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How To Find Funding in South Africa

One of the challenges involved in starting a business is how to find funding. Fortunately there several places to look to and things you can do to look like an attractive investment. Below is a guide for how to go about finding funds for an SME.

Tracy Lee Nicol

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Many entrepreneurs believe they’ve got a great idea but are hamstrung in getting the project off the ground because they don’t know how to find funding.

By taking steps in critical areas like market research, understanding the (realistic) scale of the opportunity, having a water tight business model and a comprehensive business plan, you can improve your odds of finding funding.

How to find funding: Where to look

Self-funding is the simplest way to kick-start your new venture. The catch of course is whether you have the funds in the first place to invest. Fortunately by bootstrapping a business and reducing as much excess expenditure as possible it could take a lot less money than you think to fund your business.

The advantage of this strategy is that you maintain full control and ownership of the venture. A word of caution though: If you have an asset like a house, you may be able to borrow against it. The risk however, is that if the business doesn’t work and you’re unable to make the repayments, you could lose your house.

Resource: 9 Different Kinds Of SME Funding

Branching out from self-funding is bootstrapping. This means that by reducing your expenditure to the bare minimum (which can also mean forgoing your salary for a time) and selling unnecessary assets, that the business will be able to fund itself as it grows and develops.

In getting funding, you will need to meet strict criteria as they are unlikely to finance a high risk venture or someone with a poor history of debt management. Due to unstable global economics, banks are also unlikely to finance a start-up as they are perceived to be high risk. On the plus side, the current interest rate cut means that it’s cheaper than ever to repay a loan.

If you don’t want to go via a bank for finance, you can investigate different forms of investors. These include angel investors who are individuals prepared to offer funds to a budding entrepreneur in exchange for a return on investment. The alternative is venture capitalists.

These are private firms that invest in high return ventures but require an equity stake in exchange for their funding. They also require adherence to the business plan and progress milestones must be met. If the business doesn’t live up to expectations the venture capitalist can liquidate the company to recover costs.

A variation of angel funding and venture capitalists is crowd funding. This is a group of individuals who contribute small amounts of money and collectively invest in a business venture. Like venture capitalists crowd funding receives equity in the business.

Related: How to Write a Funding Proposal

Business-funding-in-south-africa

How to find finding: Pleasing your investors

  • Get it right. When pitching to investors make sure you know all aspects of the business, the products or services, its place in the market and the industry it operates in. If possible, have the product or service out in the market before approaching investors as they would rather see real data than speculative data.
  • Have the background. Investors want to know that they’re putting their money in a good venture. Have the relevant skills, experience, management skills and knowledge to give them the confidence they need to invest. This also means having good understanding of your competition.
  • Demonstrate a need. It’s all well and good having a great idea that is unique in its offering, but if there is no market there is no business.
  • Return on investment. Angel investors aside, the majority of investors will want a good return for their risk. Be realistic (erring on the side of caution) with your financial projections showing how long it will take to break-even, turn a profit and repay funds. Included in your pitch should be a clear exit strategy so they can cash in and move on. Most investors are savvy business people and they’ll smell a rat a mile off, so don’t ever lie.

Related: New Ways SMEs Can Find Funding

 

Tracy-Lee Nicol is an experienced business writer and magazine editor. She was awarded a Masters degree with distinction from Rhodes university in 2010, and in the time since has honed her business acumen and writing skills profiling some of South Africa's most successful entrepreneurs, CEOs, franchisees and franchisors.Find her on Google+.

How to Guides

3 Start-up Funding Tips To Help Launch Your Company

Most great ideas are just dollars away from becoming the next big thing. It is important to do your research and never quit.

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Starting a start-up is one of the most terrifying and rewarding experiences anyone can ever have. It is rife with decision making and hard choices. Coming up with the product and showcasing it to people you know and outside investors is an incredible thrill. There is also immense stress that comes with owning a start-up. This comes, primarily, in the form of finances.

Those who own a start-up know that money is hard to come by and, whatever money there is, is immediately put to use. That is why venture capitalism has grown to the rate that it has. In the early 2000s, start-ups were not the hot ticket that they are today and since the tech boom we have seen a dramatic rise in the amount of start-ups year-to-year. The issue is not where to get the money, but, how?

