South Africa’s first equity crowdfunding platform Uprise.Africa has officially launched after being told by the Financial Services Board (FSB) that the platform does not fall foul of the Collective Investment Schemes Act, the platform’s founder and COO Patrick Schofield said yesterday.
Speaking at a media briefing at Workshop 17 in Cape Town yesterday to highlight the first four deals that will shortly go live on the platform, Schofield — the founder of donations based crowdfunding site Thundafund — said the FSB has been “very quiet” on commenting on the platform.
The FSB was notably absent yesterday from the briefing despite being sent an invitation from the platform, and did not respond to comment on the legality of the platform when Ventureburn contacted FSB media manager Nokuthula Mtungwa on Tuesday.
“The FSB has been very quiet. We have been keeping them in the loop in terms of what we are doing,” said Schofield, whose team has been spent the last 18 months to ensure that all regulatory issues are addressed.
‘We got confirmation back from the FSB that Uprise.Africa does not fall in the gambit of a collective investment’
However he pointed out that when the platform’s attorneys Dommisse had earlier sent the FSB details of the structure of the platform, the authority had responded by saying that the platform would not contravene the Collective Investment Schemes Act.
“We got confirmation back from them that Uprise.Africa does not fall in the gambit of a collective investment,” he added.
At present he said the platform is operating under a Category 1 FSB license through the entity Uprise Markets, which allows the organisation to market shares. Investors would be able to buy and sell shares to other investors, he said.
Schofield added that the platform also contains “constant” risk warnings. In addition potential investors are required to answer five questions to ensure that they are aware of what they are getting themselves into, before they can invest in any deal on the platform.
The platform is also partnering with Dommisse Attorneys and Yue Diligence to add credibility to investments and Schofield added that plans are still under way to get venture capital (VC) funds on board to vet deals.
Added Schofield: “We aren’t cowboys going out there trying to disrupt”.
Eight percent fee on deals
Turning to the fees the platform would levy, Schofield said a total of eight percent would be levied on investments – five percent would go to the platform, two percent would be taken as a management fee to cover post-investment costs and one percent would be kept to cover the costs of the platform.
In addition investors would need to pay a five percent carry fee. Most VCs have between a 15% and 20% carry fee, Schofield added.
Campaigns are likely to run for 90 days and must raise a certain minimum amount for the campaign to be successful and funding to be approved.
Schofield pointed out that until the campaign has closed, investors will be able to withdraw any investments they pledged.
In addition the pledged amount from any investor will only be considered an investment when the investor has received a prospectus — which he added would be sent to the investor in the course of the campaign (rather than made available to them at the beginning of the campaign).
Those whose campaigns are not successful, will only be levied bank charges.
‘Campaigns likely to cost R50 000 each’
However the platform’s investor relations head, Vuyisa Qabaka, said it would likely cost R50 000 for each organisation that wants to launch a campaign – to cover the cost of video and marketing, legal fees and any financial audit that may need to be carried out.
While the platform initially aimed to list six investments when it launched, Qabaka said two further deals were not “systematically ready” to be listed.
The four deals, which are yet to go live, are:
- Storied, a Jacana Publishing project to help publish more African fiction and poetry in which the company is seeking R3-million in exchange for a total equity of 49% in the project.
- Jobvine Freelance, a freelancing app by job listing site Jobvine, which is looking for R3-million in exchange for a total of four percent equity.
- The Green Cab, in which The Green Cab company is looking for R3.5-million in exchange for total equity of 35% to fund a cab division operating hybrid and electric vehicles.
- Beerhouse: A beer restaurant that is looking to use crowdfunding to fund a new Durban outlet.
Schofield said each deal would be dedicated a slot to run their own campaign. Details on which deal would run the first campaign would be revealed shortly, he said.
So far 800 entrepreneurs and project managers had signed up on the platform, as well as 400 investors. Schofield reckoned about one in 40 would become successful in listing their project, meaning the platform may have about 20 campaigns it can run soon.