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CROWDFUNDING AT INDIA: A STUDY OF INDIAN ONLINE CROWDFUNDING

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 CROWDFUNDING AT INDIA
A STUDY OF INDIAN ONLINE CROWDFUNDING
PLATFORMS
AUTHORS
DR. HETAL JHAVERI
Faculty
PGIM-AMSoM
Ahmedabad University
16/1 Vikram Sarabhai Marg,
Opp. IIM-A,
Navrangpura,
Ahmedabad – 380009 (India)
hetal.jhaveri@ahduni.edu.in
Cell: +91 98793 99109
PROF. ANJALI CHOKSI
Faculty
PGIM-AMSoM
Ahmedabad University
16/1 Vikram Sarabhai Marg,
Opp. IIM-A,
Navrangpura,
Ahmedabad – 380009 (India)
anjali.choksi@ahduni.edu.in
Cell: +91 98257 73179
ABSTRACT

Crowdfunding is a collective effort by people who network and contribute collectively for a cause or a business idea.
This seems very similar to the traditional concept of charity or social cooperation but unlike funding here is done
with an objective of earning some return either monetary or intangible. The modern day crowdfunding is associated
with internet and the use of social media for fundraising. In India crowdfunding is still in its nascent stage even
though the potential is incredibly high. The paper studies the select Indian online crowdfunding platforms (CFPs),
their area of focus, fund raising strategies, and their revenue models. CFPs not only support business activities but
also social causes. E.g. Ketto (www.ketto.org) supports NPO, creative and social causes through the platform. The
CFPs were selected to represent a diverse set of crowdfunding sectors and the availability of data.

Keywords: Crowdfunding, Online Platforms, Campaigns

INTRODUCTION

Crowdfunding is a process of soliciting funds from the general public to support an idea or create projects or fund
businesses. It directly connects people with money to the people who need it. It is nothing else but the crowd’s
collective pocketbook. It allows large groups of people to replace banks and other institutions as a source of funds.
The concept of collective funding of a project by a group of people is as old as time.

The modern day crowdfunding is the modified, internet model of the same old concept. The Web has made the entire
process of floating an idea and raising funds for the same much easier and faster. Apart from getting access to funds,
another major advantage is to getting validation of the idea or concept.

One of the first instances of using internet to raise funds occurred in 1997 when the British rock group Marillion
raised $60,000 from its fans to fund its North American tour. ArtistShare was the first US-based company to
establish the crowdfunding website in 2001.

LITERATURE REVIEW

Crowdfunding is a novel method for funding a variety of new ventures, allowing individual founders of for-profit,
cultural, or social projects to request funding from many individuals, often in return for future products or equity.
Crowdfunding projects can range greatly in both goal and magnitude, from small artistic projects to entrepreneurs
seeking hundreds of thousands of dollars in seed capital as an alternative to traditional venture capital investment
(Schwienbacher and Larralde, 2010). It is more of an informal form of financing projects – either commercial or
non-commercial. Here, a large number of people (the crowd) fund small amounts of money to accumulate into an
investment large enough to finance a project (or a start-up company).

Crowdfunding is a collective effort by people who network and pool their money together, usually via the internet, in
order to invest in and support efforts initiated by other people or organizations (Ordanini, 2009). New ventures
require resources to succeed, and one of the most critical of these is financing (Gompers and Lerner, 2004; Gorman
and Sahlman, 1989; Kortum and Lerner, 2000). Over the past few years, crowdfunding has emerged as novel way for
entrepreneurial ventures to secure funds without having to look for venture capital or other traditional sources of
venture investment.

Schwienbacher and Larralde (2010) define crowdfunding as an open call, essentially through the Internet, for the
provision of financial resources either in form of donation or in exchange for some form of reward and/or voting
rights in order to support initiatives for specific purposes. Thus, the crowd generates financial support for already
proposed initiatives.

The crowdfunding mechanism is also related to social networking, where consumers actively participate in online
communities to share information, knowledge and suggestions about a new initiative and/or brand. However,
crowdfunding goes beyond conventional social-network participation by incorporating more proactive roles for
consumers, such as selecting new initiatives to support and providing financial backing for them.

