What is crowdfunding ?

 Raising money from large number of people.

 A form of alternative finance.
 Irish loan funds started in early 1700s.
 War Bonds were used to crowdfund military products.
 British rock band Marillion funded US tour in 1997.
 Current Scenario
• It has emerged as a popular option for entrepreneurs.
• From $ 530 million ( 2009) to $ 1.5 Billion ( 2011)
• April 2012 : JOBS Act passed in US by President Obama.
• Aims to lessen regulation burdens on small businesses.
• Active in India with exceptions under relevant acts.
Types of Crowdfunding

Donation Crowdfunding

Reward Crowdfunding

Peer to Peer Lending

Equity Crowdfunding
Donation Crowdfunding
• It is exercised for social or philanthropic purposes
• Hence it is not in exchange of any commodity of value.
• Organizations like Ketto and Milaap.
• Milaap & Ketto charge 5% & 6% of the total money raised
• Ketto grew 4X raising Rs 115 Crore from Covid campaigns.
Reward Crowdfunding
• Money is invested in anticipation of product.
• The product is tangible or a service.
• Usually run by individual artists, film makers , startups.

Reward

Pre-orders Services Recognition

Peer to Peer Crowdfunding
• Also known as debt crowdfunding ? Crowdlending
• Donations accepted with obligation to pay later.
• These are unsecured loans.
• In India only NBFC licensed to operate can lend.
• This falls under RBI and not SEBI.
Source : https://www.rbi.org.in/scripts/bs_viewcontent.aspx?
Id=3164
Equity Crowdfunding
• Investors get equity shares in return of investment.
• Currently illegal in India and SEBI is the regulatory body for equities.
• SEBI has specified these as “ Unauthorized , Unregulated and Illegal”.
• Raising funds in India governed by
1. Companies Act , 2013.
2. SEBI Act, 1992.
3. Securities Contracts(Regulation)Act, 1956.
4. Depositories Act, 1996.
Accredited Investors
• Qualified Institutional Buyer ( QIBs)
• Companies with minimum net worth of 20 Crores.
• High Net Worth Individuals ( HNIs) with minimum net worth of 2
Crores
• Eligible Retail Investors ( ERIs)
Comparison
Way Ahead
• Projected transaction value of $9.4 Million in 2021 – Statista
• SEBI and RBI to collectively regulate the crowdfunding market.
• Many success stories like Holosuit , Indian startup that raised $50
million.
• Global CAGR of 16%
References
• https://www.fundable.com/crowdfunding101/history-of-crowdfunding
• https://www.investindia.gov.in/team-india-blogs/crowdfunding-india-0
• https://www.ketto.org/blog/donation-based-crowdfunding-in-india
• https://blog.ipleaders.in/all-you-need-to-know-about-crowdfunding-in-india/
• https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=3164
• https://taxguru.in/sebi/crowdfunding-india.html
• https://www.mordorintelligence.com/industry-reports/crowdfunding-marke
t
• https://www.forbes.com/sites/forbesbusinesscouncil/2021/12/28/crowdfun
ding-the-investing-gateway-of-the-future/?sh=7205cb2bee02
• https://economictimes.indiatimes.com/small-biz/entrepreneurship/crowdfu
ndings-tryst-with-success/articleshow/81464803.cms#:~:text=As%20per%20