ENTREPRENEURSHIP SERIES (XI): CROWDFUNDING

A fortnight ago, I met a colleagues’ brother and we got talking. We talked a great deal about business, and I was surprised at his knowledge about a thousand and one startups one can set mind and hands on as a full-time or part-time entrepreneur. Interestingly, since he finished his National Youth Service Corp, NYSC program (mandatory one year service to Nigeria, after graduation) in 2010 he’d been unemployed, and though he comes from a relatively well to do family, he hadn’t been able to take advantage of that to bring any of his business ideas and “visions” to life. I figured that he probably wants that BIG HIT in business that many young people, me inclusive dream of.

Those “Hits” are possible, but most times it is the small and humble beginnings that lead to those big ones we hear of today. I have considered it pertinent that after going through some businesses we could try our hands on, that we take a step back once a while to look at how to fund these businesses, as I have done a few times already since we started this entrepreneurial journey. You don’t need a soothsayer to tell you that without capital most businesses will remain ideas till they probably, die. I should remind you also, that my aim is to sow ideas in the minds of nine-to-fivers, though the unemployed may also benefit from what I share. The reason why I have decided to make my niche of the working class, regardless of what they earn, is because their jobs in most cases will be the primary source of funding for their small businesses, and something to fall back on when the business go awry, and they make plans either to resuscitate it or chart a new business path entirely.

With that out of the way, let us get to the crux of the matter. The present harsh economic climate in Nigeria (in particular, and the world in general) can be said to be visible to the blind and audible even to the deaf, hence not many people, even financial institutions are disposed to lending anyone money, especially those without any form of collateral, sometimes even with the collateral. It could be easier for a camel to pass through the eye of a needle than for some loans to be granted. What I am about to open your mind to isn’t something that’s new, as it is in fact an innovation that has remained quite relevant today as it has always been, and some businesses that we today refer to in glowing terms were founded on its very steps.

GOFUNDME is quite popular today, for people seeking to raise funds especially for a cause and the likes. There are other websites just like that, where many people have been able to raise funds especially in the western/developed economies. I say this because apart from the fact that online CROWDFUNDING (raising monetary contributions from a large number of people) sites aren’t popular in Nigeria, it is also viewed with skepticism and suspicion because of the nature of our society, where even lofty innovations are easily exploited for negative purposes, but that still doesn’t take away from the good that can be done with such sites, besides there’d been a way things were done before Gofundme, EquityNet, Razoo, Pledgie, IndieGoGo, GiveForward, FundRazr, Kickstarter and other crowdfunding sites came to be upon us.

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The traditional way is to raise funds for business by asking family members, friends and close associates and acquaintances for monetary assistance, but definitely not like begging for alms. Even if these weren’t hard times, people are reluctant to just give out money for free, so it’s bad idea to ask anyone to just give you money to start a business, even if you think it’s small and such would-be benefactor should have no qualms parting with such an amount. Many have gotten abused because they requested and got “free launches”, many others didn’t get because really there’s nothing like a free lunch, even in Freetown (like they say). A few others still manage to get funds, most times from family and rarely from non-relatives who are nothing but Benevolent Spirits breaking nuts for people they know not so much about. Such philanthropists, especially those without political ambitions (as you’d readily find in Nigeria) or ulterior motives, are very rare to come by, and one cannot build hopes on finding even the noblest of them, especially when you need them the most.

Therefore, when we crowdfund, the best bet is always those close to us. It can be embarrassing but the idea isn’t to relent. A closed door (and many of those will be encountered, some for good reasons for which you shouldn’t blame those so approached, but turned you down) shouldn’t also stop you from approaching another. Once you are able to raise the required sum, or something close to or above it, remember that Investment Money isn’t to be “chopped” or “whacked” as we say here in local parlance, it ain’t for the solving of problems or challenges of a personal nature. It should be for what it is meant for strictly, i.e. business even if you’re on your deathbed (I don’t mean this). Most times what you get from people won’t be commensurate with what they have, as giving is more out of goodwill of the giver than his/her ability, and you shouldn’t begrudge those who have much but can only give little at the moment. The fact that they have given little now, doesn’t mean that they won’t give more the next time, especially if you prove yourself deserving/worthy of a next one.

Financiers like to know that they aren’t the only one investing in your business, for it means that others trust you enough to leave their money with you. So, when crowdfunding be sure to name names of others who have invested in you (your business) except they request to be anonymous. It is essential also to ensure that loans so collected (except where the financier asks that it be seen as a gift) be paid as and at when due, or in the case of an investment, dividends duly paid. Should you be on the verge of defaulting, be sure to reach out to the benefactors on your list, to intimate them of happenings, as well as how soon you intend to resolve the impasse, so that their mind can be at rest that their investment haven’t gone to waste.

Businesses can go either way, when there’s profit it is best to share with those who invested and intimate those who funded as gifts (even send them gifts in appreciation, if you can afford it), and pay back those who loaned you seed-funds to startup, or further invest in your business. Some times, one may convert investors to creditors when business is doing well, but do so with respect as they won’t be part of the business anymore, or you reduce their shareholding. When business heads south, it isn’t right to bail on your financiers, rather go back and seek their understanding of the unfortunate situation of things. You may lose some if not a large part of your benefactors, but there will still be a few if not more (or worse still, absolutely none) that will continue to stand by you through thick and thin, as you navigate your path in business and on your way to being a full-time entrepreneur. For the nine-to-fiver, it is pertinent to organize a plan via which creditors will be fully paid their due some howbeit in installments when business goes sideways, if for nothing else, to leave you in good standing with them regardless of whether they’d be willing or not to invest again with you in future. Mazel Tov!

‘kovich

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6 thoughts on “ENTREPRENEURSHIP SERIES (XI): CROWDFUNDING

  1. Well spelt out. The truth is that raising funds for business via crowdfunding is quite herculean. The issue with trust among folks is a very dicey one. If one is lucky, fine. And just as you pointed out, it’s very important the businessman doesn’t fail the trust of his benefactors in due time.

    Also, we shouldn’t forget that bank loans apart from being difficult to access, have significant hidden charges along with the repayment principal/ interests and banks usually don’t furnish a debtor with such details until such a person realises for himself/herself during repayment. The more reason we must think it through thoroughly before going for it.

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    1. You’re very right Sir, sometimes even with the best intentions by the businessperson, crowdfunding can be tough, but if one can pull it off, and maintains a good, respectful, integrity-driven, as well as purposeful relationship with ones’ benefactors, s/he will find even beyond the sky her/his limits, even of and among benefactors that aren’t related to him or her.

      As for bank loans, the rates remain inimical to the growth of small businesses, that’s without even the hidden charges you alluded to.

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    1. Yea, very sad but true. Which is why online crowdfunding isn’t gaining much ground in Nigeria, because people within and outside of Nigeria are afraid of being scammed, especially when a Nigerian or Nigeria is involved.

      You can’t however rule out the presence of genuine businesspeople desirous of making a difference in Nigeria or as Nigerians, who then have to make do with what system that are available to raise funds for business.

      This should come in handy for them.

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  2. Barbarakay1, it’s true that there’s been so many scams associated with Nigerians but that’s not to say scammers represent the larger chunk of the country. In fact, I bet you, you’ll still find one of the most honest people on earth in Nigeria. Anyway, no thanks to the bad eggs who have suceeded in painting us all in bad light. Thank you.

    Liked by 1 person

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