Siyabonga writes:

I have a modern African restaurant and bar concept that I started researching five years ago. This is a start-up business, for which I have a comprehensive business plan and associated documentation. Over the years I have been mentored by Business Partners Limited who have now committed themselves to funding 50% of the business, provided I am able to find other investors to fund. I have also approached the National Empowerment Fund (NEF) who want me to do a viability study. Do you have any other recommendations?

Maya replies:

You could consider an alternative form of capital raising, namely crowdfunding. This is where individuals invest in your business in exchange for a benefit.

One of the more successful South African crowdfunding platforms is Thundafund which has focused on micro and small businesses who offer a “reward” to investors which is produced from the project itself. For example, you could give investors a free dinner at your restaurant in exchange for providing funding. Not only do you raise capital but you have pre-sold your meals ensuring a demand from the day you open.

This also effectively works as a feasibility study because it shows whether there is a demand for the product before you have even started business. Not only have you tested your product but you also do not have to repay a loan with interest and all the other costs involved – you just have to deliver your product.

If you are able to show sufficient support via crowdfunding, then the NEF may be prepared to commit additional funds matching those of your individual investors.