StartMe, a website that lets South African entrepreneurs “crowdsource” funding, operates on a very different model to the popular Kickstarter funding platform.
Founded by Ben Botes and Lourie Nel, StartMe launched its site earlier this year (2012) to offer South African entrepreneurs a place to raise money in many small increments from a group of investors.
This method of raising money is called “crowdfunding”, with users from all over the world allowed to pledge money towards a project, or create their own projects that others can then help fund.
To encourage pledges, project creators typically specify “reward tiers” in addition to the amount of money they would like to raise.
Perks are given to investors according to the scale defined by the entrepreneur’s reward tiers. Rewards can range from an acknowledgement to a physical product.
Projects on Kickstarter only receive their funding (and backers their reward) if it receives enough pledges to make its goal. Kickstarter then takes 5% of all the money that goes to successful projects.
Credit card processing fees to Amazon are also applicable, which Kickstarter says on its website amount to another 3–5% deducted from the amount entrepreneurs raise.