In this article we hope to cover the basics of start-up funding that will increase the amount of exposure you get and increase the odds of receiving funding. Most great ideas are just dollars away from becoming the next big thing. It is important to do your research and never quit.

Related: Angels & Demons: What To Know When Negotiating Equity Funding For Your Start-up

1. Focus On Vision

One thing that advisors and investors will both look for in a company is what that company stands for. In essence, it is important to reduce your business to a singular idea that represents the whole accurately and with great fervour.

The goal of your business should be stated clearly so that any potential investor knows exactly who they are investing in. For instance, if your business is centred around helping the disabled use computers, then state that clearly and let investors know. Simply put, investors do not want to invest in entrepreneurs who are only interested in making money.

While making money is a very positive thing, it should not be the sole reason for any endeavour. Your company’s vision should be the key aspect of your pitch and your investment stack.

2. Run The Data

It is crucial that all entrepreneurs know their business inside and out. This means searching for similar businesses and getting their numbers. Get to know the market like the back of your hand and keep a record of any data you come up with.

Investors want to see the average ROI in an industry. They want to see what the average operating cost is and how much they should invest to make your product viable. Even though this can be a difficult step, there are a number of outside resources that can gather market data for you but it is an important step to learn everything you can about the market you’re entering.

3. Seek More Than Money

One of the most valuable assets to any entrepreneur is a trusted advisor that can help you in your journey to success. It is tempting for startups to go out into the world and make deals on their own. While that is a fine strategy to use it may not be the best way to go about funding your business.

Related: The Investor Sourcing Guide

Seeking the help of an advisor can save you a lot of headache and heartache. Typically, advisors can help you manage your funds and gain traction in the VC world. Ambling through the dark to try to find funding can oftentimes lead to deals that are either one-sided or unsound. Having an advisor there to guide you and double check all of your work can prevent loss and will give you the edge you need in negotiating. Indeed, one of the most valuable assets to any company is their advisor.

When starting a start-up, you are faced with an overwhelming amount of tasks and things to do that can hamper your progress. Add, on top of everything else, the need for funding and then you can get into a real snafu.

The best way to fund your business is simple. You have to be yourself and know your value in the market. You also have to trust outside help to guide you in your path to business growth. Through the use of advisors and in the process of synthesising your businesses goals, you can make a business that will succeed in any climate. Funding a start-up can be a laborious task, but, if you know how to approach it, you can make it an exciting journey that validates your business and leads to a land of opportunity.

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How to Guides

Attention Black Entrepreneurs: Start-Up Funding From Government Grants & Funds

Government grants and funding are a great source of finances when you’re trying to get your business off the ground or expand to new horizons.

Entrepreneur

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Government Grants and Funding in South Africa

A small business can on average employ 12 people. The drop in entrepreneurial activity over the past five years is equal to 2.3 million possible job opportunities lost. Small and micro business sectors are the main source of real employment in the economy.

South Africa’s economy needs to inspire entrepreneurship in order for it to grow. By creating an environment that is friendlier to small businesses and actively encouraging the sector, the country is in a better position to create jobs.

Two simple measures that would go a long way to support and develop entrepreneurs is access to finance and improvement of logistics.

Content in this guide

  1. National Empowerment Fund (NEF)
  2. Industrial Development Corporation (IDC) Funding
  3. Small Enterprise Finance Agency (SEFA)
  4. The Isivande Women’s Fund (IWF)
  5. Khula SME Fund
  6. Black Business Supplier Development Programme (BBSDP)
  7. Incubation Support Programme (ISP)
  8. National Youth Development Agency (NYDA)
  9. PDF Download

Government Funds

The government created government funding to extend finances to previously disadvantaged South African’s in order to develop black economic development. Your much needed capital investment could come from government funding opportunities.

Financing a small business, whether you’re starting-up or trying to expand, is a challenge all entrepreneurs go through. Here are a few examples of government funding that focuses on black entrepreneurs:

National Empowerment Fund (NEF)

National Empowerment Fund

National Empowerment Fund

The NEF is, a part of the government’s development mandate to encourage black participation in business and entrepreneurship. It helps to assist black entrepreneurs in achieving funding. This fund aims to assist black youth, women and men, communities and businesses to achieve sustainable success.

