Startup Christmas

Excerpt from a mailer that went out this week (not composed by me):

Startup Christmas

#StartUp Christmas was conceived by Jens (Shopstar), Alex (StoneTree) and Werner (PayFast) over a glass of wine at an end-of-conference party.

Conversations, which started with the classic “Sjoe! What a year its been!“, ended with a serious discussion on how to best bid it farewell.

The biggest challenge –okay, not exactly the biggest, but a significant challenge none-the-less– is that its really hard to have a big end of year party with just three people. Just adding beer to the people you have be staring at every day doesn’t really do much.

But – add a few like-minded startups, a pool, a DJ, some fairy lights, a Santa – and BOOM: #StartUp Christmas is born.

We hope that you can make it. It’s going to be fun – much more fun than you, the two other devs and shot of tequila each. Promise.

Go check out the website: www.startupchristmas.com. RSVP, while you’re there. I can’t wait.

Separate your transactional and marketing emails

Companies send out two very distinct, very different types of emails (or at least, they should).

Transactional (or business) emails relate to the specific individual: welcome emails, invoices for payment, lost password requests, scheduled system downtime and the like.

Marketing (or newsletter) emails relate to things that the individual might find interesting such as new features, opinion pieces from your blog and new features.

It’s about reputation – baby!

reputation

Mail providers uses something called a sender reputation score to determine whether or not to display your emails to the recipient. Just because an email displays as “sent” on your side, doesn’t mean that the recipient actually received the email. The reasons behind this are all rather logical: they are in place to make sure that spammers (and dodgy operators in general) will lose reputation and you won’t be bombarded with unwanted mail (which will either never appear or show up in your spam box).

I won’t go into it too much, but your reputation is based on two things: IP reputation (or server reputation) and domain reputation. Some ISPs look focus more (or exclusively) on either of them, so it’s a good idea to think of your reputation holistally.

Things you should consider

Different mail providers have different standards, but there are a few things that are very important to keep your reputation high:

A squeaky clean server

server

Don’t ever bother signing up with a dodgy mail operator. If you are on a shared hosting environment and use the same servers for email, you’re looking for trouble, since other people might send spam from other websites on that server.

If you don’t know where to start, sign up with MailChimp for marketing email and Sendgrid for transactional email. They know what they’re doing, provide good support and have thorough documentation to help you do things right.

No spam complaints

spam

While you’ll never be able to completely control this, you need to try and avoid spam complaints as far as possible. This means two things: 1. Write meaningful content and 2. Make it easy to unsubscribe.

The more relevant (or value-adding) your marketing messages are going to be and the more control you give your user, the fewer spam complaints you’ll have.

You should also give your users the option to opt out of certain types of transactional emails, as Twitter allows you to do:

Twitter email controls

Content

content

Sending out large attachments (or certain types of attachment), having suspicious subject lines (or content) and badly formatted HTML emails all could lower your reputation.

If you’re using a quality email service to compile your emails, providing valuable content and not trying to push Viagra on people, you should be good.

Segment, segment, segment

segment

Segment your email recipients as much as is reasonably possible.

If you sell three types of products (say cloud backup software, booking software and e-commerce software), you don’t want to tell hotel owners (using your booking software) that there has been a version update to the e-commerce platform.

You don’t want to send a newsletter about changes to online shopping delivery laws in your country to everyone/if it doesn’t relate to the cloud backup users.

You could –depending on your business— further segment your subscribers (for marketing mail) and users (for transactional mail) by location, industry and the like. This will help greatly in refining the value-adding message for the recipient.

Use different email addresses (but don’t go overboard)

emails

Some companies use different domains to distinguish between their marketing and transactional mail, but this is, in my opinion, a bad idea.

Simply create separate email addresses like noreply@yourdomain.com (for transactional mail, which/if it has to be delivered) and insight@yourdomain.com (for marketing mail).

With modern mail applications you can set separate reply-to addresses (so if someone replies to your newsletter email, that it goes to something like support@yourdomain.com)

This helps your customers to filter your emails. Users might want add an email filter on your newsletters, since that kind of information isn’t critical to operations (I like to keep a clean inbox and get to my newsletters when I have downtime).

