June 2016 Edition of BEACON, A Monthly Newsletter by SIMCON. Inside this issue: About Us Our Team INDUSTRY ANALYSIS : Advertising Industry Brand Analysis: IKEA Case Study Analysis: Philips Concept of the month: Crowdfunding

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Contents
ABOUT US
OUR TEAM
INDUSTRY ANALYSIS
BRAND ANALYSIS
CASE ANALYSIS
CONCEPT OF THE MONTH:
CROWD FUNDING

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OUR PRESENCE
ABOUT US
VISION
The SIMCON - SIMSREE consulting club is an
initiative started in 2012 for those students in
pursuit of excellence in management consulting
and strategic management. Aimed at creating
awareness among the students about consultancy
as a discipline, the club strives to maintain strong
relations with top consultancy firms and provide
platform to craft highly skilled & competent
consultants from SIMSREE. The club is a resource
for information about consulting and a place for
students to obtain real-world consulting experience.
SIMCON provides an avenue of interaction among
faculty, students and alumni through competitions,
live projects, guest lectures, and conclaves. For
this purpose the club has also been publishing its
monthlynewsletter– BEACON (BE A CONSULTANT)
and maintains a FACEBOOK PAGE where latest
news and development in the consulting industry
are posted.
MISSION
To create awareness amongst the students
about consulting industry & its latest trends.
To maintain strong relations with top
consultancy firms.
To provide platform to craft highly skilled &
competent consultants from SIMSREE.
To provide exposure to students via
competitions, live projects, guest lectures &
conclaves.
Contributions invited:
To make this feature a successful effort, we seek continued involvement and contribution from our readers, that is YOU. We
invite articles, research papers, and trivia on themes related to consulting. Be it industry news, consulting trends, a joke, a
cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts and mail your
entries to simcon.simsree@gmail.com.
Best Regards,
SIMCON - SIMSREE CONSULTING CLUB

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OUR TEAM
ARPIT agrawal
ASHAYDHURI
HUZEFABODABHAIWALA
KARANCHOPRA
NAMANCHANDAK
praCHIKORE
SARANGKULKARNI
YOGESHMOHATA

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ADVERTISING
INDUSTRY ANALYSIS

