Crowdfunding is the practice of funding projects by raising small amounts of money from a large number of people, typically via the Internet. There are several types of crowdfunding: donation-based, reward-based, peer-to-peer lending, and equity-based. Crowdfunding provides benefits like access to capital and risk hedging but also poses risks like lack of due diligence and default risk for lenders. In India, while equity crowdfunding is still being regulated, other forms like donation, reward, and peer-to-peer crowdfunding are allowed through platforms such as BitGiving, Milaap, and Start51. SEBI is working on a

2. Presented By
Rithvicca M – I MBA
Venkatesh D – I MBA
Guided by
Dr. N. Manicka Mahesh M.Com., M.B.A, M.Phil,
I.C.W.A.I Inter., Ph.D
Asst. Professor
School of Management
SKCET, Coimbatore.
CROWDFUNDING
An Overview

3. IDEA
FUND

4. MEANING
Crowdfunding is the
practice of funding
a project by raising
monetary
contributions from
a large number of
people, today often
performed
via internet-
mediated registries

6. PROVENANCE
• The term “crowd funding” is coined by
entrepreneur Michael Sullivan. Sullivan uses
the term to help explain the launch of his
own project, a failed attempt to create an
incubator for emerging video blogs and
other projects.

7. EVOLUTION
• 1997 : Origin
• 2009 : Kickstarter Launches
• 2010 : Fundraise Introduces First Real
Estate Crowdfunding Model.
• 2012 : The JOBS Act
• 2014 : Crowdfunding the Potato Salad
• 2015 : An Industry in crisis

8. TYPES

9. DONATION CROWDFUNDING
• Philanthropic venture
• Enables individuals to directly share their money
with causes and projects.
• Sometimes they will receive a simple "thank you"
or a special mention – or even a physical item
such as a postcard – however, the pledge is
essentially a donation.

10. Examples

11. REWARD CROWDFUNDING
• It involves people
contributing to a
campaign, and getting a
tangible or intangible
reward in return.
• Types
 KIA(keep it All)
 AON (All or Nothing)

12. PEER TO PEER CROWDFUNDING
• P2P is the practice of lending money to
unrelated individuals, or "peers“.

13. Example

14. Example

15. EQUITY CROWDFUNDING
• It is the online offering of private company
securities to a group of people for investment.
• The term equity crowdfunding is often used to
describe crowd investing into both debt and
equity based instruments.

16. Examples

17. Types Form of
Contribution
Form of Return Motivation of
Funder
Donation
Crowdfunding
Donation Intangible Benefits Intrinsic and social
motivation
Reward
Crowdfunding
Donation Pre
Purchase
Rewards but also
intangible benefits
Combination of
Intrinsic and social
motivation and desire
for reward
Peer to Peer
Crowdfunding
Loan Repayment of Loan
with Interest
Primarily financially
motivated
Equity Crowdfunding
Investment Return on investment
in time if the business
does well
Combination of
intrinsic, social and
Financial motivation

18. GLOBAL SCENARIO
• United states : JOBS act
• Canada : Canadian Securities
Administrators (CSA)
• New Zealand : Financial Markets
Conduct Act(FMCA)
• United Kingdom : Financial Conduct
Authority (FCA)
• India : Security Exchange Board
of India (SEBI)

19. INDIAN SCENARIO
• Equity crowdfunding as of now, is not possible in
India, since it runs afoul of Section 42 of the
Companies Act, 2013.
• Equity crowdfunding as a mechanism for
fundraising by companies is presently being
scrutinised by SEBI.
• However, other forms of crowdfunding viz donation,
rewards and peer-to-peer lending are possible.

20. INDIAN CROWDFUNDING PLATFORMS
• BitGiving
• Millaap
• Ketto.org
• Start51
• Funddreamsindia
• Wishberry.in
• Catapult

22. • Isitha Anand launched BitGiving
in December 2013
• Milaap disburses loan of which
100% goes to the borrowers.
• Milaap is not a charity where
you donate money, but actually
loan them to people who need
it.
• The idea of not making people
dependent, but making them
independent, making them
productive is fantastic.

23. Ateet Bajaj
Founder- Start51

24. BENEFITS
• It provides access to capital.
• It hedges risk.
• It serves as a marketing tool
• It gives proof of concept.
• It allows crowdsourcing of brainstorming.
• Alternative source of financing
• It introduces prospective loyal customers.
• New mode of financing to SMEs
• Facilitates Portfolio Diversification
• It’s easier than traditional applications.
• It provides the opportunity of pre-selling.

25. RISKS
• There are limited follow up mechanisms.
• A lot of the creators posting their projects online have
good ideas and no business expertise.
• Tax laws governing the ecommerce environment are
not clearly defined.
• There is no collateral as in case of Corporate Bonds.
• Venture Capital Funds (VCFs) and Private Equity (PE)
Investors.
• Risk of Investor
• Internet Security issues.

26. Risk –Continued
• The risk of failure is further increased by the
fact that the funding is potentially by
participants who do not have the skills and
experience needed to assess the risk before
investing/lending.
• There is possibility of genuine websites being
used by fraudsters claiming to be promoters of
projects

27. • SEBI regulatory framework
• A quick review of the SEBI paper gives us
pointers to what the possible regulations
could be. Under the proposed terms,
three entities, namely,
–the crowdfunding platform,
–the investor, and
–the issuing company, would be regulated.
Prevailing Scenario

28. • The issuing company is restricted in terms of
its size, the amount of funds to be raised and
its age.
• The investor is restricted in terms of its
accreditation, minimum net worth and, in
case of eligible retail investors, the maximum
investment that may be made overall or in a
single crowdfunding event.
• Crowdfunding platforms are also restricted in
terms of who may set them up and the checks
and balances to be put in place.

29. Effort Never Dies
Thank You