Don’t make the mistake of sending emails from too many “from addresses) like using the first names of every newsletter contributor. It might give it a personal touch, but if the recipient has added tom@yourdomain.com to her address book, particularly when it’s filtered it so that all emails from “Tom” should go to her newsletter/social inbox, you’re going to piss her off when you clutter her inbox with an unfiltered email from steve@yourdomain.com and mandy@yourdomain.com. 

Authenticate! Use DKIM and set an SPF record

stamp

I should have mentioned this first, as it is one of the most important things to help show the recipient’s mail provider that you’ve authorised certain servers (say, those of Sendgrid) to send emails on your behalf.

You’ll notice that some emails (usually marketing emails) you receive have the “sent via somedomain.com”. Here’s a blurb by Google on it.

In some cases the mail might even end up in your spam folder with a warning from your mail provider saying that they couldn’t verify the sender of the email. The following email (from the otherwise superb Buffer)

subscription without SPF records

It’s a remarkably simply fix, you’ll simply need to reach out to your email (or hosting) provider and ask them (or do some light browsing through their documentation).

Two blurbs by Google: the first on Sender Policy Framework and the second on DomainKeys Identified Mail.

Testing

You can check your reputation free on SenderScore (should be taken with a grain of salt, as not all mail providers use the same formulas)

To test a whole range of things associated with your domain, check out the excellent MX toolbox.

In closing

Authenticating your email can be a little complicated, but it is a necessary step to make sure your emails get delivered. Make sure that you use a reliable/clean server to send messages from and always give people a way to opt out of your marketing messages (and if possible, a way to control the amount of transactional messages).

Lastly –and this should be at the core of what you do; not just your emails—only create and share things if they add value.

Email is a tricky thing to get right and you can go down lengthy wormholes to get things right, but it is far cheaper to get it right right now, than to spend the extra time and money (and lost resources) by having mails go unread or servers blacklisted.

Lessons learned at the Lean Startup Machine

The Lean Startup book, by Eric Ries has had a really big impact in the way I think about and approach various projects since the day I first read it. It’s applicable not just to work projects, but also for one of the many side projects, charitable causes and ideas I’m tinkering away at in my spare time.

Lean Startup

At the crux, it is about focusing on getting things done quickly: shortening the development by doing clever experiments and pivoting (or exiting) early to avoid spending a very costly amount of time (and money) working on something that is likely to fail.

It’s not as much about failing –something I do think needs to be seen in a different light—but it is about failing faster.

There’s obviously more to it: good management & accounting, building, measuring, learning…just go ahead and read it (email me, I’ll lend you my Kindle copy). I can’t recommend it enough.

Lean Startup Machine

I was lucky to attend the very first Lean Startup Machine in South Africa here in Cape Town (and plan on doing so again in future, hopefully in other cities). LSM are weekend workshops, held all over the world, where you are taught how to build something people (other than you) actually want. You get to build (or break) an idea or business in three days.

The majority of new ventures fail because they build something that not enough people find valuable, followed by running out of money (but the one feeds into the other). There are 101 startup post-mortems, worth a glance, here.

For me it ties in nicely with any idea you might have (not just founding a tech startup).

I was part of a superb team and we worked hard all weekend on refining our idea on how to create a simple platform to help bridge the gap between the demand and supply of the superb art this city (and country) has.

I’m very proud to say that our team was chosen as the winner of the event, but I’m getting ahead of myself…

 

This isn’t much about the actual event (one I highly recommend to anyone working in a fast-changing environment) or about us winning (the takeaways would be the same), but rather about what my thoughts are as an attendee.

Your team matters

team

Our team consisted of two people working for startups (myself and Nic, in e-commerce), a bright artist (Clara), a developer with a few small businesses (Nathan) and someone working in finance (Jason). There was a lot of synergy in getting to our mutual goal, but we were diverse enough to constantly challenge each other’s ideas and ensure that we didn’t fall into the groupthink trap.

The best thing you can do is to get out of the building

get-out-of-the-building

There are a lot of valuable lessons you can take from the weekend, but by far and beyond the best one is to get out of the building (and asking people the right questions). We learned an incredible amount by just talking to potential customers and artists. Knowing who your (potential) customer is something you should

I know that Steve Jobs said that “people don’t know what they want until you show them“, but that is only great advice if you are actually Steve Jobs. If you’re not, get out of the building and talk to people.

