- Challenge: Financial Inclusion
- Team Members
- The Problem: A Common Story
- Raise: What We’re Building
- Market Size
- Why do we need blockchain?
- Existing solutions
Raise is a secure blockchain enabled crowdsale platform for emerging market innovators to access funding from backers anywhere in the world. Raise is one of the first investment platforms of its kind - it leverages multi-coin blockchain technology to unite global investors with local entrepreneurs.
Challenge: Financial Inclusion - Our team members are diaspora from emerging markets. We believe that sustainable and independent growth in our countries comes from supporting local entrepreneurs. For this reason, we’ve chosen to enter the financial inclusion challenge.
And as emerging market entrepreneurs, we are familiar with the significant challenges of building an early-stage technology product and business in our countries. We also know that technology businesses are highly scalable and can create many jobs in a relatively short amount of time, which reduces youth unemployment. However, one of the major barriers to entry for early-stage products is initial funding. Our team is tackling this significant barrier by building Raise.
Team Members -
Danielle Leong (United States) – Data Science;
David Nuff (Nigeria) – UI and Design;
Lucia Gallardo (Honduras) – Operations, Early-Stage Investment, and Marketing;
Luiz Hamilton Ribeiro Leite Soares (Brazil) – Smart Contract Developer;
Marvin Coleby (Bahamas) – Product and Venture Investing;
Shagufta Rizwan (India) – Token Architecture and Cryptoeconomics.
The Problem: A Common Story -
BeepBus is a Barbadian early-stage startup disrupting transportation in the Caribbean. Their app provides accurate information on bus times to reduce congestion and contribute to necessary urban planning. They are also building a taxi share-riding solution. Since their founding, BeepBus has already created jobs and can create many more with early-stage capital. 31.23% of youth between the ages of 15-24 are unemployed in Barbados.
The BeepBus team has been unable to obtain Angel or venture funding to continue building their product and therefore resorted to raising funds on a donation crowdfunding platform. They recently raised USD $3,935 from local Barbadian backers and lost over 15% to transaction fees. To make matters worse, the Barbadian government flew to Silicon Valley to meet with Uber to negotiate tax incentives to attract the company to Barbados. Without funding, BeepBus has little market penetration and cannot possibly compete with industry giants like Uber.
BeepBus is a common story throughout emerging markets. Innovation is suffocated and youth unemployment rates (ages 15-24) in our countries stay high: Bahamas (31%), Brazil (24.6%) Honduras (12.3%), India (9.6%). But what if BeepBus could raise funds from Barbadian and Caribbean diaspora members that are conscious of the old transportation system and that have an interest in seeing the economy grow? And what if BeepBus could raise this money while paying lower transaction fees? Over 100,000 of its citizens live outside of Barbados. Even if each of them invested $1 in BeepBus, their team could raise significant funds, expand their product and return a financial benefit to each Barbadian emigrant.
Although youth unemployment is caused by many factors, a principal driver of it is a dependency on foreign businesses that can pick up and leave whenever conditions become unfavourable for their bottom line. In the long-run, stifling local small and medium enterprises is a primary cause of weakened economic conditions and of unemployment. Furthermore, local populations are inadvertently conditioned to be risk averse over time.
Thriving innovation ecosystems combat both youth unemployment and risk aversion. Technology startups, in particular, can create jobs and positive impact in a short amount of time. However, these startups have to be funded through the innovation continuum in order to become sustainable sources of wealth and employment. Unfortunately, 83% of global venture funding goes to developed market startups, limiting potential and job creation for local emerging market startups.
Emerging market technology innovators experience limited access to capital:
(a) The World Bank estimates that 17 million emerging market SMEs face limited access to funds, which represents an estimated USD $2.6 trillion credit gap;
(b) Our data shows that 83% of global startup funding in 2016 went to North American and European startups, while only 3% collectively went to Africa, the Caribbean, Latin America and Middle East. Asia accounted for 12%, driven primarily by China and India.
Limited funding suffocates innovation, limits potential employment and creates a difficult entrepreneurial environment. Entrepreneurs throughout Africa, Asia, the Caribbean, Eastern Europe, Latin America and the Middle East are instead forced to bootstrap their ideas for expensive technology products. Eventually, the bootstrap method runs out.
That is where Raise comes in.
Raise: What We’re Building - Raise is a secure blockchain enabled crowdsale platform for emerging market innovators to access funding from backers anywhere in the world. Raise is one of the first investment platforms of its kind - it leverages multi-coin blockchain technology to unite global investors with local entrepreneurs.
The long-term goal for this platform is to build a cross-border community economy for diaspora and local populations. Diaspora members are geographically disconnected from their home, but just as with remittances, many are always looking for a way to participate in their local economy and support the family and friends that still live there. We should know, we are all diaspora members eager to remain connected in some way, shape or form and desperate to see our respective country’s conditions improve. To achieve this cross-border community economy, we want to take crowdfunding tools to create that platform using blockchain technology. Integrating all of these crowdfunding tools on blockchain technology to emerging markets (over 95% of the world population by 2030) is undoubtedly unrealistic in one platform. Therefore, we are creating a road map to phase in features sequentially over time. During that time, our market will also continue to grow.
