Wondering to know about crowdfunding for startups in India. This article will give clarity to all your doubts about this topic.
It organizes campaigns for ventures, films, music, technology, startup ideas, innovative products, etc.
Apart from that, it helps entrepreneurs to partner with incubators, mentors, sales, the marketing community, etc.
Its main focus is to provide the best quality crowdfunding platforms.
Crowdfunding means collecting funds from a large number of investors for starting a startup or for building a venture or for a social cause or for starting a new project.
Getting funds from angel or venture investors or from the bank is not an easy task. That's why the lack of funds is the major reason for the failure of a startup in India.
But crowdfunding provides an easy platform for raising funds very easily and in fact, it is better than other sources of funds because investors have minimal control over your enterprise.
So in this article, we are focused on learning about crowdfunding, its types, and different sites of crowdfunding in India.
Before learning different sites of crowdfunding in India, first, we will discuss what is crowdfunding and its types.
Before learning different sites of crowdfunding in India, first, we will discuss what is crowdfunding and its types.
What Is Crowdfunding?
Crowdfunding means collecting funds from multiple numbers of investors for a specific project, idea, startup, social cause, donation, etc.
The users can showcase their products on crowding platforms or sites and if investors and fund donors like their project then they get funding for that. In simple words, crowdfunding platforms form a link between fund collectors and fund donors.
These platforms charge some percentage of commission from the fund collected. If you want to know about different crowdfunding sites for startups in India then read this article from starting.
It is better than other sources of funds because the founders of startups have full control over their venture.
Types Of Crowdfunding In India
There are five types of crowdfunding in India where founders can raise funds for their projects. These are discussed as follows-:
1. Donation-based crowdfunding
In donation-based crowdfunding investors or funds, donors contribute money to specific projects related to a social cause like sanitation, healthcare, disaster projects, helping patients, conservation issues, etc.
The investors do not contribute their money for any returns or profits but they actually want to help the community through their charity.
The entrepreneur or founder can present their social campaigns or ideas on crowdfunding platforms and in return, some of these platforms charge fees of 5%-10% from total funds collected.
The best sites for donation-based crowdfunding in India are Kickstarter, Indigegeo, GoFundMe, and FuelADream.
2. Equity-based crowdfunding
In equity-based crowdfunding entrepreneurs or founders present their startup or venture ideas on the crowdfunding platform. If investors like their idea then they invest money in their startup and in return they get some equity share of that startup.
The value of equity shares increases with the growth of the company and by selling these shares investors can earn money.
This type of crowdfunding is especially for innovative products like software or apps or online service.
There is a greater risk for both investors and entrepreneurs. Loss can occur to investors if the company did not perform well and for entrepreneurs, there is a risk because they are sharing there inside information of the business to an outsider.
Unfortunately, this type of crowdfunding is illegal in India.SEBI has restricted this to protect the interest of investors. In India, investors do not have much skill or expertise to invest in these platforms, so small investors do not get attracted to such risky investments.
The second reason is that there is in India there is no such regulatory firm to monitor these investments.
3. Reward-based crowdfunding
In reward-based crowdfunding, investors get some products or services in return for their investments.
This is especially for creative products like art&design, Softwares, paintings, pieces of jewelry, fashion products, lifestyle products, films, watches, music, etc.
The best sites for reward-based crowdfunding are Kickstarter and Indiegogo. Usually, the businesses which opt for this type do not get a loan from the bank easily.
So, crowdfunding is a better option for them. This type is best for B2C businesses as entrepreneurs get direct feedback about their product or service from investors.
Milaap is best for Reward-based crowdfunding.
4. Lending-based crowdfunding
In lending-based crowdfunding entrepreneurs or founders share their ideas or startup projects on platforms and if investors like their idea then they lend money to them with a fixed rate of interest.
It is less risky as compared to equity-based crowdfunding as investors get fix rate of interest and entrepreneurs need not share their inside information of the business.
It is also called peer-to-peer crowdfunding and it is regulated by the Reserve bank of India.
If you think that your business cash-flow and working capital are good then you should definitely go for this type.
5. Pre-order crowdfunding
In pre-order crowdfunding, investors invest money in startup or venture, and in return, they get a Pre-order for products.
In simple terms, it means that if today an investor will invest money in this type then when the business will launch its products or service, they will get it first as compared to others.
This type is especially for fashion, gaming, lifestyle products. This helps the founder to get reviews about their products.