Timing, luck and hard work matters

timing

Yes, once you have a winning idea (and a winning team) you have to work your ass off. It’s relatively easy to do so over a weekend of camping out at a central meeting point, so not really relevant for LSM, but new ideas and products take a lot of hard work. Something they also take is a large element of good timing and pure dumb luck. Sure, you might have worked hard your entire life and maybe have the accolades to show for it, but you were still born, by stroke of luck, into the circumstances that allowed you to get educated, work and meet the right people to carve your way to the top.

I was lucky to get into the right group, we were lucky to have a bunch of great, hardworking members and we were lucky that we could get the right idea and right advice from the right people.

Mentors matter

mentors

I’m a firm believer of learning from those who have already learned the lessons (and bumped their heads a few times). Obviously at an event like this there will be mixed advice, since every person’s experience up to that point of time was unique to their story, but there were a lot of superb feedback and ideas from them.

This is something I’m definitely going to spend more time incorporating into my own career, but more on that later.

Winning at LSM doesn’t (really) matter

win

Again, I was absolutely stoked at our team winning the event (just look at our goofy grins), but the lessons would have been as relevant if we didn’t win.

We got great press out of the event, a couple of publications even reported on it (and there was a lot of interest from the art community), we won some cool prizes but in the end we still had to pull the plug on the entire thing. As much as we wanted to pursue our platform –The Artery– we all still had our day jobs and couldn’t contribute enough time to build it into what we all envisioned it to be.

But that’s OK! The incredible value from the team building, challenging your ideas, learning how to ask the right questions and just hanging out with a diverse group of attendees and mentors make it more than worth the admission price.

If there is ever a Lean Startup Machine in your city, go ahead and join it.

Bitcoin for my Blue Polo

I’m selling my back-up car for, you’ve guessed it, Bitcoin: http://bitcoinformybluepolo.com/

Bitcoin for my Blue Polo

Lessons I learned at AfrikaBurn

It has been over a few weeks since I participated in AfrikaBurn, the South African chapter of Burning Man. I say participate and not witness because as they kept explaining: “You don’t go to AfrikaBurn, you are AfrikaBurn”.

AfrikaBurn

AfrikaBurn. It’s not (all) about naked people.

It might be a bit insensitive to talk about marketing, consumerism and business regarding an event that tries actively to shun all of that. They don’t even allow any money to change hands, instead you’re expected to hand out gifts and/or barter and be completely self-sufficient in every way.  It stands in beautiful ironic contrast to the big-branded corporate festivals; despite (or because of) what they are at heart, they have become one of the strongest brands in the space.

Which brings me to the first item:

People love brands

People become very loyal to brands, particularly those with a strong message, a clear voice, consistency and a community. Loyal to the point of overpaying, loyal to the point of becoming an ambassador and loyal to the point of defending the brand’s message, voice and community. Not only does this apply to the brand of AfrikaBurn, but to all the different pop-up venues around.

Despite brands being all-but banned at the event (you are even encouraged to cover your rental car’s advertising), you couldn’t help but overhear “Let’s meet at Wonky Willy’s at 10pm”, or “I’ll see you for sundowners at The Stock Exchange“. A lot of these places had a consistency of culture (and quality), a lot of effort that went into crafting their story (and space) and as the links show, they’ve garnered up a lot of likes on their Facebook pages (there is no cell phone reception at AfrikaBurn).

I’m not saying it’s a bad thing; it’s just interesting to note that people tend to find and follow the brands they associate with.

People want to belong

We are social, tribal beings and we have been that way for millions of years. Only very recently, due to vast changes in mobility, money and migration, has our way of living in and associating with tribes been disrupted. But that doesn’t mean that we don’t want to belong to the tribes we find; be it your local running group, a hackaton/meetup group or something bigger like association with people with aligned political or social ideologies. See Seth Godin’s 2009 talk on tribes on TED or read some of the many books/articles he’s published on the topic.

Once you feel you’re part of the AfrikaBurn tribe, you feel like you belong there, even if only for a few days.

People want to be challenged

And challenging it is. It’s no fairy tale to navigate a murderously rocky road for hours on end, to set up a campsite on a brutally hard patch of dry ground in the middle of the Karoo desert with no access to…anything.