Our primary target market is diaspora members. We intend to target students, remote workers and other technologically savvy diaspora populations.
Raise wants to tackle one small problem first, to make funding accessible to technology entrepreneurs in emerging markets - and as blockchains become more secure and scalable and people become more familiar with the Raise platform - we will phase in new features like rewards and donations. We eventually want a diaspora member to use Raise tokens in exchange for rewards (personal or local for family and friends), donations, loans and investments. The $500bn remittances market is only one aspect of cross-border finance and relationships between diaspora and local populations.
We, therefore, narrowed the project’s scope to solve an immediate pain point that we are all familiar with: emerging market technology innovators have limited access to funding. Raise is inspired by token sales and traditional equity crowdfunding technologies (“Crowdinvesting”). Crowdinvesting created impressive opportunities for innovators to accept capital funding in developed markets. However, those platforms are geographically limited due to different approaches by national securities regulators. Our research shows that most emerging market securities regulators are hesitant to create enabling regimes for equity crowdfunding, again limiting access to funding.
Raise replicates equity crowdfunding models without the regulatory and security limitations. The platform will be built to satisfy KYC, auditing and tracking concerns expressed by securities regulators in emerging markets. It will also be built to be as user-friendly as possible. Users would not need to know what blockchain is to use it.
Market Size - There are major market size opportunities:
(1) The World Bank estimates that the crowdinvesting industry in emerging markets will be worth USD $96bn by 2025;
(2) There are over 250 million migrants that collectively hold over $500bn in savings;
(3) USD $441bn in remittances were sent to emerging market regions in 2016;
(4) Remote workers and migration are expected to exponentially increase, driving the current diaspora population from 250 million people upward. In Canada, for example, the population is expected to increase by 20 million, with 90.8% of that growth driven by inward migratory populations.
Why do we need blockchain? - Raise is a cross-border financing platform that leverages smart contracts and crowdsale strategies to transfer value. The application must be secure, log and create verifiable auditable transaction data and allow users to send value across borders cheaply and quickly.
The Raise ecosystem comprises of a distributed network of emerging market entrepreneurs and diaspora backers distributed geographically all across the globe. Blockchain will help us empower these budding innovators by bringing them together with the global backers on a distributed and decentralised platform.
Raise is a milestone achievement based funding model. Our smart contracts will hold the money like an escrow unless the required milestones are achieved by the innovators. Blockchain provides a significant trust factor here and eliminates the need for a third party by means of transparency of records. Code is law in case of dispute between the backers and innovators which could only be achieved with the public, distributed, cryptographically secured and synchronised nature of blockchain.
Raise operates across borders and needs to be secure, protect against money laundering or other criminal activities and be auditable. A blockchain-powered platform allows us to create an immutable ledger that can log and transact micropayments for easy auditing. A platform with immutable security measures also protects against attacks and double spending, allowing diaspora members and local populations to send and receive funds without fear of losing them.
A Raise token will be used as a medium of exchange for backers to contribute to innovators and their projects. The token will be traceable to each project to ensure security and reduce risk. In addition, the token serves an important function since it can allow backers to sell their tokens in projects on secondary exchanges. This creates liquidity and removes the inherent risks of investing in emerging market entrepreneurs.
Existing solutions - Equity Crowdfunding
We created a legal memorandum to evaluate the equity crowdfunding market and legality in emerging markets here. We drew inspiration for Raise from the rapid success and decentralized nature of equity crowdfunding platforms.
Equity crowdfunding platforms created impressive opportunities for innovators to accept capital funding in developed markets. However, those platforms are geographically limited due to different approaches by national securities regulators and are virtually unavailable in emerging markets.
Starbase is a project by Chinese founders that aims to make crowdsales more accessible to creators. Users on the platform use STAR Tokens to exchange for goods and services as well as to create their tokens and wallets. The Starbase platform allows creators to issue tokens to backers on a global scales that backers than then use to trade on major cryptocurrency exchanges. Their whitepaper states that they aim to increase the non-blockchain utilization of permission less blockchains. Their crowdsale has not yet been announced but they intend to launch in Q4 2017.
Coinlist is an initiative by Protocol Labs and Angel List. Their aim is to create a more accessible platform for accredited U.S. investors to participate in token crowdsales. They intend to launch on August 7, 2017.
KickICO is a blockchain crowdfunding platform that claims to be the first platform to use both crowdfunding and crowdsale technology in one platform. They are integrating crypto technology into crowdfunding to create a platform for blockchain and non-blockchain backers to raise funds and for backers to support them all over the world. They are building an all-in-one platform for platform users to start crowdfund, crowdsale and crowdinvesting campaigns. Their whitepaper describes KICKONOMY – a community that runs on KickCoins and allows creators to launch campaigns and for users to back them. Their value propositions are listed below:
Liquid tokens; Protection against fraudulent sales; Marketplace based platform; KickICO recently raised over US $20m in their token generation event.
Movement Capital (previously Homestrings)
One of the more popular crowdinvesting platforms for emerging market development projects. This platform does not use blockchain technology and has not launched.