Fulfill your dream by crowdfunding or contribute to fulfill someone else’s dream...
In crowd-funding a large number of individuals (i.e. a “crowd”) interested in your idea chip in small amounts to make your project come alive. It is an opportunity to validate your idea with people who believe in your project.
Crowdfunding is an excellent source of seed funding to build prototype of a physical product or a beta version of an online project etc. Although crowdfunding contributors do not get any stake in the project, as a sign of gratitude, they receive recognition and rewards like DVDs, discount coupons, invitation to events, merchandise, acknowledgment in credits, T-shirts and other perks.
If you are not an entrepreneur seeking crowdfunding, you may join the crowd to fund an idea that has been posted by someone else. These ideas usually are entrepreneurial, imaginative and sometimes downright quirky.
Ideas which have received crowdfunding include board games, adventure travel, app design, games design, robotics, technology, short films, photography, art, festivals etc. The world over, crowd-funding is known to creative projects, personal or social causes and lately for startup funding too. Thanks to this mode of funding, project gets going, brand gets established, idea receives publicity. In the next stage, the entrepreneur can approach venture capitalists or investors for larger funding.
How does crowd-funding work?
There are various online platforms for crowd-funding. They may charge a low upfront fee and/or a small percentage of funds collected. An online pitch, funding target and a closing date is then put up on the crowdfunding website.
The online pitch may include text information and video presentation to enable the idea, concept and story are communicated effectively Simultaneously the entrepreneur needs to promote through social media and reach out to relatives, friends, fans and potential funders.
Once the target amount is collected, the same is transferred (less the upfront charge, if applicable) by the website to the creator along with the details of the investors. The campaign can be extended in case the target amount is not collected by the closing date.
During the project's implementation, the entrepreneur remains in touch with the contributors and the crowdfunding portal since the success of the project is in everyone’s interest. Listed under Resources section are the online crowd-funding platforms that you can access and explore this exciting new activity!!
Equity crowdfunding platforms (ECP)...
Whereas general or social crowd-funding platforms raise funds for a project or a cause, equity crowdfunding pertains to raising seed capital or working capital for stratup companies. In the case of normal crowdfunding, investors do not expect any returns from their investments but in startup equity crowdfunding investors receive equity shares in the company, thus entitling them returns from their investment.
Although investment made through ECPs is on private placement basis, the 'legality' of these platforms in India is still not established since SEBI has pronounced them as unauthorised.