I was also very apprehensive of the event: I didn’t think that I’d have a good time with a bunch of half-naked, half-baked people (or completely naked and on an intergalactic acid trip). Ultimately I was challenged in many ways and I think due to the shared hardship, I had a fantastic time.

Nudity sells

This is a bit of an anecdotal observation, but I did witness people flocking to a woman’s stand for some free dal, the very second after she completely undressed (she had the sign with her unattended stand before).

It’s great to see people (of various races, ages, genders and sexual orientation) be comfortable in expressing themselves (clothed or otherwise), but unfortunately those in the “otherwise” category got the most looks, stares, likes and creepy male sex-pests with cameras following them.

People want to express

The amount of creativity at the event is utterly mind-blowing. Artists will spend weeks in the desert to work on massive art pieces, which usually get burned to the ground on the last night. The majority of people dress up and the majority of those in costume have phenomenal costumes. Everyone is given a blank canvas in how they want to express themselves and the results are spectacular.

People want to impress

This happens, unfortunately, where vanity takes over and the desire to impress gets stronger than the desire to express. It’s a fine line and we overstep it all the time, with what we do, say or buy.

Getting makes us happy

The idea of giving is core to what Burning Man/AfrikaBurn is. It’s amazing to just walk up to a bar and get a free drink, wake up early for coffee and beskuit underneath the windmill at Die Stoep or getting your bike fixed at a popup shop at no cost.

Of course, this all relies on people donating a big chunk of their time and money, which brings me to:

Giving makes us happier

One of my favourite memories was walking around with my friends, handing out free BLT sandwiches and mugs of bourbon whiskey. Yep, we just walked around, and whoever wanted a drink or a bite could help themselves to it. The look of joy in a drunken person’s eyes after handing them a bacon sandwich is sincere. But more than that: the feeling of giving that sandwich was even better. Financing the transaction didn’t matter that much; the appreciation and recognition counted for more.

It’s been studied, you feel better when give.

Self-reliance is very wasteful

“You need to be radically self-reliant”, reads the AfrikaBurn survival guide. Unfortunately that’s also wasteful in its own way: if everyone brings their own lighters (or food/water/shelter/batteries/bicycle repair kits/whatever) you end up with a lot of unused (or in some case spoiled) utility. There isn’t a central place to get water (or buy food), so there’s a lot of that that is brought in in excess and a lot goes to waste in the end.

Self-reliance is very reliable

When a system breaks down for an individual –like running out of food or water– you are far more protected when you belong to a community of sharing, self-reliant individuals. There is no real central point that can break down and leave everyone stranded. I’m embarrassed to say that we forgot to check our spare tyre pressure before we left. My girlfriend and I were left at the mercy of…the very first car that stopped after our (rather spectacular) tyre blowout on the road.

In closing: it was a very fun (and dare I say, special) event. I’m slowly starting to get excited about the next one.

 

How to track Bing Ads with Google Analytics

Big platforms (and companies) don’t always play nicely together. Google is the search engine superpower in the one corner, Microsoft is the hardware giant in the other corner (in South Africa, at least).

bing-ads

Why you should consider Bing Ads

Despite your spiffy company Macbook Air running the latest version of Chrome (with Google set as the default search engine), most of your demographic probably use Windows-based machines, which usually comes pre-loaded with a bunch of Microsoft things (like Internet Explorer, Bing and MSN). You need to cater to these customers too.

Bing Ads aren’t tracked by default

Or rather: they are tracked in Google Analytics as organic search traffic.There is no tracking code in Bing Ads by default. This is something that will make most marketers either pull out their hair or just ignore advertising with MSN altogether, but this will be at the expense of missing out on a lot of Bing (and Yahoo!) traffic, which a competitor might cheaply acquire.

Use Google’s URL Builder

Google’s URL Builder is a handy tool for when you want to change a URL so that it will get tracked using unique parameters. At minimum, you have to provide a URL, a campaign source, campaign medium and campaign name.

If you, for instance, have a newsletter with a blue and red button that both link back to your website, you might want to create two unique links for the respective buttons that will look like this:

http://www.yoursite.com/?utm_source=newsletter&utm_medium=email&utm_content=blue-button&utm_campaign=christmas-sale

and

http://www.yoursite.com/?utm_source=newsletter&utm_medium=email&utm_content=blue-button&utm_campaign=christmas-sale

This will allow you to see in Google Analytics how many people clicked on the red versus blue button for your Christmas sale, which you promoted via your email newsletter.

