However, after SEBIs (Securities and Exchange Board of India) new guidelines, a lot of questions have been raised as to whether crowd-funding will be able to achieve what is worth since equity crowdfunding holds no existence in India now. But the massive response that reward based crowdfunding portals are getting, clearly illustrates that Indian markets are investment ready, thereby proliferating the effect. Hence, emerging start-ups, social causes, events, tech innovations and even real estate can look at it as one of the major avenues for fundraising.

So, the sectors that can expect a lot from crowd-funding are as follows:

1. Social Causes-  People around are indulged in some or the other way to benefit the society. For such social causes, crowd-funding can be extra beneficial as it can fuel up the entire initiative by gauging financial help and stitching more hands to join the initiative or cause.

Source- The Hindu Business

2. Innovation Start-ups-  For start-ups, reward based crowd-funding has become the easiest way to reach out to masses in the first phase of launch itself. This in indeed instilling them with lot of confidence in themselves as well as the product because they are not just raising funds it is also fetching them with a POC (PROOF OF CONCEPT) at a very early stage which helps them in company evaluation. Also, when a start-up raises funds first via a crowd-funding platform and then reaches out investors, it gives investors a lot of confidence in the product because if masses are ready to support, then it is quite evident that the product will be a big hit post launch.

3. Tech Products- Young students, tech geeks, coders, hack-a-holics are working hard to come up with the most creative, hard to think and innovative products in the market to make lives simpler and easier. Crowd-funding is the best way to let people know about these innovations and also enable them to become a part of the product life cycle by creating a backbone for the innovation and be the their first set of early adopters.

Source- oberlo

4. Events and Festivals- We see a lot musical festivals, religious festivals take up the crowd-funding way, to easily access the crowd, generate visibility and sell out tickets early. Music festivals such as Control Alt Delete, DIY Day and Bangalore Open Air festival are a few examples of events that were almost entirely funded by crowd contributions in 2014. One such recent event that was also crowd-funded was Cultural Fest organised by Art-Of-Living, which gauged a lot of mileage through this initiative.

5. Films and Music Albums– “Fans have the power to make or break a celebrity” is very rightly said. They are those who with their power can also launch music albums and fund movies that they wish to. With recent developments in the crowd-funding and crowd-sourcing industry, music albums, movies, theater shows, plays are proving to be crowd pullers because they can showcase to their audience that once launched, they can be huge success.

6. Authors and Books- Getting a book crowdfunded is the new trend for self-publishing authors. Crowd-funding is the best way to procure pre-selling orders for books that have not yet launched, which also helps in generating a fan base and relieves you from the stress of tight funds. Therefore, before you even launch your book, you are already there on people’s shelves and all of this by sincerely leveraging the power of the crowd, who can also become your potential investors.

7. Artists and Art Projects- Very recently, an SRCC student group named “iOTA” launched their crowdfunding campaign to promote Indian art and artists whose DIS-ABILITY is their ABILITY. This campaign gauged a lot of eyeballs and momentum amongst the youth. Similarly, many other artists are looking at Crowdfunding as a decent opportunity to get traction, visibility and worth for their art.

8. Real Estate– Real estate developers admit that crowd-funding is a double-edged sword and needs to be handled carefully. Currently real estate is going through a tough phase, suffering from liquidity woes, lack of transparency, project delays, long gestations period and lack of regulation in the Industry but once crowd-funding enters the picture, all these woes and grievances are taken care of automatically. And according to the back builders and developers, the ROI from crowd-funding in Real Estate has proved to be it to be the best investment so far.

All this very clearly illustrates that Crowdfunding has become the mainstream alternative to conventional and orthodox modes of raising funds. Therefore, as per my perspective of crowdfunding, it promises a bright future and remarkable growth in the times to come, because crowd-funding not only ensures that investors fund the campaign, but people who believe in the project also become a part of it.

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Due to such unfortunate events the Banning of Unregulated Deposit Schemes Bill, 2018, which aims to check unscrupulous entities from cheating gullible investors, was introduced in the Lok Sabha in July last year. This proposed legislation to check Ponzi schemes can make crowdfunding illegal and financing for startups more difficult unless the concept of an “unregulated deposit” is explicitly defined in the bill, according to M Veerappa Moily, chairman of the parliamentary standing committee on finance, that submitted its recommendations on the bill to the Parliament earlier this month, on January 3.

Even though the panel appreciated the intent of the bill, it expressed its concern over unbridled powers the proposed law gives to enforcement agencies by not defining “unregulated” deposits explicitly.

According to the proposed bill, except deposits that are regulated by regulators, all other fund-raising activities will fall within the definition of “unregulated” deposits.

As per the bill, legitimate deposits, are overseen by the Securities & Exchange Board of India (SEBI), National Housing Bank, Pension Fund Regulatory and Development Authority, Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (IRDAI), Employees’ Provident Fund Organisation, the ministry of corporate affairs and other schemes offered by state governments.

“There are also financing arrangements and channels of financing, involving entities in the informal sector including startups and small entrepreneurs, which may by ‘default’ fall under the ambit of ‘unregulated scheme’ due to absence in the Bill of a coherent, clear-cut definition of ‘unregulated’,” the report said.

“We have submitted our recommendations. Now, it is up to the government to apply its mind and accept or reject our recommendations,” Moily said.

This is what Subhadeep Bhattacharyya, co-founder, jubi.ai, a Mumbai-based tech startup has to say on the subject

Subhadeep said, “In India, the angel ecosystem is not well defined. Their funding cheque-sizes are often very small. Most of the investors are now consolidating their investments instead of funding more number of startups. The global ecosystem is well ahead of us. At this point in time, a bill in its present form can have a negative impact on startups. This is the time for India to nurture startups.”

Shruti Rajan, a partner at the law firm Cyril Amarchand Mangaldas remarks and shares her suggestions on the bill.

Shruti said, “The solution to that could be to introduce exceptions based on ticket size, nature of the investor, etc in this bill. But as and when SEBI introduces a regulatory structure for crowdfunding, one would have to go back to this legislation and bring in necessary amendments as well.”

She further added, “A law like this, therefore, only reinforces the importance of protecting that last-mile investor/depositor. Once it becomes law, the bill does not prohibit fund-raising from NBFCs (non-banking financial companies), MFIs (microfinance institutions), etc, even where formal banking channels are not available. In a way, this will also encourage small ventures to seek formal lines of credit rather than unorganised pools of capital for funding. All this serves the larger financial inclusion goal very well.”

Sources:

Proposed law on ponzi scheme to hurt crowdfunding for startups: Panel

Main Image: © Indian Express, file photo

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