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Introduction
The Indian advertising industry has evolved from
being a small-scaled business to a full-fledged industry.
The advertising industry is projected to be the second
fastest growing advertising market in Asia after China.
The Indian government has given tremendous support
to the advertising and marketing industry. Advertising
expenditure is likely to increase in the financial
sector, driven by Reserve Bank of India (RBI) policies
which could result in a more favourable business
environment. Also, proposed licences for new banks
and better market sentiments render the advertising
and marketing industry in India a fertile space.
Market Size
India’s advertising industry is expected to grow at a
rate of 16.8 per cent! year-on-year to Rs 51,365 crore
(US$ 7.54 billion) in 2016, buoyed by positive industry
sentiment and a strong GDP growth of 7 per cent and
above.
Print contributes a significant portion to the total
advertising revenue, accounting for almost 41.2 per
cent, whereas TV contributes 38.2 per cent, and digital
contributes 11 per cent of the total revenue. Outdoor,
Radio and Cinema make up the balance 10 per cent.
The online advertising market in India is expected to
touch Rs 3,575 crore (US$ 538.09 million) in 2015
from Rs 2,750 crore (US$ 413.92 million) in 2014. Of
the current Rs 2,750 crore (US$ 538.09 million) digital
advertisement market, search and display contribute
the most - search advertisements constitute 38 per
cent of total advertisement spends followed by display
advertisement at 29 per cent, as per the study.
The Internet's share in total advertising revenue is
anticipated to grow twofold from eight per cent in
2013 to 16 per cent in 2018. Online advertising, which
was estimated at Rs 2,900 crore (US$ 436.50 million)
in 2013, could jump threefold to Rs 10,000 crore (US$
1.51 billion) in five years, increasing at a compound
annual rate of 28 per cent.
It is interesting to note that Indians paid Rs 25,200
crore (US$ 3.79 billion) to access the Internet in 2013,
a figure greater than the Rs 22,300 crore (US$ 3.36
billion) that print medium garnered in subscription
and advertising.
History Of Indian Advertising
Advertising In India
Advertisers in India have reached 75 percent of the
population, using television as a media device, and
the rest of the population is reached via radio. India,
however, favours newspapers, magazines, television,
radio, billboards and business publications to convey
messages about various products. It is the advertising
agencies' advertisements which portray ideas to the
audience – agencies that compete to be ranked as the
best. The world's leading advertising agencies– Ogilvy
and Mather, J. Walter Thompson, BBDO, Lintas,
McCann-Ericsson and Leo Burnett have successfully
made a mark in the Indian market. The advertising
agencies are ranked in order of their creativity as well
as the expertise to deliver the content and message.
There are many parameters on which they are graded,
and these are just a few.
The top ten advertising agencies of India
• Ogilvy and Mather Limited
• Mudra communications Pvt. Ltd
• Lintas India Pvt. Ltd
Great Eastern Shipping Company delivers Kamsarmax Dry Bulk Carrier Jag Aakash to the
buyers.2015
2008 JointventureannouncedwithDOFSubseaASA,Norway
GEShippingwinscrudesupplyorderforMRPL.GEShippingacquires26-pcstakeinUSL2005
2003
Great Eastern entered into a joint venture agreement amongst Qatar General Petroleum
Corporation(QGPC) andUBAir Pvtltd.andunitedHelichartersPvtLtd.2002
1998
MarksthebeginningofnewmediumInternet1990
1976
1970
1920
BDattaram&CoclaimstobetheoldestexistingIndianagencyinGirgauminBombay1905
Classifiedadvertising
Ads appears for the first time in print in Hickey’s Bengal Gazette (India’s first newspaper
1800
Entersthefirstforeignownedadagencies(JWT)
ConceptofcommercialprogrammingacceptedbyAllIndiaRadio
CommercialTelevisioninitiated
BombayDyeingbecomesthefirstcolourTVad
The Shipping Corporation of India, Varun Shipping and Great Eastern Company (Gesco)
joined hands to transport liquefied petroleum gas (LPG) imported on free-on-board (FoB)
basis.
Great Eastern Company bagged the lighterage contract from IOCto move crude oil on the
eastcoast.

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• JWT (Hindustan Thompson Associates Pvt. Ltd.)
• FCB-Ulka advertising pvt. Ltd
• Rediffusion DY&R Pvt Ltd
• RK Swamy BBDO Pvt Ltd
• McCann-Ericsson India Ltd
• Leo Burnett
• Grey worldwide (India) Pvt Ltd
Types Of Advertising
If you ask most people what is meant by "type" of
advertising, invariably they will respond by defining it
in terms of how it is delivered (e.g., television ad, radio
ad, etc.). But in marketing, type of advertising refers to
the primary "focus" of the message being sent and falls
into one of the following four categories
• Product-Oriented Advertising
• Image Advertising
• Advocacy Advertising
• Public Service Advertising
• MoMark Services, a mobile based customer
engagement platform for small and medium
businesses, has raised US$ 600,000 from YourNest
Angel Fund and LNB Group, to scale up its product
offerings and talent acquisition.
• Tata Motors has appointed renowned football
player Lionel Messi as the global brand ambassador
for Tata cars and utility vehicles globally, with an
aim to tap the youth market and expand visibility
and presence of Tata Motors in newer markets.
• Advertising agency J Walter Thompson has
launched its global digital agency network 'Mirum'
in India which will provide services such as
strategy and consulting services, campaigns and
content, experience and platforms, analytics and
innovation and product development, with the
target to increase non-traditional media revenues
to 40-45 per cent from 35 per cent currently.
• DDB Mudra Group has planned to launch ‘Track
DDB’, a brand that addresses the data-led world of
marketing communications, which will provide
services like creative, data and digital analytics,
database marketing, CRM, digital and mobile
marketing in India.
All India Radio (AIR) has appointed ‘releaseMyAd’ as
a virtual agency to let advertisers book ads for all of
AIR’s station online.
Google is all set to help India implement Prime
Minister Mr Narendra Modi's "Digital India"
initiative, and the government has a well laid out plan
to realise it, said Google's Chief Internet Evangelist
Mr Vinton G. Cerf. Digital India is Rs 1.13 trillion
(US$ 16.58 billion) government initiative that seeks
to transform the country into a connected economy,
attract investment in electronics manufacturing, and
create millions of jobs and support trade.
As companies look for better productivity
and increasing efficiencies in a tough market
environment, market research firm Nielsen has
launched its first consumer neuroscience lab in India
at its Mumbai headquarters. The neuroscience lab
will augment the company's research capabilities
in packaging and research, improving their
effectiveness.
MPS North America LLC, the US subsidiary of
Bengaluru-based publishing solutions provider MPS
Ltd, has acquired Electronic Publishing Services
Inc. (EPS), a New York-based firm with interests
in content creation, art rendering, design and
production. The deal will allow MPS to strengthen its
Recent Developments
• Indian Railways has appointed Ernst & Young
(EY) as a consultant to discover its advertising
potential, which is in line with the Railway Budget
proposal of increasing non-fare earnings to over
Rs 5,000 crore (US$ 733.6 million) in five years.