Types of NEF Funding

The NEF has four main channels of funding that consist of subdivisions. These are:

1. iMbewu Fund:

  • This consists of subdivision is entrepreneur finance, procurement finance and franchise finance.
  • This fund supports black entrepreneurs who are starting up a new business or expanding an existing one.
  • This contribution takes the form of offering debt counselling, quasi-equity and equity finance products.
  • The funds contribution ranges from R250 000 to a maximum of R10 million

2. uMnotho Fund:

  • This NEF funding has subdivisions in finance, new venture finance, expansion capital, capital markets, and liquidity and warehousing.
  • This fund is available to black entrepreneurs who manage or own businesses, new ventures, expanding existing business. It is also available to black entrepreneurs who want to buy a share of equity in black and white owned businesses.
  • The contributions from this fund range from R2 million to R75 million.

3. Rural and Community Development Fund:

  • This NEF fund has subdivisions in acquisition, new venture capital, expansion capital and start-up/green categories.
  • The creation of this government fund is to promote sustainable change in social and economic relations along with supporting and developing the rural economy by financing sustainable enterprises and co-operatives.
  • This NEF funding ranges from R1 million to R50 million.

3. Strategic Projects:

  • This NEF fund has subdivisions of empowerment objectives.
  • The aim of the government fund is to increase black participation in early-stage projects.
  • These projects need to have economic merit and the ability to deliver on the government’s development mandate.

How Can You Apply for NEF Funding?

NEF funding is available for start-up and existing businesses. It will conduct the following processes when evaluating your business:

  1. It will conduct a, self-needs analysis to determine how the NEF funding can assist your businesses needs and which offer is best suited.
  2. You will need to provide an application form and a comprehensive proposal with evidence that supports the commercial viability and financial position of your business.
  3. After you’ve submitted your application to the NEF, it will assess your information for final approval and receiving of funds.
  4. The NEF website offers the following checklist to ensure you include everything needed when applying for funding.
  5. You’ll need to meet all the requirements or your application won’t be successfully considered.
  6. This process can take up to six weeks.
  7. If your application is successful, it could take up to three to four months to receive NEF funding.

Contact Details for NEF Funding

  • For more information about the NEF fund, visit www.nefcorp.co.za.
  • Email general enquiries to info@nefcorp.co.za
  • Or call the following numbers +27 (0)11 305 8000 or 0861 843 633 (call centre).

NEF Funding

Part of the government’s economic development mandate is to encourage black participation in business and entrepreneurship. The National Empowerment Fund (NEF) is designed to assist black entrepreneurs get funding.


Industrial Development Corporation (IDC) Funding

Industrial-Development-Corporation-logo

Industrial Development Corporation

IDC funding is available to those who have an existing business or wish to start a new one; those that have the visions of job creation along with serving previously disadvantaged communities.

The IDC achieves its goals by providing finance for industrial projects, promoting partnerships between and across industries within SA and internationally. It focuses on projects that finance and facilitate, that lead to the creation and innovation of new industries. It also focuses on diverse expertise to drive growth in priority sectors and to take on higher-risk funding projects.

The IDC supports B-BBEE and actively boosts and promotes black-owned and managed business along with those with employment equity. It aims at developing the skills of black employees and business owners, by supporting local, regional, provincial and national government projects.

The Different Types of IDC Funding

1. Development Funds.

  • These funds aim at supporting projects that will have high long-term impacts on the economy through growth.
  • Its aim is to bring projects out of the informal sector and into the economic mainstream.
  • Please find more information on these funds and links to the online application process here.

2. Agro-Processing Competitiveness Fund

  • This government fund provides support and helps businesses to achieve increased competitiveness, business growth, job creation and development in the agro-processing and beverages industries.
  • For further information and a link for the online application process please visit here.

3. Product Process Development Scheme (PPD)

  • The aim of this fund is to provide financial support to micro and small enterprises where the total assets are below R5 million, annual turnover is less than R13 million, and the business employs less than 50 people.
  • The fund intends to promote innovation and technology development with financial support.
  • This enables the development of new products and/or processes.
  • For more information on the PPD Scheme continue to the website here, to apply for funding, please visit their website http://www.idc.co.za/, click on “Online Funding” and follow the prompts.

4. Risk Capital Facility Programme

  • IDC Funding aimed at providing risk finance to businesses owned by previously disadvantaged individuals that offer substantial job creation potential.
  • For more information on the Risk Capital Facility Programme continue to the website here, to apply for funding please visit their website http://www.idc.co.za/, click on “Online Funding” and follow the prompts.