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CROWDSOURCING AND CROWDFUNDING

Crowdfunding draws inspiration from concepts like micro-finance (Morduch, 1999) and crowdsourcing (Poetz and
Schreier, 2012), but represents its own unique category of fundraising, facilitated by a growing number of internet
sites devoted to the topic. Crowdfunding is based on the principle of crowdsourcing. It is an application of crowd
sourcing.

Jeff Howe defines crowdsourcing as the power of the many that can be leveraged to accomplish feats that were once
the responsibility of a specialized few, in his book Crowdsourcing: How the Power of the Crowd Is Driving the
Future of Business.

Wikipedia is one of the best known examples of a crowdsourcing model. It is an online encyclopaedia that is
completely written by users, containing over 3 million articles in English. A large number of people, each one of
whom putting a little effort in reaching a big goal together.

THE CROWDFUNDING OPERATIONS

Identification of a project / cause by the initiater.

Selection of the crowdfunding platform (CFP) that fits well with the project / cause OR starting own
platform

Introduction of the project / cause to the crowd (prospective fund providers) and convencing the crowd why
should the fund providers invest / donate.

Story telling : the story should be understandable and should be able to make connection with the listeners.

Updating the progress of the project/ cause on the CFP.

Receiving contribution made by the crowd throgh CFP

Start the project

Earn returns

Reward the crowd through CFP

Fig. 1 – The working of crowdfunding

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MODELS OF CROWDFUNDING

There are 2 basic models of crowdfunding.

EQUITY-BASED AND DONATION-BASED AND

LENDING-BASED
• The birth of crowdfunding has come through this
model
• Funders donate via a collaborative goal based process
• In return for products, perks or rewards.
• Most effective for digital goods (e.g. software, film
and music)
• So far this model has raised the largest amount of
funds per campaign
REWARD-BASED
•More recent model
•For cause based campaigns
•Businesses seeking capital sell ownership stakes
online in the form of equity or debt.
•Individuals who fund become owners or
shareholders and have a potential for financial
return, unlike in the donation model.

Fig. 2 – Models of Crowdfunding

Massolution (http://www.massolution.com), a leading firm in crowdsourcing solutions, defines 4 categories of

crowdfunding platforms (CFPs). A CFP is an operator that facilitates monetary exchange between funders and
fundraisers.

Lending-
Equity-based
based

Reward- Donation-
based based

Fig. 3 – Categories of Crowdfunding1,

1
http://www.crowdfunding.nl/wp-content/uploads/2012/05/92834651-Massolution-abridged-Crowd-Funding-
Industry-Report1.pdf

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 Fig. 4 – Growth of CFP, Source: http://www.massolution.com

Thus, reward-based is the largest category in terms of number of CFPs. Reward-based is the largest category; while
equity-based is the fastest growing category.

GLOBAL EXPERIENCE OF CROWDFUNDING

There are 500+ CFPs worldwide. They collectively raised $2.7 billion in 2012, across more than 1 million individual
campaigns globally. The same is estimated to be $5.1 billion for 2013.

 Top 3 global players2

 www.kickstarter.com
 www.indiegogo.com
 www.rockethub.com

2
http://www.forbes.com/sites/katetaylor/2013/08/06/6-top-crowdfunding-websites-which-one-is-right-for-your-
project/

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 Fig. 5 – Growth in Worldwide Funding, Source: http://www.massolution.com

Realising the importance and the span of crowdfunding, as a source of entrepreneurial finance, the Federal
Government of the US has designed special regulations, Jobs Act, 2012. The Act governs the fundraising by various
CFPs.
INDIAN EXPERIENCE OF CROWDFUNDING

Crowdfunding is relatively a new concept in India and the usage of Internet for raising funds is even less. According
to a World Bank report (2012), India has only 10 CFPs as against 344 in the US and 87 in the UK.