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foothold in North America.
Jaipur-based Girnar Software Private Limited, which
owns and operates the website CarDekho.com,
announced that it has raised US$ 50 million in its
second round of funding. The funding was led by
Hillhouse Capital with participation from Tybourne
Capital and Sequoia Capital.
ZipDial has become the first Indian technology
product startup to be bought by Twitter in what is the
third such deal led by a global corporation following
the acquisitions by Facebook and Yahoo. The ZipDial
deal is expected to cost Twitter US$ 34-35 million.
This feature is expected to help Twitter reach people
who will come online for the first time in countries
such as Brazil, India and Indonesia, mostly using a
mobile device.
Telecom major Axiata's subsidiary, Axiata Digital
Advertising (ADA) has formed a joint venture with
US-based advertising tech firm Adknowledge to
get into the US$ 47 billion digital ad market in the
Asia Pacific region and has identified India as a 'key'
market.
Government Initiatives
The Governments of India and Canada have signed
an audio-visual co-production deal which facilitates
producers from both countries to harness their
collective artistic, technical, financial and marketing
resources, and encourage exchange of culture and
art between the two countries. The agreement is also
likely to lead to better promotion of Indian locales
for shooting films. "The agreement will also lead to
the transparent funding of film production and boost
export of Indian films into the Canadian market," as
per the agreement.
India and Poland are seeking to enhance cooperation
in the digitisation and restoration of film archives. This
was decided in a meeting between Mr Bimal Julka,
Secretary of Information and Broadcasting, India,
and a delegation from Poland led by Ms Malgorzata
Omilanowska, Secretary of State. The two countries
will form a joint working group that will help improve
cooperation in fields such as student exchange
programmes, animation, films and digitisation, among
others. Mr Rajyavardhan Singh Rathore, Minister of
State for Information & Broadcasting, has announced
that Indian government has planned to increase
advertising spend on the digital platform which will
help increases the government’s presence in digital
media.
Road Ahead
The advertising and marketing sector in India is
expected to enjoy a good run. E-commerce companies
are expected to dominate marketing trends in 2015.
Growth is expected in retail advertisement, on the
back of factors such as several players entering the food
and beverages segment, e-commerce gaining more
popularity in the country, and domestic companies
testing out the waters. The rural region is a potentially
profitable target. For instance, in the automobiles
sector, the focus of two-wheelers on rural areas could
mean more launches and more advertising spends.
The telecom sector could see growth as well, driven by
better smartphone penetration and service providers
cutting down on prices.
References
WPP-Advertising, Wordstream-Online Advertising, ADWeek-
Advertising, Marketing Zone-Types of Advertising, Masable-
Advertising

