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Crowdfunding 101: Insider tips on all you need to know about it

You must have come across Facebook posts asking you to back someone’s project or Instagram popping up stories of how you can help build a product or maybe when you play Ludo online, all by lending small amounts of money. Millions see these ads, and thousands are motivated to lend, and that’s how crowdfunding works. 

crowdfunding

One of the first examples of crowdfunding could be Shyam Benegal’s movie ​Manthan where each of 5 Lakh farmers funded Rs 2 and became producers of the film. Crowdfunding is if you want people to donate funds to support your cause – be it an upcoming startup, an NGO/non-profit organisation, any particular event, campaign or even artworks like movies or designing. Several investors may donate small amounts that can help you realise your dream project. 

Most of the bootstrapped startups choose crowdfunding routes to build the capital and nurture their businesses. One of the most benefited sectors in India through crowdfunding has been that of health/medicalMore donations have been received on medical expenses and charitable causes while crowdfunding for business or creative art is still gaining a foothold. There are many such crowdfunding events organised where people can support a business idea if they think it’s worth it. 

crowdfunding

We connected with Sana Sabah​, CEO of ​ShuruArt​, who supports art and artists through this online platform. She had initially raised funds through Ketto, and she shared her experience with us, ​“The platform is user-friendly. It was easy for the contributors as well as our team to work through it as tax deductions, commissions, etc. are already sorted out.” There are a plethora of apps to name for generating funds. Ketto, Milaap, ImpactGuru are more renowned for serving non-profit institutions & personal development/health issues, while ​RangDe helps rural and micro-entrepreneurs through peer-to-peer lending. ​Kickstarter, Wishberry, IndieGogo, etc. are some of the marketplace platforms that support new startup businesses. 

Crowdfunding is not limited to these lending sites. In case you don’t want a mediator then use your personal/professional/business social media handles to share the donation links, bank details, UPI, Paytm, etc. to arrange funds from a pool of investors. 

Swati Singh (author, social worker, Hindi editor at Feminism In India & founder of ​MUHEEM​) has done many campaigns through crowdsourcing of funds. She says, ​“My entire organisation functions largely on crowdfunding. I draw my staff’s salaries and plan our future engagements through funds donated to us by generous investors. While we have used sites like Milaap and others, we rely hugely on our social media to build trust and customer base to approach them later as well, and we share details of beneficiaries with our donors.” 

crowdfunding

Crucial points you need to keep in mind:

  • Crowdfunding is regulated by RBI 
  • There are many types of crowdfunding like reward-based funding, donation-based, debt-based, etc. 
  • Equity-based crowdfunding is illegal in India 
  • Apps/sites that solicit funds for the fundraisers can keep a share from the total funds raised as a commission 
  • Only charity & NGO donations are exempt from tax deductions under Section 80C, to both the donor and the fundraiser 
  • Catapooolt, FuelADream, FairCent, and many such apps can empower you to do what you love. These crowdfunding apps and sites have helped bridge the gap between capital investments for business and financial support to artists//innovators/researchers as well as charity donations to the needy.
  • With better accessibility and lesser gatekeepers, things have become easier and quicker, but credibility is important.
  • As a donor, do not fall prey to fraudsters and as a fundraiser, always maintain the transparency.

All illustrations: Courtesy Getty

Yashi Das

Yashi Das is a writing enthusiast & a social media lover who currently elucidates Investment & Personal Finance topics and likes to share her personal views on trending issues.