 Few well known CFPs in India -

 Catapooolt - http://www.crowdfundinsider.com/
 Ignite Intent – http://www.igniteintent.com/
 Ketto - http://ketto.org/
 Pick A Venture - http://signup.pikaventure.com/
 Start 51 - http://www.start51.com/
 Wishberry - https://www.wishberry.in/

Apart from the local players, many global CFPs have also launched their local platforms for India e.g. Grow VC -
http://india.growvc.com/. This means, the initiator has various options for launching his/her idea and same way the
investor has various options to select the right idea and the CFP based on his preferences.

A study by Catapooolt summarises the key demographics of the investors/crowdfunders in India.

 Average contribution per project: Rs 2,800/-
 Average number of contributors per project: 24
 Most contributors are from cities Mumbai and Delhi. Almost 60% of current funders are coming from non-
metros and international destinations.
 Most crowdfunders are currently males aged between 25-40 years

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METHOD

OBJECTIVES OF THE STUDY

 To understand the crowd funding scenario in India.
 To study the functioning of various Indian online CFPs.

DATA COLLECTION

In order to study Indian online CFPs, six fundraising websites were selected on the basis of availability of
information, locational presence, scale and also the type of crowd.

The contents of these websites were then compared on the basis of seven key parameters selected after initial
screening and analysis of all the websites.

The study is restricted to Indian online CFPs.

INDIAN ONLINE CROWD FUNDING PLATFORMS

The crowdfunding websites were compared on the basis of following parameters. These parameters were selected
based on the comparison of crowdfunding websites done by inc. com, a leading global CFP.
 Operations
 Founders
 The Catch
 Cost
 Funds Raised
 Types of Projects/Campaigns
 Campaign Page

RESULT

From the study of these five websites, the important observations are summarized in the following table.

Sr. CRITERIA KETTO WISHBERRY CATAPOOOLT IGNITE START51

No. INTENT
1 WEBSITE www.ketto.org www.wishberry.in www.catapoolt.com www.ignitei www.start51.c
ADDRESS ntent.com om
2 LAUNCHED Aug 15, 2012 2011 2010 July 2010 July 2012
Soft launch – April
2012
3 SECTORS Supports only Social as well as Media & All areas. Any creative
social causes creative projects. entertainment – ideas in all
floated by NGO film, food, movies, books, areas.
technology, films & Start-ups.
theater & others-8
categories
4 PUNCH LINE Raise Money for Go Fund Catalyzing Where Ideas Add Life to
What Really Yourself! Creativity by Get Life Your Ideas
Matters Pooling People

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Sr. CRITERIA KETTO WISHBERRY CATAPOOOLT IGNITE START51
No. INTENT
5 FOUNDERS Mumbai based Anshulika Dubey A brand owned by Rinkesh Backed by
online CFP. & Priyanka Starting Blocks Shah, an parent firm
Varun Sheth & Agarwal, young Media Ventures Pvt. MBA from Start Online
Kunal Kapoor. entrepreneurs. Ltd. Narsee Services Pvt.
KWAN-funding Key executives - Monjee. Ltd.
partner, a global Satish Kataria
celebrity (pioneer of crowd
management funding in India),
company. Yogesh Karikurve
(Experience in film
funding, mktg. &
distribution), Dipti
D’Cunha (a film
consultant), and
Soham Sengupta.
6 SCOPE Very limited Limited Wide Wide Wide
7 MARKETING Backed by Backed by good Targeted marketing Experienced Provides a
TOOL Bollywood team looking after of specific projects, marketing platform for
celebrities - projects to make it offline marketing advisors and creators &
Shabana Azmi, success. with partners and outsourcing audience to
Soha Ali Khan Catapooolt partners work together
and Nargis catalogue. to make new
Fakhri. ventures.
8 USP Best for NGOs. 1. India’s first 1.World’s first CFP 1. Supports 1. Support
online CFP. with 3 tier reward small projects and
2. Provides in- systems – projects also. do not look for
depth feedback on a) Rewards shared 2. College financial
rewards, video by creators students profits.
scripts, etc. and b) Rewards by looking for 2. Project
even help connect Catapooolt – their pocket creator keeps
with those who membership kit, gift money. 100%
could help out in vouchers etc. - tying 3. Project ownership and
process. up with brands like creators responsibility.
3. Accepts credit CCD, Dominos etc. keep 100%
and debit cards, c) Reward by ownership of
net banking as sharing on social their work.
well as cash & media websites by 4. Team
cheque pickups Catapooolt. reviews the
from home. 2. Team approves or project in a
4. Give cool rejects the projects span of 4
rewards that are in just 48 hours. days.
exclusive &
inaccessible in
general.
9 BUSINESS 1.Collecting Provide in-depth Process – create, Create an 1. Projects are
MODEL donations for less feedback on contribute, and Intent independent
fortunate people rewards, pitch celebrate. will be and get 51
“Give and Get” video scripts, etc. reviewed days to reach
2. Connects and even connect and financial
directly donors at you with folks get started target.
the project level. who could help 2. Direct
you out in the support of
process. contributors.