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IKEA
BRAND ANALYSIS

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Introduction
IKEA, stylish yet affordable furniture provider, is today
one of the world’s most successful retailers. Even after
Mr. Kamprad relinquished his participation in day to
day operations at IKEA, company has embraced his
thoughts and values. Kamprad, pioneer of flat-pack
furniture (Ready-to-assemble), had ordinary middle-
class origin which propelled his respect for money,
minimum wastage, innovative and cheaper solutions.
Later this was imbibed into IKEA employees and it
became Ikea culture.
History
Mr. Ingvar Kamprad started his business at the age
of 17 when his father awarded him some money
for doing well in school. The name IKEA stands for
initials, Ingvar Kamprad from Elmtaryd, Agunnaryd,
his village in Sweden. Initially, he started selling pens,
wallets, watchesand later by 1947 he started selling
furniture as well. He believed in providing high
quality products at low price. But due to the low prices,
furniture manufacturers began protesting against
IKEA. This forced him to design furniture himself.
Also due to the ban, he had to procure raw material
and furniture supplies from Poland. With this, he not
only overcame the hurdles but could provide furniture
at even lower prices than before.
After the quick and significant success in Sweden,
in 1963, Ikea opened its first store outside the
country in Norway. IKEA followed and made the
self-service method successful. IKEA stores didn’t
have sales team in store to persuade people to buy
particular product. Though, to help people service
desks and written information about the products
were available. Customers could walk down the store
and select products. A Label was given to them for
each product selected by them. At the delivery dock,
they could collect all the products in flat-pack form.
Also, customers were required to arrange their own
transportation. Although, they could buy car racks or
rent a van for the same. With the self-service method
IKEA was able to keep the prices in check.
Advertisement to show that Ikea products are so easy
to assemble that even baby can do it
IKEA has presence in over 27 countries and has 315
IKEA group stores. It procures products from over
53 countries across world. Sourcing in bulk and then
storing furniture in parts in warehouses has made it
possible for IKEA to sell at lower prices. IKEA had
presence India since 1983, as it was sourcing from
India. Though in 2013, it announced that it would
open a store in India which would be based out of
Hyderabad.
Product Portfolio
IKEA offers everything which you would need to
furnish your home. It has everything from bed-room,
bathroom to living room furnishings, plants, racks etc.
And all this is available in different styles. It also has
children section which includes everything from room
décor, toys, tableware, safety etc. Company proudly
mentions that all the products follow EU norms and
they are safe to use. It has around 9500 products
currently listed with it.

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Ikea Timeline
2008
Ikeatoopenits1ststoreinIndiaasGovernmenthasallowed100%FDI.2017
2000
IKEAontheweb
TheIKEAwebsitewww.IKEA.comislaunched.1997
1986
Ikeagroupisformed.
TheIKEAGroupisformedanditsownerisafoundation,theStitchtingINGKAFoundation,
whichisbasedintheNetherlands.
1982
1963
1958
1951
Mr.Kampradstartedsellingfurnituremanufacturedbylocalmanufacturers.1947
Mr. Kamprad started Ikea with selling a mail-order business selling pencils, postcards, and
othermerchandise.
1943
ThefirstIKEAstoreopensinSweden
ThefirstIKEAstoreinÄlmhulthad6,700squaremetresofhomefurnishings!Atthetime,it
wasthelargestfurnituredisplayinScandinavia.
IKEAarrivesinNorway
ThefirstIKEAstoreoutsideSwedenopensinOslo.
NewpresidentandCEO
Mr.KampradretiredfromGroupManagementtobecomeanadvisortotheparentcompany
INGKAHoldingB.V.andAndersMobergbecomesPresidentandCEOoftheIKEAGroup.
IKEAcustomerscanshoponline
E-shoppingislaunchedinSwedenandDenmark.Sincethenmanyothermarketshavestarted
FirstIkeacataloguewaspublished
Marketing Strategies
Company focuses on its mission “creating everyday
better life for more people”
Attractive names used by Ikea to name its products
Ikea product catalogue
This was used by Mr. Kampard since the inception
of IKEA, even before he forayed into business of
furniture. It is still one of their major contributors of
marketing activities. People can tear the pages and
makeacollageofit.Thiscatalogueisdistributedworld-
wide with around 190 million copies in 27 different
languages and 56 different editions displaying over
9500 products.
But, in China local competitors copied its products
using product catalogue. Ikea stopped its product
catalogue and counteracted by advertising on Chinese
Social Media and micro-blogging website Weibo to
target their desired market segment.
Mobile App
In 2014, IKEA introduced Augmented Reality
feature into its iOS and android applications.
Through this, users could see how furniture would
look in their room. It gave users 180-360 degree
view of their room and 3D rendering of furniture. It
helped users to make more informed decisions. This
also improved user engagement for company and
represented IKEA as an innovative company.
Click here to watch commercial
Low Price
Lowpriceistheimportantdriverindesigningproducts
at IKEA. They also focus on quality, sustainability and
looks but price is the central factor. They decide the
target price and design solution around it. Since 2000,
every year they have reduced prices of furniture by
2-3 %. They succeeded in doing so by investing a large
amount of their net saving into improving processes.
During recession in 2008, they reinvested 100% of
the net savings into business so that they could keep
prices low. Despite low prices, Ikea has maintained
10% growth. This helped them attract customers even
during economic turmoil.
Advertisements
Ikea’s advertisements are in line with their values and
philosophy. An advertisement created by German
advertising Agency, Thjnk Hamburg, was a reflection
of it. It created RGB billboard which was displaying 3
different messages with different color. Thereby saving
space and expressing more.

