Home Loans Start-Up Funds What is crowdfunding? How does CrowdFunding work?

What is crowdfunding? How does CrowdFunding work?


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.

Understanding Crowdfunding

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.

In India

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.

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  1. Its a fairly new yet worth an idea. I shared a cab with a stranger once and he discussed about a similar thing with me where he, his family members and extended family had pooled in some money and started up a business and depending on how much each one invested, they would yeild the profit. Wasnt familiar with the word crowdfunding than but can relate to it now. They thought it was a good way to keep the entire family intact. Similarly like minded people can put their plans to work together rather than struggling to raise funds individually. A very innovative way out from the traditional methods of applying for a loan and paying additional interest to the banks. Saves a huge amount of one’s money.

  2. Crowdfunding can be very useful for the ones who want to setup a business. Crowdfunding is worth a try and a innovative way to raise money. Crowdfunding can be a good source to raise money for small businesses, but when it comes to large-scale businesses it can be a bit risky. None the less, the concept is worth a shot and people can make a good use of it with proper study.

  3. What an amazing approach for social integrity and unity. It seems to be a kind of willing arrangement of money by the individuals and lending it to one in need, well that could be a startup or any individual. This will surely be an asset for the society and will thus help in embracing the social life and thus easy and vast spread of business or for whatever purpose it is being used. Really going to help in the spread of our traditional virtues.

  4. A unique and yet a very nice concept to raise funds to start a business or initiate an event is crowdfunding. Since the concept is based on raising small amounts of money from a crowd, it is easy to raise funds. The type of crowdfunding depends on the reason for which the fund needs to be raised. This article is truly very useful for all those who are looking forward to raise funds,

  5. A great article that helps you explore a great alternative way of raising funds for a project or a business venture. Crowdfunding is usually done through online platform. It is good way to raise funds. There are a number of crowdfunding site, such as Indiegogo, Kickstater and crowdfunder many more.

  6. Crowdfunding is a great platform for all people who wish flourish.Actually many people tend to think about the capital before starting a business as it is too expensive for them at the starting so at this time the best way for this solution is crowdfunding it gives them initial support .So if crowdfunding becomes popular in India I think almost most of the people would benefit from it.

  7. Gosh, I need a few projects crowdfunded. But this is such a good program for people who want to do good in the world.
    I hope this takes off in India, because the population is so large it’s hard for investment companies to get visibility of every project. And if the project is crowdfunded – you know there is a need for it in the world, that people like you and me support it! And then we can feel like we are a part of something bigger as well, without needing to be SO rich to invest.

  8. This article was very informative, but I would like to know how successful it is for people to crowdfund. If no one takes interest, it will never take off. This concept will definitely work with people who have a large supportive social network and/or an idea which everyone wants to see take off.

  9. Interesting article !!!! What makes idea of Crowdfunding appealing , is that the supporters would invest their money into an unknown project.I doubt that this idea would succeed in India.Because Indian people are more trusting the proposals which are screened by regulatory authorities and approved within legal framework.It has been just a decade , where the IPO has become popular.Crowdfunding , though looks appealing , will certainly take time for taking off in India due to risks of project non viability and risk of total loss in such cases.

  10. It is a really exciting thing that crowdfunding is now emerging in India as a major source of investment. A little amount can sometimes do wonders. And crowd funding justifies the same. It is very glad to have an investment in the form of crowdfunding as it doesn’t impose a huge liability over any investors. So the risk is less and flexibility is more. Nice read indeed.

  11. Just a few days back there was a news in the paper about how an athelete was helped to reach his target by crowd funding. Indeed an intresting prospect that needs proper channel to grow. Both the methods of crowd funding namely donation or reward based and debt crowd funding is an innovative way of lending money.

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