By visiting Web sites like Kickstarter and Indiegogo, you can give money to any number of causes. These Web sites collect small amounts from many individuals in what is known as crowdfunding to finance everything from business start-ups to charitable causes to art projects.
While online crowdfunding is still relatively new, it has already demonstrated that many small contributions can add up. Deloitte, the accounting and consulting firm, estimates that the largest 30 crowdfunding sites raised more than $1.5 billion over the last five years, and expects that in 2013 alone the number could be $3 billion.
Now, a San Francisco start-up, SunFunder, is hoping that the collective power of the crowd can help bring a bit of clean, renewable energy to people living off the electric grid in rural areas of Africa and Asia. Since its crowdfunding site made its debut last July, the company has raised $50,000 from about 300 investors to finance four business ventures that sell solar-powered products in these areas, according to SunFunder?s founder, Ryan Levinson. Anyone is eligible to join the site ? so far investors have come from 18 different countries ? and the minimum investment is $10.
Unlike some other crowdfunding operations, SunFunder does not contribute the money to these small businesses; it lends the money and charges interest. As the loan is paid back, SunFunder returns the principal to its investors. Two of the four projects are already starting to pay the money back, Mr. Levinson said.
According to Richard Turner, the marketing director at SunnyMoney, a solar business that serves rural regions in Africa, demand is booming for small-scale solar-powered systems that provide light and charge cellphones. The alternative for many people in those regions is to rely on kerosene lamps to light homes and shops, which exposes them to potential harmful problems and the risk of starting a fire if a lamp is knocked over.
With the price of solar-powered technologies coming down, a solar-powered light can pay for itself in seven weeks with the money saved on kerosene, Mr. Turner said in a telephone interview from his London office. Since its founding, SunnyMoney has sold almost 300,000 solar-powered lights, which charge during the day and provide several hours of light at night. It hopes to hit the million mark before the end of this year.
The big challenge is finding working capital to buy inventory and build out the business. ?It?s difficult to attract funding from traditional financial institutions, and it can be a long, protracted process,? he said.
Within a month of being listed on the SunFunder Web site, SunnyMoney?s latest project, providing solar lights in the Chadiza district in Zambia, had attracted 86 investors contributing a total of $10,000.
Not only was crowdfunding quicker than negotiating a loan with a bank, it also helped SunnyMoney get its message out, Mr. Turner said. ?People who invest also spread your story on social media or word of mouth, so we?re engaging people, some of whom get more involved as supporters,? he added.
Mr. Levinson says he is encouraged by the early results of the SunFunder model and that the company is exploring additional ways to raise money.
Still, SunFunder?s $50,000 is only a drop in the bucket. The question for some in the industry is whether crowdfunding can unlock a significant amount of financing for businesses bringing renewable energy products to off-the-grid areas.
?It?s still too early to tell,? said Donn Tice, chief executive at d.light design, a manufacturer of solar light products and a supplier to companies like SunnyMoney.??This is still a new concept, and it?s unclear if and when this can really scale. Many of these businesses will be looking to raise a lot of money.?
Still, he is bullish on SunFunder?s concept. More conventional forms of financing could be attracted to this industry if crowdfunding ?can demonstrate that these businesses can make money and provide a return to investors,? he said.
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