By the crowd for the crowd

2014-07-20 15:00

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Kanyi Maqubela, a young South African and partner in capital fund Collaborative, has a war chest of $33?million to pursue and fund tech start-ups

With risk appetite having taken a knock following the global financial crisis in 2008, small businesses are turning to online platforms such as Kickstarter and Indiegogo to fund their plans. This is known as crowdfunding.

Others are turning to more formal internet lending businesses such as Funding Circle and Thinkcats, known as peer-to-peer lenders.

According to a March 2014 European Commission paper on crowdfunding, the amount of money it has provided for small and medium enterprises (SMEs) in the UK is growing rapidly, reaching £332?million (R6?billion) last year, and assisting 5?000 start-ups between 2011 and last year.

“I believe crowdfunding may have the potential to help catalyse existing efforts to create entrepreneurial cultures and ecosystems in developing nations,” Steve Case, the co-founder of mass media corporation AOL, wrote in the foreword of a World Bank study on the topic.

Locally, more than 3?000 people have pledged funds to more than 90 projects on the Thundafund platform so far, according to founder Patrick Schofield.

“[The] total amount raised for projects [was] over R1.7?million. Thundafund officially launched in November 2013,” he said.

“I’m using ‘over’ because there are projects presently crowdfunding [which] have gone over their tipping point, but have not closed yet.”

He said the platform planned to raise R170?million for more than 3?300 projects in the next three years, creating 9?000 jobs.

Bankers are none too pleased about the emergence of these systems, saying they could undermine the global banking system.

Calls to regulate the “shadow finance” system are increasing in volume – the reason the European Commission undertook the study on crowdfunding.

But Kanyi Maqubela does not buy the bankers’ concerns.

“In the case of alternative lending and banking, the special interests are traditionally aligned with the big incumbents, so of course they want to protect those interests,” he said. “But good regulation will protect consumers. And that can, and should, mean supporting the right types of technology.”

He would know. Maqubela – who was born in Soweto but left South Africa as a toddler more than two decades ago to join his father in exile – is a partner in a multimillion-dollar venture capital fund called Collaborative.

With YouTube co-founder Chad Hurley and musician Pharrell among its colourful basket of investors, the fund has backed the hottest start-ups in Silicon Valley, including Kickstarter, content website Reddit and annotation service RapGenius.

Now with a second war chest of $33?million (R352?million) – Kickstarter, Reddit and RapGenius are all investees of the first fund, a humble $10 million – Maqubela and Collaborative are on the prowl for the next big thing.

Maqubela’s work has earned him the top spot on business and technology news website Business Insider’s recent list of the top 14 “30 and under: rising stars in Silicon Valley who find the hottest deals and invest in them”.

One of these deals is InVenture, which provides “spot” loans to users in India, Kenya and South Africa using mobile money data.

“They are in the ‘future of credit’ space, which is already growing fast but is going to explode in the coming years,” said Maqubela. “So they pull in M-pesa transaction history and use that to determine on-the-spot credit-worthiness.”

Maqubela has also worked on, a new software platform that allows communities to crowdfund commercial software applications, and then share equally in the profits.

Anyone can contribute the software code, design or copy, and if it is accepted, they’ll become part owners and earn a proportional share of the project’s revenue. Maqubela called it an example of “software eating the corporation”.

The 28-year-old’s journey to these deal-making activities started at Stanford University, where the founders of Silicon Valley heavyweights Google, Hewlett-Packard and Yahoo studied.

“At the beginning of the 2000s, just postbubble, it was a quieter, humbler tech community, but still the biggest one in the world.

“So, inevitably, a classmate had a start-up idea and convinced me to help him with it.”

It was a jobs and networking idea which came about a year after Facebook was launched, with LinkedIn being “just older, so we thought building a jobs-focused social network would get some traction”.

“We ended up building, which grew to more than 300?000 members.”

At its height, it employed 35 people in the US and Russia. Firms such as Goldman Sachs, Google, Time Warner and Facebook used the site to recruit talent, according to a press release issued when it was acquired by Universum Global in 2011.

“There was no turning back for me,” said Maqubela. “I had the bug!”

But the acquisition has taught him some hard lessons. “We had gone through a reorganisation, had a new CEO and everybody was truly exhausted,” he said.

“The key lesson from it was that a start-up journey is characterised by high highs and frequent lows, and can only be taught through experience, which is why most venture capitalists are older – they’ve seen how uniquely hard it is.”

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