Funding has always been the one single spirit-sapping aspect of any new business or venture. Although there are numerous ways of funding that has been established for long, the idea of crowdfunding, typically through the internet is fresh and new.
Crowdfunding just as the name suggests is a method of funding that is done by the crowd. Lots of people come together and pool in small amounts of money and meet the monetary requirement of the said business or venture. The ‘crowd’ could be anyone from friends, family, friends of friends or total strangers who may have personal reasons or monetary reasons to contribute. Say for example, instead of collecting a lakh from one single person, a hundred people can contribute a thousand rupees each which is not a huge amount. The Kannada feature film Lucia was entirely funded by the crowd to the tune of 50 lakh rupees.
How It Works
Crowdfunding works in two ways. One is Donation and reward based. Another is Debt Crowdfunding. Donation and reward based crowdfunding works on the basis of belief and a sense of altruism. You need to make the people you approach believe in your idea. The reward can be an album of the work or ticket to an event depending on the nature of the idea. Debt crowdfunding is a straight forward way of crowdfunding. The funds have to be returned back to the funders once the business reaches a position to return.
Crowdfunding online in India began during the year 2008. Rangde.org were the first to launch the crowdfunding platform in India. It started to go mainstream during the mid of the year 2011 and since then this market has only been growing with growing number of platforms coming into play.Some of the prominent ones among the peer to peer lending circle are Rang de in the social donation category, Wishberry is known for film makers and music producers, and Faircent is known for debt crowdfunding.
India is starting to witness a new crowdfunding platform come into existene once in every two months which is quite a thing in itself. The question is who is here to stay. Wishberry has already made a name which needs to be sustained while Faircent is the leader for now in the debt crowdfunding space. The major challenge for Faircent though is the recovery of the lent money which makes it look risky.
Although crowdfunding is up and running in India, it’s in the stage of infancy and would be too premature to predict anything solid at this stage. The future looks exciting for people who want the money to work for them. At the same time, people with limited resources have a huge upcoming market which is a doorway to create all those that are just ideas now. This gives everyone an opportunity to be a part of something big and popular.
Recommended Read :
- What is Crowdfunding?
- Bridge Loan Start Ventures
- What is Vendor Financing?
- Raising Fund From Family and Friends for Start Up Venture
- How to Secure a Micro Loan for Start Up Business?
- How to Invest in a Start Up?
- Risks Involved in Start Up Investing
- How Can I Become An Angel Investor?
- How Risky is to Become An Angel Investor?
- What is Bridge Loan?
- What is Venture Debt Financing?