Crowdfunding: Be a part of India’s powerful form of social investing

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In 1885, when the Statue of Liberty was shipped from France to America in pieces, the United States was unable to raise funds for its pedestal. But thanks to a press campaign and small donations from 160,000 donors, the base was finally built – thanks to one of the country’s first major ‘crowdfunding’ projects, although the fancy term did not exist. at the time. Interestingly, modern crowdfunding is often attributed to a 1996-97 internet campaign by British rock band Marillion. Fans of the group raised $ 60,000 to sponsor their US tour. The success of the campaign laid the foundation for platforms like Indiegogo and Kickstarter in the United States.

Today, crowdfunding is slowly but steadily gaining ground as an alternative form of investment for investors, both in India and around the world. The World Bank, in its 2019 Crowdfunding Report, said the developing world has the capacity to deploy up to $ 96 billion per year by 2025 in crowdfunding investments. “While I was working in the banking industry, I saw huge potential in providing loans to people below 25,000 rupees,” says Ajit Kumar, founder and CEO of RupeeCircle, a platform for P2P (peer to peer) loan. “They didn’t have access to capital for emergencies or to start something new.” Since 2017, RupeeCircle has raised Rs 18.12 crore, providing an annual return of 15-25% to its investors.

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But with India’s central bank RBI regulating the P2P lending industry in 2017, is there any reason to worry about platforms? “Absolutely not,” insists Shantanu Srivastava, public affairs manager, Thinkthrough Consulting. “This is good for investors as well as for platforms, as a rock-solid compliance system is now in place. Platform owners also believe the regulation has really helped. According to Mayukh Choudhury, co-founder and CEO of Milaap, a crowdfunding platform: “It will definitely benefit the segment.

Businesses large and small are considering this new financing option. E-commerce giant Amazon, through its Amazon Wings initiative, has launched crowdfunding campaigns for small businesses affected by COVID-19. “We worked with (crowdfunding platform) Ketto to launch this program with fee waivers for Amazon sellers. We were able to support 16 Amazon sellers who raised nearly Rs 15 lakh, helping more than 1,000 families survive the lockdown when they had no other source of help or income, ”a spokesperson said. word to ET.

Ketto co-founder and CEO Varun Sheth, however, believes crowdfunding for a start-up or small business is still evolving in India. “These companies still prefer traditional methods of financing. There is a strong need to make them aware of the concept of crowdfunding, ”he says. US venture capitalist and founder of Draper Fisher Jurvetson, Tim Draper, is more optimistic. “The start-ups that we see (in India) are amazing, and the capital seems to be very available for the best companies. Crowdfunding is new to India, but I think people need to be able to take risks to fund a startup that could be India’s next unicorn. ”

With equity-based crowdfunding still banned in India, the donation or reward model has gained momentum, especially during the pandemic, with money being raised for the needy. “Donation-based crowdfunding platforms in India collectively raise over Rs 500 crore per year. ImpactGuru alone has raised over 15 crore rupees just for COVID-19 related fundraisers, ”said Piyush Jain, co-founder and CEO of ImpactGuru. We have raised over $ 200 million, including some of our global crowdfunding partners over the past six years. »Adds Milaap’s Choudhury. “About 5 to 6 players in the segment were able to make their presence felt, mainly in medical emergencies and disaster management,” he says. The platform which, since August 2020, allows people to launch a free shopping campaign on voluntary “tips” from its users.

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Growing internet access and digital payments penetration are fueling crowdfunding growth, but more government push can help the segment thrive. “The government can mobilize money from people living in subways to help farmers and small businesses,” says Kumar of RupeeCircle. “If done right, it can change the face of India.”

So what does the future of crowdfunding look like in India? “It certainly looks promising,” says Anshulika Dubey, co-founder and COO, Wishberry, a rewards-based crowdfunding platform for creative projects. “Crowdfunding based on donations or rewards for creative artists is the need of the moment and their only lifeline in the absence of any government, CSR (corporate social responsibility) or private funding. But does it have the potential to become a mainstream investment option? “Trust, transparency and impact assessment will be the main levers for crowdsourcing to become an attractive investment option. Along with the three levers, adequate regulations will be needed to protect investors, ”says Ankur Pahwa, e-commerce industry leader, EY India. Hopefully the power of the crowd will be better understood and utilized in the times to come.

Meet the Drapers is a groundbreaking entrepreneurial show from Silicon Valley where the Draper family searches for the next billion dollar idea and viewers invest in their favorite businesses. To learn more about Meet the Drapers, click
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The article was written by Pallavi Chakravorty of The Times Group.

Disclaimer: This article was produced on behalf of Meet the Drapers by the Times Internet Spotlight team.


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