8
Sr. CRITERIA KETTO WISHBERRY CATAPOOOLT IGNITE START51
No. INTENT
10 REGION OF Domestic as well Both Global with sp. Domestic Domestic
OPERATION as international focus on Asia
platform
11 FEES/COMMIS No charges Upfront fee of Rs. Fees - 15% of the Free of 5 % of
SION 2,500. total funds raised charge contribution if
successful.
12 SPECIAL Received grant NA NA NA NA
GRANT / from Google $
FUNDING 120,000 amount
RECD. worth of
advertisement.
Raised angel
funding from Ah!
Ventures and
Calcutta Angels
13 STORIES 14 campaigns in 600 campaigns Movie - Cutthroat 81% of IIT Mentoring 12
2012. based on the book – Mumbai, business ideas
The Great Indian electric – which were
Butterfly. Raised racing car shortlisted
Rs.7.9 lac. from 30
applications
received.
14 CONTRIBUTIO Min. Rs. 100 – Min. Rs 50 – max. Min. Rs.500 – max. Depends on Depends on
N max. any amount Rs.50,000 any amount project project

15 MINIMUM Rs. 1000 100% of target Min. collection NA NA

FUND RAISING amount else should be 80% of
refunded back. the requirements
16 DURATION TO Depends on Maximum of 100 Maximum 90 days Depends on Maximum 51
RAISE FUNDS project days. project days
17 NO. OF NA 7,250+ 1,000 + College NA
CONTRIBUTO projects
RS
18 FUNDS RAISED Rs.77 lac from Rs.260 lac Rs.11 lac NA NA
Ah! Ventures and
Calcutta Angels.
Rs 45 lac till
2013.
19 SPECIAL Very focused on Good presence Advisors – promote Main 1.Gives advice
REMARKS social causes. and coverage in the ideas and help in criteria- on legal and
media fund raising. 1.Project life company
cycle, registration
2. Practical issues
usefulness 2.Offers
and consultancy
acceptance and guidance
3.Dedication on campaigns
of the
initiator and
strength
towards the
project.

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Sr. CRITERIA KETTO WISHBERRY CATAPOOOLT IGNITE START51
No. INTENT
20 CHALLENGES NA NA To create awareness 1.To change NA
about crowdfunding the mindset
of people
2.Credibility
of initiator

21 FUTURE Supporting Investment with Want to cater to Increase the Encouraging

PLANS charities through dramatic returns global audience to awareness of projects full of
increasing contribute for Asian crowdfundin ambition and
penetration of creative projects and g. innovation.
young support regional
generations. cinemas.

DISCUSSION

KEY FINDINGS

 Ketto is the only platform dedicated to social causes and to ensure positive funding response from the crowd, it
takes support from various celebrities. Rest others give relatively more emphasis on innovative and creative
projects.
 For this, Ketto has adopted donation based model whereas other CFPs have adopted reward based model.
 Ketto by having a social cause focus does not charge any fees from the initiator and Ignite Intent with a
commercial focus also does not charge any fees as it supports projects floated by college students.
 Ketto is the only platform that has received foreign grant.
 When most CFPs have domestic focus, Catapooolt has domestic as well as global orientation.
 Wishberry has floated the highest number of campaigns so far, may be because it offers the longest period to
the initiators to keep their projects floated. It also has the largest pool of contributors who collectively
contributed the most.
 Catapooolt and Start51 assist not only in fundraising but also offer advice to the initiators.

