Crowd-funding is the pooling of resources by a group of people for a common goal. Crowd-funding is not new to India. There are many instances of organisations reaching out to common people for funding. However, the emergence of platforms that promote crowd-funding is fairly recent to India. These platforms help start-ups or small businesses meet their funding requirements.
Crowd-funding has been in India for quiet a few years now however still the quantum of funds collected is very much low as compared to the crowd-funding platforms in USA and Europe. From that perspective, it may not be wrong to say that the Indian crowd-funding space itself is in nascent stage.Crowdfunding may seem like an easy shortcut for the entrepreneur in need of funding; in theory, as long as you have a good idea, people from all over the world will come together to help you make your idea a reality.
Unfortunately, it’s a bit more complicated than that.
Before you pour your hopes into launching your business with a hugely successful crowdfunding campaign, be sure to bear these seven important considerations in mind.
1. Different platforms have different rules.
Crowdfunding in India is a new and is growing in an alarming rate.In India, there are large numbers of crowdfunding/ crowd sourcing platforms available. Different platforms also have different requirements for who can post—for example
- DreamWallets.com (Present across 16 categories including social, creative, startups, Travel, literature etc.)
- WishBerry.in – Primarily into creative space (E.g. Movies, Music etc.)
- Ketto.org (Primarly into Social Causes)
- Bit Giving (Primarly into Crowdfunding, PR, Media Relations, Social Media)
2. Intellectual property rights.
If you’re posting your idea while it’s still in the early stages of conception, be aware of intellectual property rights. If you don’t file for a patent and you post your idea haphazardly, someone else might improve upon your design, prototype it, and patent it before you ever have a chance to follow up. This isn’t to say that the crowdfunding market is full of idea poachers, but it pays to be extra cautious. Along the same lines, make sure your idea is fully fleshed out before you even consider crowdfunding as an option—know all your costs and have a plan for production early on.
3. You won’t get all the money.
First, recognize that most platforms will take away a percentage of whatever you earn in your campaign immediately as part of their standard fees. After that, you’ll have to worry about taxes. Keep this in mind when setting your initial goals; you’ll have to raise an amount above and beyond what you actually need, and use the rest of the money to pay for the opportunity. Also consider what you’ll have to spend to initially promote your campaign in the first place, which brings me to my next point.
4. Campaigns don’t sell themselves.
We’ve all been sold the idea that crowdfunding is a kind of natural selection that allows the greatest ideas to thrive and flourish, while weaker ideas work themselves out of the system. The thinking here is that people will naturally stumble upon these good ideas, support them on their own, and the rest will take care of itself. Unfortunately, this almost never happens. The most successful campaigns are the most active campaigns, where funders actively engage with their prospective funders, post new content, and syndicate material that leads new people to view the campaign. In short, you’ll have to advertise your crowdfunding campaign like you would your business in general.
5. There are many other paths to funding.
Crowdfunding is one of the newest and arguably, means of generating funding for a business idea, but that doesn’t mean it’s the only effective one. Be sure to look into other options to fund your business, and chart out the pros and cons of each. For example, you might pitch the idea to potential investors in your friends or family, or to angel investors and venture capitalists. You might consider investing your own personal capital, or opening a line of credit with a financial institution. Don’t limit your options unnecessarily; do your research.
None of these considerations are meant to illustrate that crowdfunding isn’t effective, or that you should rule it out as a possibility. On the contrary, crowdfunding is a miracle of modern technology that has allowed thousands of people to achieve greatness in one context or another.
However, It’s hugely important to realize that the system isn’t perfect, and you’ll need to address any misconceptions you have about crowdfunding, before you count on it for more than it’s worth.