Experts predict that fundraising will be the next big thing in business. Bank loans, corporate investments, and venture capital are just a few ways to raise money. Online crowdfunding, on the other hand, is by far the easiest and safest way to get money from people who support your cause. When managed properly, it has proven to be an excellent alternative funding source for various reasons and urgent financial requirements. Crowdfunding platform in India driving traffic to the campaign, providing donors with secure payment options, and operating the website are all services for which they typically charge a service charge of a percentage of the funds raised. Websites that accept donations take a set percentage of the total amount raised.
What is the concept of crowdfunding?
The concept of online crowdsourcing was developed in the West. The recent COVID-19 outbreak has dramatically increased the popularity of crowdfunding among the Indian populace. However, because the term is new, many people still need to learn about its potential and whether it is permitted in India. Through this essay, we briefly clarify the various types of online crowdfunding and our nation’s laws.
Who is permitted to fund a new business and how much they can contribute are subject to restrictions in most jurisdictions. These regulations are intended to prevent unsophisticated or non-wealthy investors from risking excessive savings, much like the restrictions placed on investing in hedge funds. Investors in new businesses risk losing their principal due to the high rate of failure.
What are the basic rules and regulations?
This is the most fundamental type of crowd sourcing when a reward is not anticipated. These typically have a fundraising objective or support a social cause. This method is not heavily regulated. In this case, investors receive something in exchange for their investment, such as a product or benefit. It is crucial to remember that shares or any other kind of stock granted will not be viewed as compensation. The government does not place a lot of restrictions on this form. When investors receive ownership in the company in exchange for their contribution, this is known as public equity funds.
Is it legal implications in India?
SEBI does not regulate rewards resource-sharing because it does not involve repaying monetary incentives. Numerous prominent co-finance platforms in India use it, which is legal. If the rewards promised aren’t delivered on time or aren’t what was promised, rewards crowdfunding can sometimes cause problems. In such instances, donors frequently have no recourse for redress because there is no applicable law or regulation. Most crowdfunding websites have strict due diligence policies that guarantee the delivery of rewards and the authenticity of campaigners. However, if a campaigner fails for any reason, the platforms are in no position to take action. Crowdfunding Platforms in India for NGOs fundraising reduce expenses by roughly 60%, which has led many organizations to adopt it as their first choice when raising money for any cause, particularly in the wake of disasters. However, in equity crowdfunding, the shares are offered much earlier. Typically, start-ups are funded by angel investors or by taking out a bank loan and equity is sold when the company becomes economically viable.