SEPTEMBER 20238henever we start a new venture, funding or capital is the first and foremost thing that comes to hit the core of our mind. A young startup might be rich with their thoughts and innovative ideas and those are at the threshold of explosion. In lack of capital or funding it might get covered and unnoticed. If the flow of money continues to be there, the primitive un-organized India can smile and deck-up in the attire of applauds from all the horizons of the globe. Entrepreneurs or startup owners come-up with new and ever trending ideas which are unique and irreplaceable, aiming to transform India into a smart nation.A Startup can finance itself from banking institutions, venture capitalists, private equity, or angel investors however there are multiple restraints attached to it as well. But, for a new born startup, it is very difficult to have access to all these methods. So, Indian Government is trying heart and soul and introducing new funding schemes of empowering young startups. Amidst a wide range of funding, crowdfunding is the most effective tool for entrepreneurs. In recent times, crowdfunding has become an alternate financial instrument globally that extends beyond the traditional circle of owners, relatives, and venture capitalists.Crowdfunding is nothing but small amounts of funds are put together by a large number of investors by way of fund-raising campaigns, accompanied by strong advertising for a specified period. These fund-raising projects can be carried out on crowdfunding platforms, social media, and many other effective platforms.Today's youth is crazy about social media and in some cases, it is useful too, and here also social media plays an impactful role, and it has become the newest addition and the most significant contributor, accelerator, and amplifier to the crowdfunding landscape of startup ecosystem across the globe.Impacts of CrowdfundingCrowdfunding is one of the most effective tools for testing the market out of the online website. It creates momentum in your business, and help you to broaden your network which can attract more investor and it builds your market. Crowdfunding helps to kickstart a business and ensures a significant growth. An average round of crowdfunding can raise $7000. It also enables an entrepreneur to understand the trend of the market even before transitioning their product onto the actual market.Trending Crowdfunding TypesCrowdfunding can be accumulated from friends, family, relatives, other acquaintances and entrepreneurs can also contribute. Crowdfunding is very much essential to amplify the growth and future of your aspiration.1. Equity Based: In this crowdfunding, the benefactor is given a certain part of their equity in the business. The lender will receive a part of the profit by dividend and has a voting right. This type of crowdfunding is illegal in India.2. Donation Based: Here individuals donate and contribute a small amount of finance without any expectation of return. This kind of crowdfunding is quite popular with NGOs or non-profit organizations who work for social causes and upliftment of society. A recent example of this type is the PMCARES fund, which was started by our honorable prime minister to raise funds to fight against natural calamities and disasters. During the Cyclone `Amphan' in eastern part of India and Covid-19 pandemic, a huge fund was raised through this fund to help the victims.3. Debt Based or Peer-to-peer Funding: It is quite similar to any other loans and these loans are to be repaid along with interest. The rate of interest is negotiable and can be decided by mutual agreement or understanding. Peer-to-peer lending can be attractive for small businesses that lack collateral or credit history to access traditional bank lending.Legal Regulations Regarding CrowdfundingIt is of utmost importance to create a statutory regulatory arm to effectively control and regulate the Indian crowdfunding market so that it can grow into a viable investment hub. The market of share and WSC COLUMNCROWDFUNDING: A CREATIVE GAME CHANGER OF INDIAN ECONOMY
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