Crowdfunding sites for startups in India
From the past few years, crowdfunding sites in India have shown massive growth. They are helping new entrepreneurs and startup owners to raise funding. So below we will discuss some famous platforms for crowdfunding-:
Crowdfunding sites for startups in India features-:
1. Indiegogo
2. Milaap
3. Crowdera
4. GoFundMe
5. Impact guru
6. Ignite intent
7. Fundable
8. Catapooolt
9. Ketto
10. Fueladream
11. Wishberry
12. Kickstarter
1. Indiegogo
Indiegogo was founded in 2008 by Danae, Eric, and Slava. It is basically
a
crowdfunding site and a site for marketing of products of ventures.
Founders come here and raise funds for their startups. Not only funding
founders can also directly sell their products to the Indiegogo network of
consumers.
The main focus of this crowding platform is product innovation and
bringing new ideas to life.
Indiegogo was the first humongous platform to raise $1 billion since its
release in 2008.
It mainly promotes physical products as compared to there sites which
promote initiatives and ideas.
It serves as a launchpad for entrepreneurial ideas.
2. Milaap
Milapp was co-founded by Mayukh Choudhary and Anoj Vishwanathan. It was
started in Bangalore.
Its main focus is providing funds in rural areas especially those who
have a low income.
It raises funds for several projects including water, sanitation,
education, natural calamities, sports, and personal funds for different causes.
Many student Entrepreneurs have also raised funds from this platform.
It charges 5-8% of the commission from funds raised. Milaap was founded
in 2010 and in August 2019 it has raised 700 crores funds to support 1.00.000
causes.
3. Crowdera
Crowdera was founded by Chet Jain and its co-founders are Chai Atreya
and Rich Matsuura.
It was founded in America so it is a global platform for raising funds.
It was launched in India in 2016.
Its main focus is on social causes, Individual causes, and enterprises.
The platform charges zero commission and has also worked for non-profit motives
for many ventures and enterprises.
Their motive is to build a giving economy with non- profit motives. In
this platform, you can raise funds from RS 500 to RS 99,999,999.
4. GoFundMe
GoFundMe was founded in 2010 to raise donation-based funds. It is
currently, the largest social crowdfunding platform which has raised $9 billion
funding from 120 million donations.
The main motive of GoFundMe is to raise money for personal, business,
and charitable causes.
There are huge users in this platform so raising funds for smaller
causes may not work.
It doesn't charge any commission but you have to pay payment fees
charged by payment processor which is generally 2.9%.
5. Impact guru
Impact guru is co-founded by Khushbu Jain and Piyush Jain. It was
founded in 2014 in Mumbai.
It is a crowdfunding platform with non-profit motives for social
projects, social enterprises, and donations.
It also raises funds for ventures and startups. It has supported over
100 projects globally.
In 2016 it has raised $5,00,000 seed funding from Singapore based
venture capital fund RB Investments.
6. Ignite Intent
Ignite Intent is co-founded by Rinikesh shah. It was started in Mumbai.
It is a crowdfunding platform that raises funds for entrepreneurs,
startups, and social projects.
It also raises micro-investments for small ventures. It follows
donation-based crowdfunding. In this platform, there is no limit to giving your
project information.
It has supported a grocery store startup in Pune whose name is
Puneexpress.
It charges a 7% commission from the total funds raised. It also helps
college students to raise funds for social purposes.
7. Fundable
Fundable was founded on May 22,2012 by Wil Schrotor and Eric Corl. It is
a crowdfunding platform that focuses on small enterprises.
It organizes campaigns for the small business sector in India. They also
focus on other areas like travel, banking, food, beverage, and fitness.
It also includes a section called "New and Noteworthy" in
which users can join all the new campaigns organized by Fundable.
It also raises funds for an affordable clinical diagnosis to intellectual
travel experiences.
its main motive is to build small businesses. It earns a profit by
charging monthly fees.
8. Catapooolt
Catapooolt was founded by Satish Kataria in 2012. He is also the
managing director of this platform.
It organizes campaigns for ventures, films, music, technology, startup ideas, innovative products, etc.
Apart from that, it helps entrepreneurs to partner with incubators, mentors, sales, the marketing community, etc.
Its main focus is to provide the best quality crowdfunding platforms.
9. Ketto
Kunal Kapoor, Varun Sheth, and Zaheer Adenwala are the co-founders of
Ketto. It is a Mumbai based platform that was founded in 2012.
It is one of the most reputed crowdfunding sites in India. This site
organizes campaigns for sports, children, women, education, healthcare, and
animal welfare.
It also has a section called "Urgently Fund Required".One of
the successful campaigns of Ketto was during Kerala Flood whose name was
"Two Wheels of Hope".In this, they provide cycles to schoolgirls.
The main motive of this platform is social cause and charity.
10. FuelADream
FuelADream was founded by Ranganath Thota. It is a reward-based
crowdfunding platform in India.
