What is crowdfunding and how to save money

you did What is Crowdfunding? have heard What type of fund is this and how is it different from normal funds? If you use social media, you’ve probably heard the term crowdfunding at one point or another.

This is a very innovative idea for any startup or company or any venture that requires funding. And with the increasing popularity of the internet, this innovative idea is reaching more and more people with the help of the internet, so now more people are joining it.

Crowdfunding is a very familiar name in the funding world. Many people are not fully aware of it, so today I thought why not explain what crowdfunding is and how useful it is so you don’t have to ask anyone else about it.

So without further delay let’s get started and find out What is Crowdfunding?,

What is Crowdfunding?

Crowdfunding is a practice where money is borrowed from a group of people to complete a project. Whoever invests their money here, they know very well where and why they invest their money. Often this happens only for a specific reason.

This is a way to raise money where the Internet and social networking such as Facebook, Twitter or any other crowdfunding-dedicated website are fully utilized.

It helps small businesses and startups to improve, it will make more people know about them through social media, which will increase their investment base and increase the chances of funding.

Crowdfunding This is not a new concept as it was already existing in our country. For example, donations, which we collect from people around us on the occasion of any festival. It makes it easy for people to do any social work.

Along with this, it is also used in films, social causes and music festivals. It is dedicated in several models such as peer to peer lending.

What are the main components of crowdfunding?

If I talk about the modern crowdfunding model, it mainly has three important parts. Which are project initiators, supporters, platforms. where Project initiator His job is to propose that he should tell people about his project. There is another supporter which can be either individuals or groups whose main task is to properly understand and support a given idea, and the third and final part is appropriate. platform This gives an opportunity to present the idea to the right people so that these three organs can work together to fulfill the idea.

Types of Crowdfunding in India

If we talk about different crowdfunding, there are many types of crowdfunding in India such as debt-based, equity-based, cause-based, reward-based, software value token, donation-based, litigation, etc.

1. Equity-Based Crowdfunding
In this type of crowdfunding, investors often invest a large amount of money so that they can get a large amount of equity in the startup. Equity-based crowdfunding is often used to grow a company.

Crowdfunding is illegal in India. SEBI (Securities and Exchange Board of India) is the only stakeholder that can formulate guidelines to legalize it.

2. Reward-based crowdfunding
Crowdfunding is a form you come across a lot. As you can understand from the name, the investor gets a tangible product in return for his investment. For example, if you are a digital watch startup, you will eventually have to reward your investors in the form of digital watches. It is completely legal in India.

3. Donation-Based Crowdfunding
In this form of crowdfunding, donors can donate to any noble cause of their choice. This donation can be of any amount. Here in the end donors don’t get any reward as reward based.

It is completely legal in India. Here donors donate wholeheartedly for the betterment of their society. For example Ratan Tata who donates a lot from time to time.

4. Debt-Based Crowdfunding
In this type of crowdfunding, you invest in a company’s security (also called a debt instrument) where your goal is to lend your money to the company, and in return the company will pay you back at a certain interest rate. .

Along with this there are two types of secured and unsecured loan instruments. Interest rates are also generally based on the level of risk associated with any particular startup or organization. It is legal in India.

5. Public-Private Partnerships (PPP) which is based on an equity-based model, is mainly used in crowdfunding in India.

Examples of Crowdfunding in India

Although you will find many examples regarding crowdfunding in India, here I am going to tell you about a few examples.

1. A crowdfunding campaign was launched to train the new generation of actors in the right way, with the original aim of preserving the theater art form of Kudiyattam.

2. There is Paralympic Badminton star Mark Dharma who didn’t have money to participate in Parabadminton, so a crowdfund was started, which covered his entire journey and he set huge records in Parabadminton International 2017 in Thailand.

What are the famous crowdfunding platforms in India?

By the way, there are many crowdfunding platforms in India, but only a few of them have managed to carve out their own niche. Here I am going to tell you about the famous crowdfunding platform.

Famous crowdfunding platform ,
Wishberry, Milap, Miracle Foundation, Creepy Crowdcube and Seeders which are doing very well in India.

Wishberry Fund Its main function is to work for creative artists.
there match Works mainly for charities.
Miracle Foundation Works mainly for orphans or orphans.
colored An internet-based peer-to-peer micro-lending platform that provides low-cost loans to rural entrepreneurs across India so that they can run their operations efficiently and easily.
Finally CrowdCube And Cedars Internet platforms that help small companies issue shares. They offer these shares to those registered users who have invested some in those companies for better returns.

Along with this, several platforms have also emerged which are designed to further fund scientific projects, one such crowdfunding is experiment.com and another is open source science projects.

What are the advantages of crowdfunding?

By the way, there are many benefits of crowdfunding, but I have tried to bring you some important ones here.

Crowdfunding, as there is no formal banking system, is not a very risky process.
It is a very efficient system and takes very little time.
It greatly increases the productivity of innovation and entrepreneurship.
With the help of this, if given proper guidance, small scale industries can progress well.
This makes the way of business strategy very easy.
It has many applications as it provides funding for highly creative work such as blogging, journalism, music, independent films and startup companies for further work.
It’s a great way to give something back to the community.
This allows manufacturers to obtain low-cost capital.
Crowdfunding makes it very easy to get more publicity, better customer base and better employees in no time.
It provides a good platform for people to donate and invest, so that the right thing reaches the right people.
It does not believe in caste and gender discrimination and treats all people equally to bring equality in society.
It brings wealth. These platforms capture search and transaction costs so that they can better participate in the market.
It opens the door to better and neglected markets for individual investors.
When investors come here, the value of the companies increases and they also increase the value of the companies.

What are the Disadvantages of Crowdfunding?

As we all know that everything has two aspects, crowdfunding also has two aspects, one is its advantages, which we already know about, now let’s understand its main disadvantages:-

It is a bit risky for new small-investors and entrepreneurs and therefore they often fail in this new venture.
Here there is a risk of reputational fire, if the goals and objectives are not achieved at the right time, it does not succeed in generating interest, which can also be a public failure.
Intellectual property (IP) protection can also be issued to manufacturers involved in crowdfunding because they have to show their final product to the public first, greatly increasing the risk of it being copied.
There is also a risk that repeating the same network of supporters will not garner the right kind of support for the campaign, which can then lead to a major failure.
As it does not come under any regulatory framework, there is always a fear of its public misuse.
As it has no formal banking system, there are more chances of fraud and money laundering.
here Credit eligibility And enforcement risk also remains.
Along with this, there is always a shortage of experts as the ration of freshers is low.
We know that the startup sector in India is still there immature Hence the chances of failure are very high here.

How can crowdfunding be successful?

If crowdfunding is to be completely successful, there are a few things that need special attention.

Such as full transparency and accountability to reduce fraud and illegal activities
Must have.
Social media should be used for public awareness.
It should always be noted that money reaches only the right people and is exposed to the least number of people.
All details correctly documentation So that the collected funds are not misused.
India should have laws to support crowdfunding and entrepreneurship.
People’s attitude towards crowdfunding should change.
private institution The perception should be changed that they are not completely profit oriented.

Along with this, if crowdfunding in India is to succeed, a business-friendly environment must be created.

what did you learn today

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