Crowdfunding ecosystem in India

Debt Based Sites

These are where contributors receive interest payments in exchange for contributions examples include FundedHere, Crowdo, and MoolahSense.

Equity Based Sites

These contributors receive shares in exchange for their contributions; examples include AngelList, Funnel, Seedrs, and Cambridge.

Reward-Based Platforms

This is where contributors are promised rewards in exchange for their support like first priority access to the product once it goes live examples include Kickstarter, Indiegogo, Ulule. 

Donation Based Platforms

This is where donations are charitable and usually tax-deductible.  Examples include Indiegogo, Patreon, Youcaring, and FriendFund.

Crowdfunding websites have to invest heavily in their platform upfront and slowly build up skills so before investing in a crowdfunding platform it is important to consider its stage of growth in the early stage the main focus should be on customer traction. You can do this by the amount of momentum being built among project initiators and investors. In the growth stage, the aim is to improve the revenue model and scale up as rapidly as possible. Finally, in the late stage, the goal is to maximize profitability and cash flow while maintaining growth.

Crowdfunding Growth in India

The large-scale acceptance of smartphones and the internet has also been a show changer. Nowadays young people from every nook and corner of digital India get the refinement of philanthropy.

Over the past 20 years, GiveIndia has arranged and verified more than 2,000 NGOs and lists their particular causes on its platform. “It is like the Amazon of online donations. You can pick the cause to which you want to donate. Out of the 2,000 NGOs, we have listed more than 200 NGOs under GiveAssured where monthly beneficiary reports are also published,” says Kumar.

For-profit platforms such as Ketto, Milaap, and ImpactGuru have engaged in a huge rise in the past few months. a relatively new startup in this space, Donatekart is also collecting INR 5 Cr – INR 6 Cr on a monthly basis. The rise in online donations is phenomenal, said founder Anil Kumar Reddy.

According to him, entrepreneurs have discovered and accepted this impact model over the past few years which transformed the game of online donations with the aid of technology. “Having spent three weeks in Chennai (during the 2015 floods), I realized that people want to donate. But there was a clear gap between what people were donating and what was in demand on the ground. For instance, donors were sending food and other stuff, but the flood-hit people were asking for tarpaulins and mosquito nets. This inspired me to set up Donatekart, a platform where we supply what is needed.”

While Ketto mostly aims at crowdfunding for medical emergencies, Milaap has developed as a tool for both NGOs and individuals searching to raise funding for a certain cause. “It means people seeking to donate to the cause of their choice can do so on our platform,” says Milaap’s co-founder and CEO Anoj Viswanathan.

Being a part of the online crowdfunding services, many of these startups are also conducting live funding and donation events, which need customized tech support. “We had organized a live distribution programme for Mumbai Dabbawalas. It saw a collection of more than INR 2.5 Cr,” says Reddy of Donatekart. Last year, the company raised a seed round from a deal of investors.

Crowdfunding and Indian Startups

It is a huge opportunity for innovators to launch their ideas, social entrepreneurs bring social change and startups raise funds. The majority of startups, individuals, and small enterprises evade complicated methods of raising funds. Raising money through angel investors, bank loans, and venture capital, involve complex procedures.

Also, before raising money, startups have to keep in mind the different funding stages to decide the mode of raising funds. Crowdfunding is a far simpler and less complicated model.

Crowdfunding is defined as a pooling of resources by a group of people for the same objective. In this notion, common mass is approached to raise funds for your project, idea execution, startup, or cause. As per a survey conducted, less than 2% of the companies end up raising funds from professional investors. The rest 98% still require to raise funds to take their startup to the other level.

The entrepreneur community in India requires a fruitful and widely admired Indian version of crowdfunding platforms like Indiegogo, Kickstarter which not only serves individuals or startups to launch a product but to also test the endorsement of the product in the market. While comparing the crowdfunding market in India with that of the United States, we are still remarkably lesser.

Future of Crowdfunding

Marketing companies are looking forward to the growth and value of crowdfunding, too. Today, whole teams and digital marketing companies are dedicated to helping clients use crowdfunding productively by promoting their campaigns, targeting funders, and following through with media coverage after the project is funded. There is no doubt that this will be continuing with more advancement in the future.

“Crowdfunding investments won’t replace expertly managed investments funds any time soon,” said Daniel Pianko, Managing Partner of University Ventures, which has approximately $300 million under management. “But it will be an exciting part of a new investing dynamic. Going forward, entrepreneurs will have to consider whether to go to crowd markets first or instead of private investors and investors will have to figure out what early crowdfunding success means for a potential company. And what’s most interesting is when professional investors start leading ‘crowd’ funding initiatives rather than raise their own small funds.”

As per the 2018 report by market research portal statista, the current transaction value in the crowdfunding segment in India amounts to $8 million in 2018 and is expected to touch $21.7 million by 2022.