Stellenbosch-based start-up Crowdinvest wants to harness social networking and “crowd sourcing” to make it possible for established investors — and those who want to begin investing but who have limited disposable income — to put money into local start-ups or contribute to charities, all without leaving their desks.
The site offers three investment models. The first is similar to the international site Kickstarter in that those looking for funding for a project offer various investment tiers that come with certain products or perks. The second involves investing in companies or assets, while the third allows people to “give back” to various charities and nonprofit organisations.
CEO Anton Breytenbach, a 29-year-old graduate of Stellenbosch University, started Crowdinvest with Jaco van der Bank, 30, a PhD student and entrepreneurship lecturer at the University of the Western Cape, and Jay Thompson, a founding partner in digital advertising agency Liquorice Africa.
The three men funded the site themselves but are looking for investors for the next phase. The site is still in beta but Breytenbach says he expects it to be launched officially by the end of May.
“There’s a saying that the best way to start a business is with minimum risk,” he says. “We used limited resources to get it up and running but we’re now into the growth phase.”
The first investment category, where investors make money off returns, includes options to invest in property, commodities like gold, and other assets, including a helicopter used by a flying school. “The return from the flying school’s operation is a share in the income the helicopter generates,” Breytenbach explains.
He says this category also allows people collectively to acquire an asset and then resell it, as in the case of a car at an auction or one that is being sold in a hurry and thus at a rate below market value.
The second category is the Kickstarter-style crowd-funding model. Breytenbach calls this the “creative category” because it is so frequently used by musicians and filmmakers to fund projects, or by designers to raise money for products they think there’s a market for but which they can’t fund alone.
The last category concerns charitable giving and includes projects such as Africa Wild, which wants to prevent the construction of commercial hotels in the Kruger National Park, and another that provides funding for food at an orphanage in Mozambique.
How it makes money
Though there is no upfront cost to list a project on Crowdinvest, it makes its money by taking a 5% “management fee” from the capital raised for a project, but only if the proposed target is met and the campaign is successful. In the event of a project falling short of its target, investors are refunded.
Breytenbach says a third party handles payments, transactions and record keeping. “We essentially have a trust account into which investors deposit their money. We facilitate the process between investor and investee and the third party does the management and reporting.”
Aside from the helicopter business, which Breytenbach says offers an estimated 12% return per annum, people can also invest in a tenanted property in Somerset West where the return comes from a pro-rata monthly share of the rental income or a share in a 100g gold bullion bar. “It’s worth about R50 000 at the moment. Once 100% growth is achieved, the bullion will be resold and the money will be redistributed.”
According to Breytenbach, Crowdinvest has no direct rivals in SA. However, Kickstarter is one of the biggest internationally. He says there is also a service called Crowdcube.com that facilitates investment in UK businesses. He says Crowdinvest is intended as a wholesale SA offering for these types of services.
The business is targeted at young working professionals between the ages of 25 and 35 who are active on social media and who want to build an investment portfolio but who have a limited amount of income to invest, be it a few hundred rand or a few thousand.
Breytenbach says the site’s ideal user is Internet savvy and social-media savvy and that Crowdinvest hopes users will promote the service and their investments in it using social services.
He says the site is also looking to build a “social-media gamification” layer into the service that will help users promote their activities on Crowdinvest, show others what they’re investing in and promote the service in the process. — (c) 2012 NewsCentral Media