Crowdfunding in India is not a new concept, it has been there since always, where people would come together for various reasons to raise money. The cause of fundraising always varied depending on the need of the society and its people. In India, people used to practice Crowdfunding for various reasons, namely to celebrate any religious occasion, to build various monuments and even for personal events like wedding, etc,.
In addition to these traditional forays, since our independence, we have also seen business empires and creative projects leverage the power of crowds through communities. Those like the Reliance Industries have been built on the contributions of thousands of small-time investors, and so have movies like Shyam Benegal’s ‘Manthan’ been realized with small contributions from a large number of people. In fact, India has a few powerful platforms now for free fundraising
Here are some of the key issues related to Crowdfunding to ponder and tackle:
Present transaction value in the Crowdfunding segment amounts to US$1.7m in the year 2019 alone. The transaction value is expected to show an annual growth rate (CAGR 2019-2023) of 0.6% resulting in the total amount of US$1.8m by 2023. The World Bank believes the growth of crowdfunding in the coming years will be spearheaded from emerging markets like Brazil, China, and India. Currently, the highest transaction value is reached in China (US$5,576m in 2019).
There is no legal or regulatory framework around this phenomenon, however, SEBI, India’s Stockmarket regulatory body is become proactive in this regards and has released a consultation paper that proposes legal, structural and regulatory framework around crowdfunding in India.
Crowdfunding Definition as per SEBI:
Crowdfunding is a solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project, business venture or social cause. Crowdfunding has been divided into 4 categories: Donation crowdfunding, Reward crowdfunding, peer-to-peer lending, and equity crowdfunding.
SEBI will allow private placement offers through internet-based crowdfunding platforms to any number of QIBs. There are certain other conditions as well which an accredited investor should meet.
- Product Startups :
There were a handful of startup projects that made good use of crowdfunding not just to raise funds, but also as a means to engage with potential customers.
- Social venture:
We saw several campaigns with a social cause in mind, including those that aim to empower rural and women entrepreneurs, education projects for children from vulnerable backgrounds, and projects that sought to create awareness on a range of social and health issues. Also, many Bollywood celebrities take to crowdfunding to support relief efforts for flood victims across the country.
- Crowdfunding Events: Crowdfunding propagates through the host to offline activities in India. With the increasing awareness about Crowdfunding, various national and global enterprises hosts crowdfunding events for their CSR activities.