What is crowdinvesting?
Crowdinvesting is the process whereby investors, big and small, buy shares online in private companies. Crowdinvesting is also known as equity-based crowdfunding, online investing or investments crowdfunding.
How is crowdinvesting different from crowdfunding?
LelapaFund is not like Kickstarter. Entrepreneurs who raise money on Kickstarter are raising donations or money in return for rewards or pre-paid products. This is called donations-based crowdfunding and rewards-based crowdfunding respectively. Entrepreneurs who raise money on crowdinvestment platforms like LelapaFund are raising money in return for shares. Crowdinvesting is thus also known as equity-based crowdfunding. What all forms of crowdfunding have in common is that they use the internet to reach a large group of funders.
How is LelapaFund different from an investment fund?
LelapaFund is not a traditional investment fund. This means that LelapaFund itself does not invest in your company. We are an intermediary that allows individual investors to invest directly in your company. Although LelapaFund has a strict selection and due diligence process that results in a portfolio of high quality companies, individual investors make the final choice on which company to invest in, and how much.
What are the key benefits?
Key benefits include:
- accessing international investors without the costly overheads (legal, flights, reincorporation, etc)
- raising more equity than can be accessed in your domestic network
- tapping into the expertise and mentorship of highly skilled individuals
- gaining global visibility for your product and company, notably amongst the African diaspora
- a streamlined, demystified due diligence process that prepares you adequately to meet investors
- instilling strong good governance at an early stage to facilitate further capital rounds and exits.
What are the key costs?
Key costs include:
- Significant investment of your CEO or CFO's time to prepare for fundraising
- Costs associated with listing your company (appraisal, prospectus, legal)
- Fundraising campaign fees: success fee and payment services fee
- Overheads related to corporate governance, such as conducting annual audited accounts.
Which companies are eligible?
For-profit private limited companies incorporated in African countries are eligible to apply. In addition, companies incorporated in other jurisdictions that are targeting the African market may apply, as well as companies where at least one founder is of African origin.
LelapaFund has a broad focus on consumer goods and tech companies. We do not accept import-export companies, consulting firms or real estate projects.
Start-ups and early-stage companies are encouraged to apply. However, we do not accept start-ups at inception or idea stage.
For-profit 3BL social entreprises are encouraged to apply.
Who will invest in my company?
Investors on LelapaFund include traditional funds, impact investors, angel investors and the general public. In compliance with French crowdinvestment law, all investors must complete and validate their Accreditation in order to access campaigns and invest. Accreditation includes an investor suitability test, KYC check and risk control.
How is my company valuation made?
To ensure ease of comparability between investment campaigns, LelapaFund conducts its own valuation for each company using a consistent methodology (a weighted combination of discounted cashflows, industry, company and team-specific factors).
Can my lead investor co-invest?
Yes. Lead investors can use LelapaFund to raise the remaining capital required to close a round, within the limit of EUR1mn.
Equity finance Basics
How is equity finance different from other forms of finance?
LelapaFund currently supports equity finance only. It is important that you understand the differences between equity and debt, grants or microfinance before you apply.
The optimal choice of finance for your company will depend on several factors such as stage of growth, cashflow and strategy. Ask your accountant or a qualified business finance professional for advice.
In general, bank loans provide capital in return for interest payments and principal repayment, whereas investors provide equity capital in return for shares in your company with the expectation that these will increase in value and yield dividends. Equity investors monitor the running of your business to ensure that funds are spent correctly and value is created, whereas a loan officer simply monitors repayments.
Equity investment is high-risk for the investor as there is often no financial or asset-based collateral. This additional risk must be compensated, which means that equity as a form of finance is typically more expensive than debt.
Equity investors conduct a series of checks and analyses known collectively as "due diligence" before they make an investment decision, whereas a loan officer will conduct a credit score.
Both equity and debt investments take the form of a legal contract protecting both parties to the transaction.
What key corporate governance requirements are there?
Your company will put in place governance structures such as a Board, and processes such as obligatory annual general meetings, annual audited accounts and regular reporting to shareholders. Shareholders are entitled to vote on certain decisions (1 share = 1 vote). Voting takes place during AGMs or when the Board calls for extraordinary shareholder meetings, and rules on the Agenda and quorum must be observed.
If the number of shareholders in your company exceeds the limit for private limited companies in your country, you will need to comply with the relevant additional corporate governance requirements.
What type of company is best suited to equity finance?
Equity finance is appropriate for ambitious companies that are experiencing high rapid growth, have large financing requirements and a clear long-term value creation path. Raising equity is considered a key milestone in a company's journey, and signals an ambition to achieve consistent growth culminating in a listing on the stock exchange or other form of exit.
Equity finance is not appropriate for companies seeking to meet the basic financial needs of its founders and their families, and for companies that do not want to share ownership and control with external investors.
What are the financial returns expectations of equity investors?
Investors' risk must be compensated by high financial returns. In general, investors expect companies to return 3x-10x the amount of their initial investment upon exit.
How do I apply?
Create a free Entrepreneur account on LelapaFund, and complete the Verification questionnaire. Our team will then contact you directly via email.
What is the timeline?
The online Verification questionnaire should take 20 - 40 minutes.
If selected for introductory due diligence, you will receive a detailed Entrepreneur Guide listing the required documents. Together with our team, we will work on a realistic timeline to complete due diligence. Depending on the maturity and complexity of your company, this can take 4 months - 12 months.
Investment preparation fees
Costs associated with investment readiness include a company appraisal and regulatory information prospectus established in compliance with crowdinvestment regulations. During due diligence, LelapaFund works with you to estimate a cost of these elements, which will vary according to the maturity and complexity of your company.
Campaign success fees
In the case of a successful campaign, LelapaFund charges 8% of the total funds raised in success fees to your company.
Payment services fees
Confidentiality & Intellectual Property
Who has access to the data I provide during Verification?
All entrepreneur data provided to LelapaFund in the Verification questionnaire is kept strictly confidential.
How do I protect my data during due diligence?
All companies undergoing due diligence with LelapaFund are required to sign our non-disclosure agreement. LelapaFund holds all information, documents and materials collected during due diligence strictly confidential.
How do I protect my patent or IP online?
Companies with core IP, patents and other sensitive material are not required to disclose this online.
Start Preparing Now
What steps can I take right now for my company?
Many companies lose out on access to finance for avoidable reasons. Make sure your company is set up in advance by:
- Being legally incorporated
- Having a clean shareholders agreement with all your first investors even if they are family members or friends
- Keeping meticulous records of your expenses and revenues, organised in Excel spreadsheets or accounting software, even when the company is still operating informally
- Building trust and "social capital" by having an online presence (Website, URL, Twitter, Facebook)
Think like an investor
Many investors have been successful entrepreneurs; however, not many entrepreneurs have been investors. Get into the investor mindset by reading up about angel investing, due diligence and company valuation methodologies. Understand the basics of a shareholders agreement and a capitalisation table. Figure out what counts the most in building trust and a strong investment case by speaking with many investors, pitching them your idea and asking for feedback. Imagine you had to invest in an entrepreneur in your ecosystem - what questions would you ask before committing your capital?