You can add these same parameters to Bing Ads, but other than for a handful of ads, it is really cumbersome to do it manually and a huge waste of time. Time you could rather be wasting on something useful…like Buzzfeed.

Use Bizable’s Bing Auto Tagger

Their great tool helps you –after registering and connecting your Bing/Microsoft account, that is — to mass-update all your Bing Ads in bulk. I’m absolutely flabberghasted as to why Microsoft doesn’t offer a solution such as this (or why they haven’t purchased Bizable’s solution outright), but I’ll just leave it at that.

You’ll go through a few steps:

Bing Ads Auto Tagger

The steps are straightforward and within a few clicks all of your ads should be updated. In a few days, you should check Google Analytics (or whichever analytical tool you’re using to do your tracking). The incoming traffic will show under “Acquisition” (or any of the related tabs where you can search for “Bing_Yahoo” or whatever tag you used).

Hope this helped!

Code Corps is live(ish)

We have liftoff!

liftoff

Courtesy: https://www.flickr.com/photos/bobfrankly

So, for the past month or two, I’ve been slaving away (or outsourcing work) to create the first Code Corps course: How to Build Your Own Website.

We’ve got great content, but we need people to start using (and importantly: testing) it. For a limited time, we’re giving away:

  • free course content
  • free hosting accounts
  • free domain names

This content alone is worth over $118. All that we ask now is that you share our story with people who might be interested in learning how to build their own website(s) or for you heading over and taking the course. Go to the website and sign up in under thirty seconds.

The aim is to open up education and create valuable online content. Code Corps can’t survive without users, so please help spread the word. We’re particularly interested in training people to create their own personal websites and sites for small businesses and charities, but anyone you might know of could help us immensely at this stage. We’re capping this round at fifty people, so get going ;-)

I’m planning on releasing courses on e-commerce, crowdfunding and online event ticketing in the next few months. Stay tuned.

 

Uber’s surge pricing

Uber has been getting some flack for their infamous “surge pricing” that’s been in effect for the past few months. I was warned about it the first time on New Year’s Eve and saw on the app rates as high as 7.5 times the regular rate. Lisa Chow did a story on NPR, other similar stories got published and the general mood is that it is an asshole move by a company that already makes heaps of money and just upsets riders (their very core customers, the ones they should keep happy).

I disagree.

uber-unavailable

Surge pricing isn’t new. A drink is more expensive outside of happy hour, airplane tickets are generally much more expensive closer to the time of the flight and you can snag day-old muffins for half their regular price.

Flexible pricing tries to adjust two things: the inefficiency of waste and the reliability (or predictability) of a service. An airplane with one hundred empty seats, after all, equals one hundred seats that technically just got wasted. An empty bar at 5pm isn’t good for the bar (be it the owner or the tip-dependent staff), muffins going uneaten and an empty fleet of taxis are all inefficient and wasteful.

A notable difference between the above examples and Uber’s surge pricing is that the happy hour at your favourite bar is generally known before you head over there (incentivising you to do so, perhaps). Uber’s surge pricing is only made known to you when you’re actually in need of their service (they recently added a feature to the app to notify you when surge pricing ends).

This leads me to the more important aspect of flexible pricing: the reliability or predictability of a service. Empty cars are inefficient, but not having any at your disposal is probably even worse.

Most people are annoyed at Uber because of their inability to know exactly, in advance, how much a trip using their service will cost. Or just the fact that they perceive a price hike to be unfair. This, to me, completely misses the point. Uber doesn’t market themselves as providing reliable prices (or even fair prices), but rather providing a reliable service. I find it far more important to have a service at my disposal for when I truly need it (in an emergency, say) rather than to have a service available at a constant flat rate. If I had a family crisis and really had to fly to Johannesburg within the next few hours, I’d probably be able to get a flight right away, albeit at a much higher price tag. In certain cases like that, the cost wouldn’t matter, but the reliability of having a service would. If I need to fly somewhere for a holiday, on the other hand, I’d probably forego the expensive immediate options and shop around until I got a deal I perceived to be (comparatively) fair.

