Crowdsourced Funding Opportunities for African Development

Can crowdsourcing be a legitimate tool for African development?

Banks in Africa - Few Solutions for the Informal Sector

Nuevva now believes it can.  Until recently, crowdsourced funding was subject to significant restrictions in western countries and had limited utilization in Africa.  In most cases, those restrictions prevented investors from obtaining equity for their investments; limiting their take-aways to products of the supported venture or just the feel-good status of having bought in to something good.  Now, in part due to the recent economic downturn, things are changing.  When the JOBS act was signed into United States law on April 5,  small businesses were given the right to sell up to $1,000,000 of securities per 12 months.  Nuevva believes that this can be meaningful for business in Africa too.

Nuevva already helps businesses around the continent find ways to expand their sales and become healthier, more sustainable enterprises.  But a gap still exists; most notably in the creation of formal small business.  In Africa, businesses tend to be either cottage industries mired in the informality of the grey market and without the ability to engage steady growth, or much larger entities whose costs and structures dwarf those smaller businesses, but whose impact is often felt more in their headquarter operations in Europe or North America than in the African countries they work in.  If Nuevva could help smaller businesses be successful in the formal market, this would increase their growth opportunities over time and keep more business benefits in Africa.

In the automotive space, Nuevva supports an African-owned large business in Mali, Prestige Motors.  Prestige competes with much larger European-owned businesses for large corporate clients, and with much smaller informal structures for retail business.  These smaller competitors are hard for Prestige to manage because they often sell counterfeit parts and import products through grey market channels; avoiding the taxes that a formal company like Prestige cannot.  In many cases, these small business would love to have the opportunity to buy wholesale from Prestige, but they lack the cash or the creditworthiness to be able to do so.  Prestige knows that it could benefit from healthier small clients, because they would provide more stable wholesale business and help Prestige expand its brands in the marketplace.

These are what Nuevva calls “small opps”.  Operations that are small, but that represent big opportunities for Nuevva business partnerships in Africa.  Here, Nuevva believes that crowdsourced equity funding can help.  Nuevva is studying the creation of a series of crowdsourced investment vehicles, each of which will be dedicated to providing funding in areas where informal structures or small investment size inhibit traditional financing access, but where the infusion of modest working capital flows can create real returns for shareholders.

For Nuevva to consider investment in a small opp; the primary criteria would be:

  • Involvement in a core Nuevva sector – automotive, extractive, recycling or green
  • Strong benefit to African-owned business
  • Direct benefit to an established Nuevva business
  • Expected net yields over 10% per annum
  • Knowledge and experience with the African principals
  • Minimum African cash investment of 10% per principle

As manager of the vehicle, Nuevva would retain a portion of the equity as a management stake, and would retain 51% voting rights in collaboration with the African investors.  Crowdsourced funders could invest from as little as $100 to upwards of fifty-thousand, with strong annual returns.  As the vehicle provides capital to the small opp, the profits are reinvested until the opp can buy out the crowdsourced investment.  In this way, Nuevva ensures the best safety for its shareholders and the strongest possible impact of its capital.

Tags: , , , , , , , , , , , , , , , , , , ,

No comments yet.

Leave a Reply