Could Crowdfunding Be a Success in Zimbabwe?

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In years gone by if you wanted to start a business your options for funding were fairly limited. Traditionally intrepid entrepreneurs would submit a business plan to the bank and hope that the loan manager liked their idea and backed it.

On a larger scale, those wanting to take their business to the next level would seek out hedge funds or billionaire investors to provide the capital they needed to upscale their business. In recent years however, crowdfunding has provided entrepreneurs with a new way to inject capital into their business plans.

In this article we describe what crowdfunding is, show you some successful examples of crowdfunding in action and analyse whether or not it could be something of value to the Zimbabwean economy.

What is Crowdfunding?

In simple terms, crowdfunding is the practice of raising capital for a business project or venture from a large number of people. Rather than requesting millions of dollars from one wealthy benefactor, a crowdfunding campaign requests much smaller amounts from huge numbers of people to spread the cost.

It’s not just business that utilises crowdfunding, notable art and restoration projects have also benefitted from crowdfunding as a source of revenue. At the beginning of 2021, Kickstarter, the largest crowdfunding platform in the US had raised a total of $5.6 billion over 197, 425 projects.

Crowdfunding Success Stories

What about the projects and business ventures that have benefitted from crowdfunding? Below you’ll find three varied and super successful beneficiaries of crowdfunding:

BorrowaBoat: Inspired by the success of AirBnB, BorrowaBoat formed in 2017 with the aim of making yacht and boat hiring cheaper and more affordable so that the average holidaymaker could experience the luxury lifestyle of oligarchs and celebrities.

Since 2017 the company has raised around £3.8 million predominantly from Crowdcube and is set to be one of the biggest players in the global charter market which is estimated to be worth around $30 billion by the year 2027.

Oculus: In 2014 Facebook made waves when they purchased virtual reality headset company Oculus for an eye-watering $2 billion. Had it not been for the investment of crowdfunding members however, it’s hard to imagine Facebook even hearing of Oculus.

The company took to Kickstarter in the early days to request $250,000 in funding to take their virtual reality headsets plans to the next level. They reached their target within four hours and the rest as they say, is history.

YOUTUBE: <iframe width=”560″ height=”315″ src=”https://www.youtube.com/embed/5q6BcQq_yhw” title=”YouTube video player” frameborder=”0″ allow=”accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture” allowfullscreen></iframe>

(Oculus Rift, a product that would not have existed without crowdfunding.)

Monzo: Public trust in banks was at an all-time low in the UK after the 2008 financial crash, so the creation of Monzo in 2016 could have been seen as somewhat of a risk. The online only bank took to Crowdcube in March 2016 to give away 3.33% of its equity to investors.

In just 96 seconds Monzo raised £1 million from 1,861 investors. Considering that the company was valued at £3.36 billion in December 2021, it doesn’t look like a bad investment…

Crowdfunding in Zimbabwe

Now that you’ve read about some of the success stories of crowdfunding, you might be wondering how it could work here in Zimbabwe and why we haven’t seen similar success stories. In simple terms it comes down to legislation and quite frankly, a lack of interest on behalf of legislators.

There are certain legal hurdles that need to be overcome to make crowdfunding here in Zimbabwe as easy and widespread as it is in the UK and USA. These include forming regulatory bodies to keep an eye over the industry and more robust checks for companies and individuals.

Without these efforts on behalf of the government crowdfunding in Zimbabwe remains a murky area. In the UK and USA where robust legal frameworks are in place, scams and frauds still do slip through the net.

Currently the fear in Zimbabwe is that not enough is being done to protect people from these type of dangerous/fraudulent investments. If steps are made to bring legislation up to date though, the following areas of Zimbabwean life could benefit enormously from crowdfunding:

Domestic Infrastructure: Zibabwe’s public debt is $11.1 billion, which is 53.9% of GDP. The vast majority of this is owed to foreign investors, notably those from the EU. There’s no escaping the fact that this debt is hampering investment in domestic infrastructure in the country.

Instead of seeking investment from countries who are no longer willing to offer it or from countries like China, whose investment comes with a high price to pay, Zimbabwe could look to crowdfunding to help grow its domestic infrastructure.

Online Business: The modern world is becoming increasingly digital with every passing month. In order from Zimbabwe to keep up with this shift, investment is needed in domestic digital companies and start-ups.

This is exactly the sort of thing that crowdfunding was designed for.

Domestic Companies: On a wider point crowdfunding could be used to increase the number of domestic company’s full stop. As global technological and cultural advances outstrip those in Zimbabwe we are increasingly reliant on overseas companies to fire our economy and provide services.

Crowdfunding would be a great step toward ending this reliance on overseas companies and giving the Zimbabwean economy the independence it craves.

Are there any crowdfunding opportunities that you think Zimbabwe is missing out on? Let us know in the comments section below.