This programme provides three channels of funding:

  1. Direct channel operating alongside IDC’s mainstream business
  2. Through a niche fund channel
  3. Third party channel.

5. Transformation and Entrepreneurship Scheme

  • This fund finances marginalised groups of South Africans such as women and the disabled.
  • The aim of the fund is to gain access to finance that will help to develop and grow your business as a start-up or through expansions or acquisitions.
  • This IDC funding also offers mentorship and non-financial support including business planning, training and mentorship.
  • For more information on the Transformation and Entrepreneurship Scheme continue to the website here, to apply for funding please visit their website http://www.idc.co.za/, click on “Online Funding” and follow the prompts.

6. Green Energy Efficiency Fund

  • The fund aims at improving energy efficiency and helping South Africa become a low-carbon economy.
  • It aims to drive down energy related costs, improve production capacity, operational effectiveness and competitiveness, which would aid in job creation.
  • For more information on the Green Energy Efficiency Fund continue to the website here, to apply for funding please visit their website http://www.idc.co.za/, click on “Online Funding” and follow the prompts.

How Can You Apply for IDC Funding?

The IDC government funds aims are: Job creation potential, rural development, urban renewal and poverty alleviation, the employment of women and youth as well as up-skilling of employees. All of the projects that the IDC funds, need to show economic viability and sustainability and should target previously disadvantaged groups, women, people with disabilities, low income working groups and marginalised communities.

Contact the IDC for funding

  • For more information on any of the funds visit www.idc.co.za, click on “Online Funding” and follow the prompts.
  • You can also phone the IDC call centre on 0860 69 38 88
  • Or email callcentre@idc.co.za.

IDC Funding

Whether you have an existing business or wish to start a new one, if your mandate is job creation and serving previously disadvantaged communities, funding from the IDC could be waiting for you. Read on to see if your business qualifies for IDC funding.


Small Enterprise Finance Agency (SEFA)

Small-Enterprise-Finance-Agency-logo

Small Enterprise Finance Agency

Do you have an existing small business or want to start one? SEFA are piloting direct finance to entrepreneurs wanting to start or grow a business.

Types of SEFA Funding

SEFA provides direct funding to business in loans between R50 000 and R3 million in three different ways: Directly to business owners, via retail finance intermediaries, and through banks using credit guarantee schemes including Khula.

1. Bridging loans

  • These are short-term loans, which provide working capital.
  • The types of working capital offered by this government fund include stock purchases and operating overheads. This loan is offered for only one year.

2. Term loans

  • This government fund is a loan of a specific amount and has a specified repayment schedule, amount and interest rate.
  • This type of SEFA funding is normally used to finance your assets that have a medium to long-term lifespan, for example machinery, vehicles, office equipment.
  • Term loans can be used to expand your business or for acquisitions.
  • This loan has a repayment range of one to five years.

3. Structured finance

  • Use this SEFA facility for funding that falls outside the parameters of the term and bridge loans.
  • Provided by a debt facility, it can be repaid over a period of five years and tailored to your unique requirements.
  • The following businesses can’t apply from the benefits of this fund: Liquor, tobacco, gambling, sex trade, armaments, speculative real estate, leveraged buy-out funds, and illegal trade.
  • This includes any business activity that would tarnish SEFA’s reputation, political organisation, entrepreneurs under debt review, insolvent business owners and business.

How to Apply for SEFA Funding?

Your start-up and existing survivalist, micro, small and medium business must meet these criteria:

  1. Submit a completed application form
  2. Submit a completed comprehensive business plan that meet SEFA’s application requirements. Include initial and supporting documentation.
  3. Demonstrated ability to repay loans
  4. Personal and business credit references
  5. The applicant must be an owner manager
  6. The applicant must be a South African citizen with ID documents or a valid permanent residence. Alternatively, the business can be in the control of a South African citizen.
  7. The business must be legally constituted including sole traders with a fixed physical address
  8. Must have contractual capacity
  9. All operations including projects, programmes activities etc. must be within South Africa
  10. The enterprise must be compliant with accepted corporate governance practices
  11. A trust that has within the trust deed the power to borrow money and pledge assets as security and to give surety for borrowing.