The advantage that Uber has (over the industry, in general) is that they can adjust the prices in real-time (as the heartless forces of supply and demand then dictate).

In closing:

Service providers need to think if price (be it sky-high, rock-bottom or somewhere in-between) or service is their biggest priority and give that their utmost attention.

Post Script

  1. I opted to walk to my party on New Year’s Eve. Who the hell pays $45 to get to a house party a few blocks away?
  2. This post didn’t mention the topic of benefit to the drivers employed by Uber. They get to keep 80% of the proceeds of each trip, including during surge pricing. I’m purely looking at it from the consumer’s side (those complaining most), but not the drivers. I’m not sure if they’re actually benefiting in real terms, so I won’t comment on it. Investor Bill Gurley has a lot about that (and surge pricing in general) on his blog.
  3. This post didn’t mention the topic of class. The only people who take Uber when it is at 7.5 times the normal rate (or even the normal rate) are the super rich and those who really need it. There are far too many people who really need (various) reliable services –in South Africa and elsewhere– but will ultimately never have access to them. There’s a fine line that need to be walked with this type of thinking, where one can start justifying providing services exclusively to the rich. There needs to be a safety net in society to help those who truly need something, but can’t necessarily afford it. There can be luxury services, but public/alternative options need to be available (such as transport, education and healthcare) and good enough for those who need it (and might not otherwise be able to afford it).

Code Corps (dot org) is in beta!

So, I decided to start a charitable enterprise. The idea is to provide free coding and design lessons (both in person and online).

Ladies and gentlemen, I present: Code Corps.

code-corps

The financial aim is to make money (by providing valuable content and creations to businesses and charities) but the charitable aim is to invest 100% of the proceeds (and donations) back into the enterprise (and make a bigger impact by reaching more students).

We (ahem, I) had our first test run on building a website with WordPress last week and I’ve gotten a venue, somewhere between discounted and free, for our first few classes (a big thank you to the incubator space Bandwidth Barn).

Please sign up to stay up to date on our future classes (either in Cape Town or online). I can’t quite tell how excited I am about getting back into teaching and organising events (strictly spare time and after-hours, of course).

Crowdfunding in South Africa: rewards-based, charitable and equity

I like crowdfunding. It usually removes friction, barriers and middlemen and matches demand with (sometimes only perceived) supply. Crowdfunding, thus far, has mostly either been for products (you send us $99, we’ll send you a smartwatch) or for donations/social causes (let’s raise money for an animal shelter). These two (product crowdfunding and donation crowdfunding) have already disrupted things in a significant way, but I think that equity crowdfunding might even be more significant in the online landscape.

crowdfunding

First, back to the original two and more focused on the South African context:

Rewards-based crowdfunding

Crowdfunding is more popular –or rather, successful–  in the developed world, as it is quite dependent on mature internet markets and access to money (disposable income or GDP per capita). Every country has it’s own regulations (or lack thereof) and culture with regards to online sales and donations, making it difficult to make blanket predictions on potential international outcomes. In South Africa, for instance, payments need to be for goods or services rendered (as in, you need to sell something or provide a service and be able to provide an invoice/receipt for the transaction). If you just want to send money to someone (like a father sending money to a dependent), it is considered a remittance and these have to go through a party with a banking license. The reason, I suspect, is that the authorities want to prevent money laundering, but there are consequences to the poor sending payments across the border. But almost everywhere, people like receiving (even if they have to pay for it) and that’s in short what rewards-based crowdfunding is about.

For emphasis: the Reserve Bank of South Africa doesn’t allow you just send money to someone. This means you can’t just send money for a crowdfunding campaign, where the recipient doesn’t provide goods or services in exchange for the payment. There’s an enormously simple loophole in all of this: just provide something.

pebble-campaign

There are reasons aplenty to do this in any case, as people are far more inclined to reach for their credit card if they get something in return. Make the minimum donation a little higher and send out a nice card, a limited edition t-shirt, a bumper sticker anything that makes it more of a transaction and less of a case of “just sending money”. A simple, cynical rule of mine regarding altruism is that whenever someone considers doing something nice, they’re first and foremost asking the very human, very selfish question: “What’s in it for me?”. Do I get a save the rhino shopping bag to make my peers see how much I care? Do I get a tax-deductible certificate for my corporate donation? Do I get a warm fuzzy feeling when I get a thank-you card? Do I get to have my name in the acknowledgements section of the book I helped to back?

