How can crowdfunding realise your dreams?

Small contributions are collected from a group of people towards a cause. We spoke to people to find out how crowdfunding works

Some high school students of Bombay Scottish school in Mumbai wanted to raise funds to enable heart surgeries for needy children in Wadia Hospital, the largest pediatric hospital in India. The children ran a campaign on Fueladream, a crowdfunding platform. As donations poured in, they managed to raise ₹60 lakh in just 21 days.

Crowdfunding is not only providing an avenue for social causes; many entrepreneurs with innovative ideas are also using this avenue to raise funds in the initial phase. You can also use this platform to finance medical expenses, publish a book, stage an event, help the society, and so on.

How it works

Through crowdfunding, small contributions are collected from a large number of people, comprising friends, family, fans, customers and individual funders. Information regarding the campaigns is hosted on online crowdfunding platforms and advertised through social media networks of the campaigners.

There are three types of crowdfunding — the first category is equity crowdfunding where equity shares are given in lieu of the funds given. The second is peer-to-peer lending where you can give or take loans from peers through online platforms, and the third is where donation is solicited from the crowd. SEBI does not allow equity crowdfunding. The third model where people donate towards a cause or buy a product at a subsidised price to help entrepreneurs, has caught public fancy.

The more popular crowdfunding sites are Ketto, impactguru and Fueladream. Fund-raising through these platforms is quite simple.

“Those wanting to raise funds through the platform need to come to the site and click on the ‘start a fund-raiser’ button,” explains Varun Sheth, CEO and co-founder, Ketto. “A form opens up that needs to be filled. You need to give as much details as possible, attach all the necessary documents and submit the fund-raiser. Within 24 to 48 hours, a team-member from Ketto will get in touch with you and there is a conversation about what needs to be added ordeleted to the campaign.” The campaigners are appraised on how the fund-raising is done and what they need to do during the campaign. After that, the campaign goes live.

Once live, the campaigner needs to share the campaign through his/her social media network — facebook, twitter, WhatsApp, instagram etc, and ask friends and family members to re-share it on their social media groups and networks. Once the link starts getting shared, the awareness grows and people start donating. The donation is made to the payment gateway on the crowdfunding website through debit or credit card, internet banking, Paytm, UPI, e-wallets, cheques etc. “There is a domino effect as more and more people start sharing the campaign, giving it a multi-level marketing effect,” says Sheth. Ketto charges a fee of 5 per cent of funds raised from individuals and corporates and 6 per cent from NGOs. Payment gateway charges are 3 per cent and GST is levied on the fee.

For entrepreneurs

Ranganath Thota, Founder, Fueladream, says that many start-ups that make innovative products are also approaching crowdfunding platforms.

“If a new innovative product, say an electric bike has market value of ₹65,000, it is given to those buying from Fueladream platform for ₹29,000,” he explains. “The bike is given to the buyer after two months and the start-up uses the funds raised to manufacture the bike.”

The recent campaign on Fueladream by the company making Fego Float, is a case in point. This is an innovative bike and car seat that promises a smooth ride for riders on pot-holed Indian roads by inserting an air-bed between the passenger and the vehicle. The promoters of Fego Float wanted to raise ₹2 lakh, but they were able to raise over ₹40 lakh as the product clicked with the buyers.

Viswanadh Malladi, CEO and co-founder, Fego Float, says that there were two reasons why he chose crowdfunding. “One, we wanted a substantial amount of money to kick-start the operations. Banks are unwilling to provide funds unless we show some revenue. They also want collaterals and guarantees. Two, the people buying here feel that they are a part of the company; that they are helping in making the company grow. It helps greatly in building brand awareness.”

Medical emergencies

Many are also using this route to finance large medical expenses involved in surgeries. Crowdfunding came to the rescue of Harsha Chellani, a Mumbai-based home maker. Her son Virat, now six-and-half years old, had been diagnosed with cerebral palsy.

She wanted to raise funds to take Virat to the US for treatment with Doman International Institute, Philadelphia, a non-profit organisation dedicated to teaching and empowering parents in the development of their child. “We have been on the institute’s programme since October 2015. Viraat is on an intensive treatment programme wherein the three of us are required to go there once in every every months (twice a year),” says Harsha.

With the cost of treatment amounting to $10,000-15,000 on a recurring basis, she wanted to explore all avenues of funding. “A trustee of a charitable trust that I approached for help, suggested raising funds through crowdfunding. I zeroed in on Ketto and everyone there has been very helpful,” says Harsha. “I posted my campaign on Facebook, WhatsApp and mail and the response has been wonderful. Complete strangers have come forward to donate,” she adds

In her latest campaign, she targeted raising ₹9 lakh, but managed to raise close to ₹10.7 lakh. The surplus can help towards extra cost needed for Medicare in India, says she.

Due diligence

But it’s also important to watch out of miscreants wanting to exploit this route. To avoid getting duped into donating for a non-existent cause, it is best to stick to the larger crowdfunding platforms, where the checks for filtering the campaigns are more stringent.

“Out of every 10 people who come to us, we select only two. We do not work with many NGOs because many of them have operation cost of 52 per cent. We only work with organisations with cost of operation below 15 per cent,” says Thota.

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