Business formation might get a boost from ‘CrowdFunding’

It seems in South Africa, a number of startup companies have financing troubles because of limited angel investor funds. This was the topic of a panel at the recent South by Southwest Interactive Festival in Austin Texas, and one proposed funding model might be promising beyond the South African borders.According to TechCentral, South African entrepreneur Eve Dmochowska presented the idea for CrowdFunding – a model through which a group of investors pool funds and decide to offer startup money to a team behind a promising business plan. Once the business begins to blossom, the CrowdFunding Board can cash out, and the company can undergo business formation and appeal to established venture capitalists.

This might sound like a familiar concept to entrepreneurs with a 501(c)3 service; the growing trend of Giving Circles – in which a number of philanthropic-minded individuals pool together their money to make a sizeable donation – proved important in keeping nonprofits afloat in downturn.

Now, CrowdFunding might offer similar benefits to future small business leaders – in South Africa and around the globe.

The model is especially timely for entrepreneurs considering business formation as Senator Christopher Dodd recently proposed a reform that might lower the angel capital available to startups in the United States.