This archive report was first published on 15 May 2020.
On May 15, 2020, the Business Daily Africa published an article highlighting the challenges faced by Kenyan startups in raising capital. The article suggested that crowd funding could be a viable option for these startups.
Startups in Kenya face a significant challenge when raising capital. Numerous independent studies have vindicated this position, showing that startups often struggle to access funding due to a lack of collateral and proven financial track records.
Young entrepreneurs, in particular, face significant barriers when trying to access funding. They often have no major assets to act as collateral for credit from financial institutions and no proven financial track records to talk about. As a result, banks consider them highly risky clients.
However, there is a mechanism that can help startups raise capital: crowd funding. Crowd funding is a digital fundraiser that involves raising small amounts of money from a large number of people, typically via the Internet.
According to Statista, the global crowd funding sector amounted to $6.9 billion in 2019 and is projected to grow in the foreseeable future. The increased uptake of cryptocurrencies such as bitcoin is also boosting the sector, given their ease of transfer globally.
Kenya has a number of unique underlying circumstances that make it an attractive market for crowd funding. The country has a high level of social media activity, a generous population, and a strong Harambee culture, which emphasizes community-based fundraising.
However, the main challenge facing crowd funding in Kenya is the lack of supportive laws, particularly for equity crowd funding. Despite this, startup entrepreneurs can still learn and develop the skills needed to conduct successful crowd funding campaigns.
Some tips for conducting a successful crowd funding campaign include conducting research to choose the right platform, describing your business idea in truth and detail, and being realistic about the amount requested. Additionally, having a team, providing frequent project updates, and working hard at your campaign can all increase your success probability.
As Dr. Kevin Wachira, a lecturer at South Eastern Kenya University, notes, 'Finally, work hard at your campaign, have some fun along the way, and above all be grateful to those who put down some money to support your idea.'
