Crowdfunding is a common method to raise funds for a project or a business. Those raising the funds can collect the money from a huge pool of investors through online platforms. It is a promising avenue for startup companies and upcoming businesses, helping them access various sources of funds. Crowdfunding for startups is an innovative way for businesses to connect with potential investors and customers. While fundraising is the prime objective, crowdfunding is an excellent way to validate a business idea and receive feedback from the community.
There are various types of Crowdfunding for startups in India including donations, debt, rewards and equity.
Tapping Crowdfunding as a Source of Funds for Startups
It can be a daunting task for entrepreneurs to perform long pitch decks, attend multiple pitching rounds and face several competitors for funding. In recent times, crowdfunding has emerged as a promising source of alternate financial instruments on a global scale, that extends beyond the conventional tire of owners, relatives and venture capitalists. Nowadays, Crowdfunding for startups in India has gained serious traction, helping enlarge the scope of a business. As compared to several open-source models of funding, the capital collected through crowdfunding ultimately belongs to the firm raising it and remains at its disposal for further use.
It will not be wrong to say that the application of technology, along with the popularity of social media is one of the most significant accelerators of the crowdfunding landscape today. However, at present crowdfunding remains in its early stages in India, with a strong need to escape investment funding in emergencies.
Need for Crowdfunding
Today, India is one of the largest startup ecosystems all across the globe. Crowdfunding can play a major role in helping Indian startups attain a steady flow of investments to take them to the number one spot. Among the most sought-after financing options are bank financing and venture capital. However, they pose a certain credit constraint on entrepreneurs. This is why, there is a strong need to broaden the range of financing options available for the startup ecosystem for their continued growth, innovation and employment generation.
In the Indian context, the potential scope and prospects of Crowdfunding for startups are largely underutilised. The regulators and policymakers of the country are yet to make a note of the uncompromised benefits of regulated crowdfunding on the attempts of a startup.
Types of Crowdfunding
Peer-to-Peer Lending
In this type of crowdfunding, a pool of investors loans money to a startup with the understanding that the money will be repaid to them along with interest. It is quite similar to a borrowing made from a bank, with the only difference being that the borrowing is made from multiple investors.
Equity Crowdfunding
It involves the sale of a stake in a startup to several investors in return for their investment. The idea is very similar to venture capital.
Reward Based Crowdfunding
It involves collecting donations from individuals for a startup in return for the expectation of receiving a non-financial reward in the future.
Donation-Based Crowdfunding
In this type of crowdfunding, several individuals come together to pool a large sum of money for a startup, with no obligation to receive any returns.
Revenue Sharing Crowdfunding
This model involves sharing of future profits of a startup or its revenue in return for funding.
Debt Securities Crowdfunding
Under this model, individuals can invest in debt securities issued by the company, such as a bond.
Hybrid Models
This type of crowdfunding model allows startups to combine the benefits of more than one type of crowdfunding.
Benefits of Crowdfunding for Startups
There are countless ways in which Crowdfunding for startups can act as a boon. Let us discuss a few of them.
1. One of the most essential benefits of crowdfunding is that it helps pool the money that a startup requires for setting up a shop and running its business. It is a major boon for startups who are unable to access traditional sources of funding for any reason.
2. Crowdfunding for startups is a way to obtain intense exposure. Running a crowdfunding campaign means inviting the world to watch a business. It is a great way to create the right degree of buzz around the business and gauge the interest of people who may be willing to connect with the startup.
3. Crowdfunding is a great way to validate a business idea. Crowdfunding campaigns can be useful to test a business idea before launching it on a full-fledged scale. It is a great way to examine the interest of the market towards the offerings of the startup.
4. Crowdfunding is an innovative way to get access to a large pool of investors, who may be interested in investing in the business and watching it grow. Crowdfunding can help raise funds of large quantum which can help a startup kick off the ground easily.
5. Crowdfunding is an impressive marketing tool since it becomes easier to raise awareness about the business among people. This is a great way to get more people interested in the business.
Financing through Crowdfunding for startups is a great way to finance a startup.
How to Get Started with Crowdfunding For A Startup?
Crowdfunding for startups is a popular way to raise the required funds for a business. Here are a few tips to help interested startups begin their crowdfunding journey.
· Before launching a crowdfunding campaign, it is vital to perform the required research and understand the crowdfunding process. Since there are quite a lot of platforms out there which host crowdfunding campaigns, it is essential to select the one that is suitable for the startup.
· Begin by creating an attractive video. It is the prime way in which a startup can put its image out there for everyone to see. The video should be exciting enough to stir the attention of the viewers and get them excited about the product and service offerings of the startup.
· A startup should aim to set a very realistic fundraising goal for the campaign. When a startup uses a very high goal, people may be less likely to donate towards it. However, setting the goal too low may also deter people from coming together to pool resources.
· People are more likely to give something towards a campaign if they expect to get something in return. Offering rewards is a great way to offer incentives to people to support the startup. Rewards in this case should be something that people may be willing to get.
· It is necessary to promote a crowdfunding campaign as much as possible. Startups should make use of social media, email marketing, or other channels to spread the word about the campaign.
It takes some planning and effort to make a crowdfunding campaign successful.
Conclusion
Crowdfunding is an innovative way to raise funds from a large number of people through an online platform. It is gaining global traction due to the possibility of tapping a large pool of investors. Startups need to ensure that a crowdfunding campaign ticks the right boxes to be able to run a successful campaign. Firstly, a startup must have a great pitch for its campaign. It should be clear, convincing and concise. Moreover, it should be able to explain what a business does and why people should invest in it.
What remains is designing a great campaign that directs the audience towards it and convinces them to collect funds for the startup. By following the steps mentioned above, any startup can tap into the potential of crowdfunding and reap its numerous benefits. There are a few factors which will impact the quantum of money that a startup can raise through crowdfunding. One of them is the platform through which the funds are being raised.
Ketto is an innovative platform for Crowdfunding for startups. It is very easy to use and offers an array of tools which can be used to raise funds for a startup. With a strong commitment towards customer service, the platform offers all-around support to its patrons. Visit https://www.ketto.org/new/crowdfunding today and experience the trustworthy services of the platform in one click.