It is further observed that each CFP as well as each project is unique by itself. With the built-in focus group and
purpose, the CFP offers support to the initiator in terms of promotion of the idea, approaching the crowd as well as
providing advisory services. Whereas each project within the ambits of the CFP, defines its purpose, fund target,
duration and rewards but the ultimate onus lies on the initiator.

CONCLUSION

The study concludes that the primary focus of the platforms under study is fundraising for either social-cause based
or creative based projects. This supports the operations and strategies adopted by them.

 Business model in all CFPs is either reward based or donation based

 An investor can contribute as low as Rs.50
 Minimum amount permitted to float a project for fundraising is as low as Rs.1,000
 Further, these CFPs either do not charge anything or charge a nominal amount from the initiator.

Crowdfunding is in nascent stage in India. It will take time to increase the awareness and change the mindset of
people. In a way it is not a new concept in India. For ages, donations have been taken to build temples, cash covers
are taken at marriages, and religious festivals are celebrated through contributions. But fund raising through
contributions from public through internet based platforms is relatively an innovative concept.

Crowdfunding is not a fundraising method that replaces all the traditional funding techniques but it is best to think it
as simply a new method of obtaining funding and should be evaluated in light of other alternatives that are available

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 to the initiator. While looking forward, crowdfunding has a bright future as internet penetration and e-commerce
success will pave the way for crowdfunding. This will help CFPs to float equity based and lending based campaigns.

REFERENCES

 Howe, Jeff, 2008: Crowdsourcing: How the Power of the Crowd is Driving the Future of Business,
Random House Business Books.
 Young, Thomas, 2013: The Everything Guide to Crowdfunding, Aadams Media.
 Agrawal, Ajay, et. al., The geography of crowdfunding, NBER working paper series.
 Douglas Cumming, Sofia Johan, Demand Driven Securities Regulation: Evidence from Crowdfunding,
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2328347
 Mollick, Ethan, The dynamics of crowdfunding: An exploratory study, Journal of Business Venturing.
 Ordanini, Andrea, et. al., Crowdfunding: transforming customers into investors through innovative service
platforms, http://www.emeraldinsight.com/journals.htm?articleid=1944376
 http://crowdfunding.org/
 http://www.crowdsourcing.org/document/crowdfunding-industry-report-abridged-version-market-trends-
composition-and-crowdfunding-platforms/14277
 http://www.douwenkoren.nl/en/how-does-crowdfunding-work/
 http://www.forbes.com/sites/katetaylor/2013/08/06/6-top-crowdfunding-websites-which-one-is-right-for-
your-project/
 http://www.inc.com/magazine/201111/comparison-of-crowdfunding-websites.html
http://inc42.com/magazine/entrepreneurship/ketto-org-crowdfunding-platform-social-
domain/#ixzz2zDkBr1FP
 http://inc42.com/magazine/buzz/funding-roundup-silverpush-catapoolt-wittyparrot/#axzz2zDk7GaPL
 http://www.infodev.org/infodev-files/wb_crowdfundingreport-v12.pdf
 https://www.igniteintent.in
 http://indiacrowdfunding.wordpress.com/
 http://ketto.org/
 https://www.kickstarter.com/help/stats
 http://www.mid-day.com/articles/indian-entrepreneurs-are-following-the-crowd-to-make-
money/213055#sthash.KkiiwN7q.dpuf
 http://www.massolution.com
 http://ncfaindia.org/crowdfunding-in-india
 http://signup.pikaventure.com/
 http://tech.firstpost.com/news-analysis/meet-wishberry-a-made-for-india-kickstarter-like-crowdfunding-
platform-217091.htmlhttps://www.wishberry.in/
 http://www.start51.com/

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