Contact SEFA for funding

  • Visit www.sefa.org.za for more information on regional branches, how to apply, exclusion criteria, products and services available. To contact head office, call 0860 00 73 32.
  • To apply for Sefa Funding visit their website http://www.sefa.org.za/, you can either submit your application online or you can print it out and submit to their physical offices. You can see the contact information for both online and physical submissions for all their funds here.

SEFA Funding

If you have an existing small business or want to start one and need funding, direct funding via Small Enterprise Finance Agency (SEFA) could be a good place to get the finance you need. Find out more here.


How to Apply for Enterprise Funding

The Isivande Women’s Fund (IWF)

Isivande-Womens-Fund

The Isivande Women’s Fund

This government fund aims at accelerating women’s economic empowerment by supplying cost effective, user friendly and responsive, available finance. The IWF offers support services to improve the success of your business.

It targets business that are starting up, expanding, rehabilitating, franchising and those that need bridging finance.

The aim of the fund is to create self-sustaining black and women owned businesses by offering you primary financial and non-financial support.

How to Apply for IWF Funding

The women owned companies need to meet the following criteria to be eligible:

  1. Operational for 6 months.
  2. Needs early stage capital for expansions and growth.
  3. 50% plus one share owned and managed by women.
  4. Have potential growth and commercial sustainability.
  5. Improving social impact with employment creation.

Contact IWF for funding

  • Businesses that are eligible and need funding between R30 000 and R2 million can submit their application.
  • Apply to the IWF through the IDF website or call +27 (11) 772 7910.
  • Download the application form here www.idf.co.za.

Khula SME Fund

Khula-SME-Fund-logo

Khula SME Fund

Offered by Khula Enterprise Finance Ltd, this government funds aim is to grow and increase sustainability of small businesses.

The purpose of the fund is to:

  • Offers SME’s early-stage and expansion capital.
  • Offer early-stage debt funding to business that meet the criteria.
  • Support SME’s in rural and peri-urban areas.
  • Improve the business owners access to finance.
  • Grow businesses so they can create new jobs.
  • Encourage meaningful economic involvement of black South Africans.
  • Foster entrepreneurship for men and women within the SME sector.

How to Apply for Khula Funding?

The following are the requirements for business wanting to apply for Khula government fund:

  • South African SME who have a majority share in their company and who are seeking to start and/or grow their company.
  • South African SME’s who have a majority share in their business that is in rural areas.

Contact Khula for funding

  • Business that are eligible and need funding can contact Khula at: +27 (0)11 807 8464.
  • To apply for Khula funding, visit the SEFA website http://www.sefa.org.za/, you can either submit your application online or you can print it out and submit to their physical offices. You can see the contact information for both online and physical submissions for the Khula Fund here.

Khula SME Fund

Khula SME Fund was established to provide early-stage and expansion capital to SMEs. Find out more here.


Black Business Supplier Development Programme (BBSDP)

Black Business Supplier Development Programme

Black Business Supplier Development Programme

The Black Business Supplier Development Programme (BBSDP) is a cost-sharing grant that offers black-owned businesses improve their competitiveness and sustainability.

This government grant does not support start-ups, only the expansions of existing business.

The aim of this government grant is to fast-track small and micro-enterprises, encourage links between black-owned businesses, corporates and public sector as well as to complement affirmative procurement and outsourcing.

It provides black entrepreneurs with a grant to a maximum of R1 million.

Do You Qualify for the BBSDP government grant?

  • Your business must be a CIPC Registered company or corporation
  • 50.1% black owned (Black, Indian or Coloured) or more
  • Management team 50% Black
  • Trading for at least one year and have financial statements to prove turnover.
  • Turnover must be between R250k and R35m per annum
  • Valid SARS tax clearance and Vat registered if turnover is greater than R1 000 000.

How to apply for the BBSDP government grant

The following are the documentation that you need to apply for the BBSDP grant:

  • CIPC Company registration documents (proof of ownership and shareholding)
  • Certified ID of all Directors/ members
  • Certified ID of all managers/ staff training (if applicable)
  • Certified financial statements for latest financial year (three years if available)
  • Management accounts for current year
  • Valid SARS tax clearance (with 3 months to expiry or get a new one)
  • VAT registration document (where applicable)
  • 3 Months bank statements
  • 3 Quotations (comparable) for every intervention
  • Declaration appointing Graphit as the consultant.
  • Company diagnostic questionnaire and application typed on template supplied by Graphit. Please send back as a Word Document
  • Domicillium form
  • Bank confirmation of your 50% contribution (Will you be able to get finance for your 50% or 20% contribution.) (Clear credit record)

To apply you will need to email all your documentation, all your documents need to be in a PDF format except your application form, which needs to be in word format. Please send them as individual documents.