It provides funds to social platforms, charity, startup ideas, and
disaster projects. Mostly it organizes its campaigns to help people of Africa
and India.
Two choices are given to users which are AON i.e All Or Nothing and KWYG
i.e Keep What You Get.
It focuses on "Quality more than Quantity".They
have a section called "Crowd Favorite List" in which
they include their most famous campaigns.
They focus on projects like Creative ideas, Charities, Events, and
community activities.
Their motive is to simply fundraise methods. They charge 6%-9% from
fundraising.
11. Wishberry
Priyanka Agarwal and Anshulika Dubey are the co-founders of Wishberry.
It is a reward-based crowdfunding platform in Mumbai.
Their site is for creative projects which include dance, photography,
stand up comedy, film production, comics, publishing, etc.
Right now it does not accept physical products, it only accepts ideas
and innovative projects.
It also provides consultation, email marketing, and marketing services.
Its motive is to bring creative and innovative ideas to build a community.
It charges a 10% commission from a fundraised. Funders receive a reward
for their fund donated on the Wishberry platform.
12. Kickstarter
Kickstarter is one of the first, reputed, and active crowdfunding sites
in India. It was launched in 2009.
It includes creative projects like films, books, technology, research,
music, etc. It prohibits charity or social projects.
It has raised about $2 billion since it was founded. Some of the famous
campaigns organized by Kickstarter are The Sweet Requiem campaign and Edible
Cutlery.
It charges a 5% commission for every successful campaign. Its main motive is to bring creativity to the community.
Benefits Of Crowdfunding
Below we will discuss some benefits of crowdfunding which will inspire you to use this platform-:
1. Better than other sources of funds
Crowdfunding is better than other sources of funds. It is better than banks as raising funds from these platforms is very easy. It does not include any restrictions.
It is better than angel and venture funding as investors have minimal control over your project.
If you have a simple product or project than crowdfunding is the best option to raise funds.
2. Best platform for feedback
It is the best platform for feedback as entrepreneurs can showcase their ideas or product on reward-based crowdfunding and pre-order crowdfunding and can get feedback from investors and users.
3. The best option for raising funds for a social cause
Mostly every crowdfunding site organizes campaigns for social causes like healthcare, sanitation, treating patients, disaster projects, food donation.
So, raising funds for these purposes is very easy. People come and donate money to your project on this platform and in return these platform charges commission.
4.Track progress of your brand
Through these platforms, investors and users can track your progress of projects. It helps investors to review your project and then invest in it.
5. Helps In Marketing
These platforms help in the marketing of startup ideas and new venture's product. Presenting your idea in front of investors is very simple.
These sites also provide referral traffic to your website. This helps in increasing your earning. The sites send unique users to your website.
6. Helps In Providing Loyal Customers
In crowdfunding platforms, entrepreneurs present their idea or project in front of users. So in their idea, they also share their motive and mission.
So, when investors read their mission and then become a part of their idea, it means that they are for the long-term. These platforms help enterprises to reach thousands of loyal customers.
7. Money doesn't matter at all
These crowding platforms are absolutely free. Sharing your idea or project in front of investors is free.
The only thing you have to pay is some percentage of commission from funds collected by you from investors to these platforms.
8. Provides Free Media Coverage
These platforms let you share your project in front of the public. So, if your projective is creative and becomes famous on these platforms then media will also provide you coverage.
Congratulation. You are getting PR free. You can become famous on social media if your project collects a very large amount of funds.
Now below we will be discussing some questions and answers to clarify your doubts and confusion.
FAQ On Crowdfunding For startups In India
1. Is crowdfunding legal in India?
No.equity based crowdfunding is not legal in India but the rest of the types of crowdfunding is legal in India. It is restricted by SEBI(Securities and exchange board of India) to protect the interest of investors.
2. Which is better Ketto or Milaap?
I think that Ketto is a better option than Milaap. It charges less commission. Ketto charges 5% commission and Milap charges 13.5% commission.
3. Is crowdfunding taxable in India?
According to Indian law, non-profit organizations are exempted from taxes. So funds raised for non-profit motive or campaign on crowdfunding platforms are exempted from taxes.
4. How does crowdfunding make money?
Crowdfunding platform makes money by charging some percentage of commission from funds raised by startups or ventures. Some platforms also charge fees on each transaction.
My views on crowdfunding for startups in India
I think that equity-based crowdfunding should be made legal in India. For new entrepreneurs, it's not easy to raise money from other investors so if this type is made legal then it will help a lot of new startups.
But proper regulatory guidelines should be issued by the government of India to protect the interest of investors.
Conclusion
So I hope you like this article. In this, we have discussed what is crowdfunding, Types of crowdfunding, and Crowdfunding for startups in India.
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