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Competitors in India
UrbanLadder, Pepperfry, Fabfurnish, Amazon India
are currently well established in India and have only
online presence. Customers don’t have to assemble
products. In online space they are the biggest
competitors.
Nilkamal is a well-known brand in India for decades
and it was a pioneer in the segment. It provides the best
quality products and it sells online through Amazon
India, Snapdeal, Fabfurnish, Pepperfry etc. Though,
the products are in higher price category.
Local Competitors in India are well-known to provide
customized products and comparatively cheaper one.
They also provide free delivery and assembly which is
well sought after in India.
STP analysis
Segmentation
Based on Geographies
It divides customers based on the regions like US,
Europe, Latin America, Asia etc. Sizes of homes,
choices of people differ across the countries. Tailored
content for each market is necessary.
Based on Income
People from different income groups have varied
choices and their propensity to buy and how regularly
they would buy also changes accordingly.
Based on Culture
People with different cultures have distinct spending
habits. Even the choices of products as well as materials
change with this.
Based on Lifestyle
Urban, semi-urban and rural lifestyles are significantly
different. Sizes of their homes and furnishing styles
differ as well. Also, material and color choices vary
accordingly.
Targeting
The main target of IKEA is “Generation Y” or
urban young aspirational people. The people who
would love to decorate their homes with stylish yet
affordable furniture. This generation would not use
same furniture for decades. As soon as they reach to
different income level or as per trend they would junk
the old furniture and look for new. They provide these
people with stylish, unique and comparatively cheaper
options. Parents having kids between age group 0-3,
3-9 and 9-12 are targeted with different options.
They are targeting larger middle class market with
affordable and good quality products. US customers
want big beds and closets whereas Chinese apartments
are small so they need smaller sizes. So, designs were
changed accordingly.
Positioning
In U.S. and European countries Ikea positioned itself
as a brand which sales furniture at prices so low that
morenumberofpeoplecanaffordit.Abrandproviding
good quality and stylish products at low prices is the
image in minds of people. Ikea prices were higher
than discounters like Aldi but lower than West Elm
and Bed, Bath & Beyond. This price helped them to
position themselves as a brand for wide middle class.
But in emerging countries like China this positioning
confused buyers in the beginning, as local
manufacturers were manufacturing products at lower
prices, also they could copy the design at cheaper
costs. So, in such countries it positioned itself as an
aspirational brand providing western styles. Though,
it kept the prices low thereby sticking to its mission.
The same strategy would be followed in India.
The IKEA concept is based on their market positioning
statement “Your partner in better living. We do our
part, you do yours. Together we save money”.
Current macro-economic conditions in India have
created conducive environment for foreign investors.
100% FDI is also allowed in processed food category
and government has allowed Ikea to open Cafés in its
stores as well. Also, local sourcing norms have been
eased. With the ease of FDI laws, current condition is
much favourable for Ikea to enter Indian market.
References
Fast Company - Most Innovative Company, Business Insider
– Ikea’s Strategy, Business Today – LBS Case Study – Ikea in
China, Strategy Business, Economic Times, Ikea

