How crowdfunding is opening new doors for entrepreneurs in Africa.

By Lisa Tanh

Illustration by Samantha Nickerson •

Illustration by Samantha Nickerson •

In North America, equity crowdfunding is rising through the ranks of business funding and is expected to pass venture capital investments—it’s a process wherein small businesses have the opportunity to raise capital from a large group of people and offer them equity in return. The appeal is largely capitalistic, but in other places in the world such as Africa, the appeal is deeply communalistic and is growing in popularity as a solution to financial capital barriers.


Leo Gaviao, the founder of CrowdFund Africa, an equity crowdfunding platform registered in Zimbabwe, says the concept of equity crowdfunding is part of Africa’s cultural construct. “Culturally, we crowdfund,” says Gaviao. “We will come together and we will help each other and give social equity. I will help my brother because somewhere along the line, someone helped me. It's not very capitalistic, it's very communalistic.”

After consulting for businesses in Africa for 15 years, Gaviao found there weren’t any good funding options available. More often than not, small businesses have no choice but to rely on bank loans for funding. These loans come with premium interest rates—as high as 12.09 per cent in Zimbabwe.

“We've seen what loans have done to a lot of small businesses that look promising,” says Gaviao. “For many, when it came time to pay the piper, there just wasn't enough to go around. You pay the piper and you're back where you started and you have to go off and work again,”  he says, adding that equity crowdfunding can lower cash flow pressures, since it does not require paying interest rates or paying back investors.

In the US and Canada, equity crowdfunding is regulated and allows businesses to raise capital from a large pool of people, who must be over the age of 18. The minimum investment amount is set by the business and can start at $100. In return, investors can receive common stock, preferred stock or a simple agreement for future equity (SAFE)—which is what differentiates equity crowdfunding from traditional crowdfunding. Common stock represents ownership in a company, preferred stock represents ownership in a company that typically comes with rights, and a SAFE represents an agreement that gives investors the right to receive common or preferred stock in the future.

In a 12-month period, businesses in the US can raise a maximum of $1.07 million USD, and businesses in Canada can raise a maximum of $500,000 CDN.

Once people feel that those who claim to be advanced impose things on them, we may have resistance. Africa needs an African solution.
— Setlakalane Molepo

While equity crowdfunding isn’t regulated in Africa, it’s starting to gain traction in some  countries. For example, Nicholas Bush, the founder of Drifter Brewery, a top craft beer manufacturer, raised R3 million which is over $278,000 CDN through Uprise.Africa: an equity crowdfunding platform based in South Africa.

“Equity crowdfunding enabled us to reach a much larger pool of potential investors than we could have otherwise,” says Bush. “The process had the additional benefit of generating a lot of exposure for our brand,” adding that Uprise.Africa assisted his company with marketing which is a common service that equity crowdfunding platforms offer.

For these reasons, Bush believes that equity crowdfunding can significantly help other entrepreneurs in Africa and provide access to capital that might not be otherwise available.

“It provides easier access to capital than traditional methods due to the larger pool of potential investors, as well as the fact that equity crowdfunding investors may be less risk averse than traditional investors due to the smaller financial commitments required,” says Bush.

According to Jonathan Moed, founder of Startup Universal, a content platform showcasing technology startups and investment opportunities focused on the emerging and developing world, access to capital for small and medium-sized businesses in Africa is nonexistent. Small and medium-sized businesses contribute more than 60 per cent of total GDP and make up almost 90 per cent of all businesses in Sub-Saharan Africa.

Gaviao says that African governments haven’t really looked at the potential of equity crowdfunding for small and medium-sized businesses and that a lot of lobbying and education needs to be done.

“From the legal perspective, we still have the same issues as the US, UK and even Canada,” he says. “No one really knew how to classify crowdfunding. What exactly is it? How do you regulate it?”

Setlakalane Molepo, the acting CEO of the Small Enterprise Finance Agency, an agency of South Africa’s Department of Small Business Development, says that equity crowdfunding should be regulated and managed by experienced people.

“I think it’s something that can help break the barriers for access to capital, but it must be properly regulated,” says Molepo. “It must be run on a trusted platform, whether government operated or private sector. It must be something where people know that they're putting their money towards a noble cause.”

Molepo suggested that governments and businesses look at how successful equity crowdfunding platforms were created in Africa and North America, and engage the founders during their own regulation process.

“It’s always advisable for those who succeeded to share lessons learned with new entrants,” he says. “It’s also important to be sensitive to West and African geo-politics. Once people feel that those who claim to be advanced impose things on them, we may have resistance. Africa needs an African solution.”


In the US, companies have successfully raised nearly $200 million through equity crowdfunding. Beyond Meat, a company that produces meat alternatives, is one of the most recent success stories. It started out raising capital through equity crowdfunding and became a billion dollar company after going public—making history with the most successful debut in more than a decade. In Canada, companies have raised less than $2 million, largely due to a lack of government support and regulatory burdens when compared to the US.

Jordan Gillissie, the founder of Equifund, an equity crowdfunding platform based in the US, says that the American system is set up in a way that gives investors the confidence to invest by holding companies accountable for fraud or misrepresentations.

“Platforms can register with the Securities Exchange Commission and become a member of the Financial Industry Regulatory Authority,” says Gillissie. “Becoming a FINRA member is a big deal because their primary goal is to keep its members accountable. So when an investor sees the FINRA logo, they’ll know this platform is held accountable to a higher standard.” adding that FINRA ensures that companies comply with federal securities laws and that there isn’t a similar body in Canada.

His advice to governments and businesses in Africa is to form a governing body that oversees all countries, otherwise companies will be bogged down by domestic legislation that will stifle innovation—which is already happening in Canada.

“Through equity crowdfunding, entrepreneurs in Africa could raise the capital that they need,” says Gillissie. “The technology and marketing showcases them to thousands of investors and no other mechanism offers the same benefit. A successful campaign will lead to brand exposure, new customers and live market research to help their product roadmap evolve.”