To apply for the BBSDP government grant, send your documents to alan@bbsdp.co.za. For further information visit the BBSDP government grant website here.

Incubation Support Programme (ISP)

Incubation Support Programme

Incubation Support Programme

Designed to create and develop successful enterprises. These are enterprises with the ability to revitalise communities and local economies.

Do You Qualify for the Incubation Support Programme?

In order to qualify for the Incubation Support Programme you need to be:

  • A registered legal entity in South Africa
  • A registered higher or further education institution
  • A licensed and/or registered science council.

This programme is also available to applicants who want to establish their own incubators or wan t to grow and expand existing ones. The incubator may either offer physical and/or virtual incubation support services. The incubator may be a:

  • Corporate incubator
  • A private investor’s incubator
  • An academic or research institution incubator in partnership with industry

The incubator must be focused on establishing and/or growing enterprises that will graduate to sustainable enterprises.

How To Apply for the Incubation Support Programme

  1. Applicants can contact the DTI directly or appointed support agencies.
  2. They can assist you with the application process.
  3. You need to submit a completed application form to the DTI.
  4. This must outline the objectives of the project and demonstrate how the incubator would function and be sustainable.
  5. Submit your applications to the Incubation Support Programme Secretariat at the DTI.

Contact Incubation Support Programme

Application enquiries: appisp@thedti.gov.za

Claims enquiries: claimisp@thedti.gov.za

National Youth Development Agency (NYDA)

National Youth Development Agency

National Youth Development Agency

This government grant is moving away from grants for youth and shifting towards mentorship and development programmes. Grants are however, still available for youth entrepreneurs.

Types of NYDA Funding

NYDA awards individual grants to formal and informal businesses that are in the start-up or development phase of their business.

These government grants get awarded to co-operatives, which is an autonomous association of people united to meet common economic and social goals through a jointly owned and democratically controlled enterprise.

Additionally, another option is community development and facilitation projects.

Do You Qualify for NYDA funding?

  • You need to be eighteen years old at the time of application
  • Need the grant for business start-up or growth
  • You need to be between the ages of 18-35 years with necessary skills, experience or with the potential skill appropriate for the enterprise
  • South African citizens and resident within the borders of South Africa
  • Are involved in the day-to-day operation and management of the business
  • Require grant from NYDA of not less than R1 000 and not more than R100 000.

Upon approval of the grant, if you are employed full time, you could be required to resign from employment and provide grant officer with proof of resignation. This is a requirement so that you can focus an appropriate amount of time on your venture.

How to apply for NYDA funding

NYDA government grants are available to entrepreneurs or co-operatives that meet the following criteria:

  1. Applicants must be a youth (18 to 35 years old). They must have the necessary skills and experience or show the potential of skills for the business and industry in which they wish to operate.
  2. Applicants must be South African citizens with ID documents and operate their business within South Africa.
  3. The applicant must need the grant to start or grow their business i.e. no other source of capital.
  4. Applicants must involve themselves in the operation and management of the business on a day to day basis and must work on a full-time basis.
  5. The business may be formal or informal and categorised as a micro-enterprise.
  6. The enterprise must show, or have potential to be commercially viable and sustainable
  7. Applicants should be sole traders or in the case of groups have a minimum of five people.

Contact details for NYDA funding

For more information on the NYDA government grant visit www.nyda.gov.za or contact the call centre on 0800 52 52 52.

Learn from entrepreneurs who started in the same place as you and have made it to the big time: 10 Dynamic Black Entrepreneurs

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How to Guides

How To Craft A Crowdfunding Campaign

Successful crowdfunding ideas come in all shapes and sizes.

GG van Rooyen

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Successful crowdfunding ideas come in all shapes and sizes. Publisher Colleen Higgs and author Ambre Nicolson decided to publish a book through crowdfunding.

