Crowding in funds for the next Steve Jobs from Africa

Crowding in funds for the next Steve Jobs from Africa

When it comes to financing for entrepreneurs, this week marked a major event in the financial industry of the United States with immense potential ramifications for the developing world. This week, the US Securities and Exchange Commission’s unanimously approved rules for equity crowdfunding.

For context, equity crowdfunding allows entrepreneurs to sell equity shares of their company to a group of investors through an internet platform, and  is a distinct category of crowdfunding apart from micro-finance (Kiva), perks-based (Indiegogo), and debt (Lending Club). The most notable crowdfunding website is Kickstarter which since 2009 has raised more than $840 million, from more than 5 million people, funding 50,000 creative projects. This platform operates on a pre-sale, perks or donation model where funders contribute funds for a future product, reward, or in-kind. Shares or equity were, until the SEC ruling, not part of the deal.

If we hold true that this SEC measure represents a seismic shift in the way entrepreneurs can raise funds in the United States, the question remains, can emerging markets leap frog the developed world to democratize access to finance for entrepreneurs in their countries?

The answer, we believe, is yes.

The latest report by infoDev, Crowdfunding’s Potential for the Developing World www.infodev.org/crowdfunding finds that by levering technology, crowdfunding can serve as an enabling mechanism for new venture formation, job creation and inclusive economic growth. infoDev estimates that the nascent global crowdfunding market, including all models of crowdfunding, could reach between $90-96 billion by 2025, which represents 1.8 times the global Venture Capital industry today.

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