch funded, there will be many who fail to raise their targeted money and will be forever associated with such a fail.

Those who do fail and go back to raising traditional forms of funding are unlikely to be welcomed back with big bags of money from VCs and banks if their crowdfunding campaign was unsuccessful. In essence, their businesses will be lucky to survive.

But like with new forms of money, new forms of business funding will mean there will be winners and losers, both for the investors and the ones chancing their arm. What else would you expect if the crowdfunding market does reach $90 billion over the next decade?