Even if you’re an existing business, crowdfunding can provide a way to fund a product or project that would otherwise be out of reach. This was the case with A to Z of Amazing South African Women, a bright and colourful book with bold illustrations that celebrate impressive South African women.

“I came across a book published in the US called An A to Z of Rad American Women and posted something on social media saying that I thought there should be a local version. A clever friend of mine called my bluff and suggested that we make one together, and so the idea was born. Publisher Colleen Higgs immediately saw the potential for the project and came on board. From the very beginning, it seemed to resonate with people — particularly women — and it is really due to their support that the book saw the light of day,” says author Ambre Nicolson.

Related: 6 Resources For Start-ups Looking For Funding

“Modjaji Books was very keen to publish the A to Z of Amazing South African Women, but we didn’t have the ready capital to fund a book like this, which is more expensive to produce than our usual text-based books,” says Colleen. “We needed funding just for this book, so crowdfunding seemed like the right idea. There are not many other ways of funding books in South Africa.”

The Thundafund crowdfunding campaign was a success, raising R104 400, slightly more than the stated goal of R100 000.

“You need to remember that a crowdfunding site typically takes a percentage of what you make, and then there are the bank fees to consider as well, so aim for about 15% more than you think you need,” says Colleen.

And how do you create a campaign that’ll provide you with all the funds you need? “I think the storytelling aspect of the campaign is very important. You need to give people a reason to care. In our case we wanted to showcase the strength and resilience of South African women, and this resonated with backers. Put time into the description of your project and into creating strong images. Your campaign has to compete with everything else vying for people’s attention online,” says Ambre. 

Crafting a campaign

As is the case with just about anything, success in crowdfunding is a result of hard work and dedication. A great campaign requires an engaging story, a desirable product, clever marketing and a solid understanding of business fundamentals. Without a good story and product, people are unlikely to fund the campaign. Without a good strategy to turn a successful campaign into a successful business, backers can be left angry and disappointed.

“While every project is different, we have found that one of the most common factors with successful campaigns is the project itself: The idea, layout of the project page, and the whole concept must say the right thing to the right audience,” says Nicholas Dilley of South African crowdfunding platform Thundafund.

“Another thing that project creators are always encouraged to do before their campaign goes live is to build up a network of supporters who believe in their campaign.”

Lastly, the rewards offered are obviously also important. “Thundafund is a rewards-based crowdfunding platform so, as expected, the rewards play a fairly large role in a campaign’s success. While the rewards may not be the icing on the cake in every campaign, they can make a small donation turn into a large one in some cases. Certain rewards can help build the credibility of a new brand, or even test the market to see which of your products will be most successful in the future of your business,” says Nicholas.

Related: 4 Tips To Secure Funding For Your Start-up

Trust is key

When it comes to crowdfunding, the most important thing is trust. By funding a venture or product that doesn’t exist yet, backers are placing a massive amount of trust in the entrepreneur. This trust can never be broken. The results can be disastrous, and can follow you long after you’ve abandoned your failed crowdfunding campaign.

From the outset, you should ensure that people understand what you are offering in return for funding.

“Rewards-based crowdfunding is not very well understood in many parts of the world. When you say ‘crowdfunding’, people tend to think it’s some sort of charity, or that people are buying shares in a business. Rewards-based crowdfunding is essentially pre-selling a product online, and most people are not aware of this. It’s important that you make this clear to people,” says Steel Cut Spirits CEO, Rob Heyns.

Trust usually comes down to honesty and open communication. Issues will almost inevitably arise, but it’s important to relay these to backers. Don’t disappear from your website or social media platforms for months and leave them wondering where you went with their money. Keep them in the loop at all times, especially if you’re dealing with unexpected problems.

“You need to prove that you will deliver, and then you actually have to do so once the campaign is completed,” says Rob. “I personally took full accountability for this campaign, as it can be easy to hide behind a product, brand or company when problems occur. We also aligned with key partners to ensure we could deliver. We were supported by Yuppiechef, so we knew we could execute on the e-commerce part, and we chose Thundafund as we knew they were the best option to execute on rewards-based crowdfunding in SA.

“We did mess up the communication with two backers who bought smaller rewards. It was merely a miscommunication, but it was eye-opening to me how great an effect such a mistake could have on a customer. We went to great lengths to solve the mistakes but it did concern me that there is an even higher trust-related expectation with crowdfunding than with normal e-commerce.”

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