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MTV
BRAND ANALYSIS
PHILIPS
CASE STUDY ANALYSISPHILIPS
CASE STUDY ANALYSIS

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Background
The large screen television segment of the consumer
electronics industry was about eight years old and
growing steadily in the 1990s. The $2 billion U.S.
consumer electronics division of one of the largest
global CE conglomerates, Philips Electronics, had
founded the mass market for large screen television
but had not turned a profit in 7 years, although annual
sales exceeded $120 million. In spite of this Industry
CAGR was averaging about 7%, the division's CAGR
for the past 3 years was -12%. The division had
experienced a quality crisis and retailers had started
migrating to competing brands.
Philips' share had eroded from more than 60% to less
than 25% among the top 20 companies in the space.
It was recommended by the CFO that the division
be shut down and the company had begun shifting
resources to other divisions.
A recently appointed executive to the Philips team was
assigned to come up with an exit strategy. However, he
discovered in less than a month that the root cause
of the profit problems was slow factory throughput
caused by an unnecessarily complex, difficult-to-build
product line.
How Corporate Culture Led To The Problem
At the time Philips’ talented sales team was strong and
had undue influence on product development. Under
sales team’s direction the product line had expanded
into a very complex state that attempted to address
every major retailer’s desire for something unique.
Differing brands, models and feature sets proliferated.
Production runs became smaller and smaller.
Changeover times increased. Parts commonalities
diminished as the product and engineering teams
became unable to keep up with a growing and ever-
changingstreamofproductchangesfromsales.Factory
throughput slowed to a crawl. Quality plummeted,
sales and margins shrank and the division's morale hit
bottom.
Next Steps
The recently appointed executive analysed the market's
growth trends and profitability and then approached
the CEO and CFO to show how the division could be
made profitable. He was told to create the company's
first business team and brought together leaders
from all the functional areas. He presented a bold
turnaround plan focusing on a complete overhaul of
the product line and the imminent shut down of the
current division. The Idea was to decrease costs by
increasing factory throughput, the turnaround plan
centred upon all new approaches to product styling,
parts commonalities, branding and merchandising.
Bluntly asking for their support, he assured the
demoralized team that if they agreed to this new
product line and marketing plan, he would freeze the
new product line for one year and not allow sales to
make any changes of any nature.
This Is What Happened Next
• The new business team became joined at the hip
and leaders from each functional division met
every week. The financials were reviewed first in
each meeting. The remaining part of the meeting
was devoted to the new product line development
and understanding the financial implications of
each decision impacting the new line.
• The new product line was created swiftly with
the main focus on parts commonalities and
differentiation that could be easily appreciated by
consumers and retail buyers but did not require
unusual changeover times in the factory.
• National TV advertising, retailer merchandising
and sales promotions were mainly focussed at in

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the new marketing plan.
• The turnaround leader hit the road with the top
sales people and helped convince key retailers to
give the new product line a try.
Results
It took a year to execute the turnaround and another
year for it to reflect in sales results. At the end of that
second year sales were up slightly, market share was up
and the division had turned in a $7 million operating
profit, after an operating loss of $5 million the year
before, for an overall improvement in IFO of $12
million. Of all the divisions in the $2 billion company,
this division was one of two that turned a profit that
year.
Key Lessons
1. Profitability gets negatively affected due to
extremely complex product lines
2. Marketing must be strong enough to control
product development
3. Gross profit can have Marketing and Product
Management as watchdogs.
4. There are often hidden profits waiting to be
unleashed
References
Harris Consulting