(Full disclosure: I make monthly donations, but I do so not because of altruism, but rather for that warm, fuzzy feeling of feeling like I’m doing something really nice.)

You’ll have to decide if you want an all-or-nothing campaign or not. With those campaigns, the backers get reimbursed if the goal amount isn’t met. This can prove to be tricky, since payment gateways/banks will charge a percentage of each payment made and if you have to reimburse backers for a campaign that fell short of a R100,000 goal, you’ll be out somewhere between R4000-R6000. Bigger platforms (Kickstarter, Indiegogo) put a “hold” or “auth” on a card, but don’t complete the payment until the project is backed. If it isn’t it just doesn’t process the payment (the same way an auth can be put on a rental car that you book, but not pay, in advance). If you don’t have an all-or-nothing campaign, you can still provide something to your backers.

Back to the rewards: some of the most successful campaigns on Kickstarter and Indiegogo are the ones that incentivise people to donate by giving them something in return. Amanda Palmer (of the Dresden Dolls) raised close to $1.2 million and some of the creative things you could get in exchange for your hard earned cash included a full night out partying with the band, dinners, photo shoots, invites to their house party and even writing something with a permanent marker on her naked body. Maybe a bit impractical (if you’re not a rock star), but the $10000 she earned for taking someone to dinner, makes for a pretty damn good return on investment.

Charitable crowdfunding

equality-indiegogo

The exception to the “goods and services” rule, outlined above, doesn’t apply to non-profit organisations. If you are a registered non-profit organisation (such as an NPO, Section 21 company, not-for-profit trust etc.) you can run a campaign for donations to be applied to a specific project of yours (or just fundraising in general). I’d say the rule of “What’s in it for me?” still applies. Give the backer something even if it isn’t a tangible product.

I predict a rise in the use of crowdfunding for churches, educational institutions and charities in general. Unfortunately, South Africa, doesn’t do a stellar job at charitable giving. This can be paired with the fact that, PPP adjusted, over 15 million earn less than $2 a day, that there isn’t a massive middle and high income class (in sheer number) left who can afford to make charitable online donations.

Enter equity crowdfunding

The idea is similar as for “traditional” crowdfunding. For a few (or few thousand) dollars, you get yourself a little stake in the company you’re backing, instead of the usual t-shirt, knick-knack or warm, fuzzy feeling. Early investment into startups was hereto primarily reserved for savvy (and wealthy) investors, depending on the country you live in.

Equity crowdfunding: US & UK

brewdogs

Regulation surrounding crowdfunded equity is evolving (where it formally exists) as backers, businesses and regulators get more used to the very idea of crowdfunding. Scottish beer brewery BrewDog raised £250,000 pounds with their awesome Equity for Punks project; giving the backers things like the novelty of saying they own a bit of a beer brand (which might be worth something, someday) to the more practical discounts on the grog. In the long run, a crowd of investors can financially gain in dividends, sale proceeds in case of a merger/acquisition or get listed on an exchange (converting mostly illiquid shares into something pegged to a cold, hard currency).

Things have been slower with equity crowdfunding in the US for many reasons. The SEC is loosening some of these investment restrictions, but these restrictions can often be hard to defend. Supporters say that individuals have every right to pick, purchase from and invest in companies as they please. Critics say that the banks argued with the same logic before the 2008 economic/housing collapse and that a lot of individuals –particularly those who lost almost everything– could have been protected if they were excluded from making risky investments by better drafted regulations.

As always, the answer lies somewhere in-between, and things like voting rights and complex legal decisions should probably not be made by the average investor. As with any investment, they should be made aware that they can lose everything (and that the vast majority of startups fail, without the net of being bought or getting listed).

We’ll probably see more successful equity campaigns, both here and abroad, complete with slick, shareable videos and predicted-returns brochures. We’ll eventually hear of early crowd-investors who made lots of money when the startup idea they backed made it big. We’ll also probably see a lot of these socially backed sites reach their evolutionary fate with crowd investors losing all their money. Watch this space.

Information on equity crowdfunding (and particular the legal restrictions/definitions around it) in South Africa is pretty hard to come by. I welcome comments by those who can contribute!