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CROWD FUNDING
CONCEPT OF THE MONTH
CROWD FUNDING
CONCEPT OF THE MONTH

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Introduction
Crowdfunding is funds which are collected in small
amounts from multiple investors through a web-based
platform or social networking site for a specific project,
business venture or social cause. Entrepreneurs who
are looking for funds for their projects can raise
money through general public. This concept is gaining
importance at a very high rate. Entrepreneur can
list his/her idea on crowdfunding platforms. These
ideas can be from different domains. Project can be
a creative project like music, film, book publication
etc. or a project can be a public-interest cause like, a
community based social or co-operative initiative or
project can also be a business venture.
Types of Crowdfunding
Crowdfunding is basically divided into four types.
These types are as follows
Donation Crowdfunding
In case of a donation crowdfunding, projects by
entrepreneurs are generally related to social cause.
Contributors in this case do not expect any return
from their investments.
For example, In the US, Kickstarter, Indiegogo etc. are
some of the platforms that support donation based
crowdfunding.
Reward Crowdfunding
Reward crowdfunding refers to solicitation of funds,
wherein investors expect some existing or a future
tangible reward. For instance, reward can be an
existing or a future consumer product. Most of the
websites which support donation crowdfunding
also enable reward crowdfunding, e.g. Kicktstarter,
Rockethub etc.
Peer to Peer Lending
In case of peer to peer lending, there is a platform
where lenders and borrowers can meet. Lenders and
borrowers register themselves on platforms. Lenders
can view the list of borrowers and borrowers can
also view the list of lenders. Interest rate for a loan
is decided by the mutual agreement of lenders and
borrowers.
Some of the leading examples from the US are Lending
Club, Prosper etc. and from UK are Zopa, Funding
Circle etc.
Equity Crowdfunding
In Equity Based Crowdfunding, project of an
entrepreneur is generally a business venture.
Contributorsinvestinthistypeofventuresbecausethey
expect certain returns. So, when contributors invest in
this type of ventures certain equity percentage is given
to them. Generally, businesses which are in early stage
prefer this type of crowdfunding. Businesses which
are planning to raise funds through this mode, give
an advertisement online on crowdfunding platforms.
Traditionally, Start-ups are funded through private
equity, angel investor or loan arrangements with a
financial institution. Any offering of public equity
takes place only after the product or business becomes
commercially viable. However, in Equity based
Crowdfunding solicitation is done at an earlier stage.
Some examples of equity crowdfunding platforms are
Syndicate Room, Crowdcube and Seedrs.
Advantages Of Crowdfunding
1. Crowdfunding provides a new mode of financing
for start-ups and SME sector. It also increases
flows of credit to SMEs and other users in the real
economy.
2. Financial crisis of 2008 resulted in failure
of number of Banks and, after that the Basel
III Capital adequacy norms have been made
applicable to Banks. As a result, banks are having
more restrictions now-a-days when it comes to
lending money to SMEs, small businesses as the
risk associated with them is very high. Hence, there
is a need for funding for SME through alternative
sources.
3. SMEs are able to raise funds at lower cost of capital
without undergoing through rigorous procedures
in this mode.
4. Crowdfunding provides new investment avenue
and provides a new product for portfolio
diversification of Investors.
5. It increases competition in a space traditionally
dominated by a few providers (providing finance
to Start-ups and SMEs).
6. The operators of a crowdfunding platform may
involve themselves in performing due diligence

18. VOLUME 04BEACON
June 2016
16
ISSUE 06
of projects which are listed or to be listed on the
platform. In this way, platform can maintain the
reputation of the website.
How it Works?
Basically there are various crowdfunding platforms
available. Entrepreneurs can join these platforms by
registering themselves on the platform. Contributors
also join the platforms by registering themselves on it.
Entrepreneur then lists his idea on this platform which
is visible to all the contributors. Contributors look at
the idea and if they are willing to invest into that idea
they can do that. It is not compulsory for contributors
to always invest in an idea.
Reference
Consultation paper by SEBI on Crowdfunding