Indian crowdfunding platforms have been quite popular among people who raise money to settle their medical expenses and for people who stand by with a social cause. Crowdfunding in India has largely been focused on these aspects. However, the scope of the crowdfunding industry in India is expanding at a rapid pace. Indian investors and rule makers have a tough time coming to terms with this.
The Indian middle class is particularly traditional about their investments. Most of the investments of an average middle class family is in the form of local land, houses and gold – things they believe will not depreciate in value. However, there are other ways ways in which one can choose to invest their money. Crowdfunding is one such way; paving way for a good investment that is also low risk in nature. For instance, equity crowdfunding is one form of investment that has evolved to become quite popular in many parts of the world.
After President Obama signed the JOBS Act in 2012, it became much easier for small businesses (mostly valued at less than a million) to seek investors online. Equity crowdfunding soon began to be associated with legitimacy in USA. Equity crowdfunding is legal in the UK as well. However, after the Sahara scam, the SEBI passed regulations in India that effectively made equity crowdfunding illegal. This has affected the scope of many small businesses that had plans to rely on crowdfunding.
Not only are Indian business people less likely to take to fundraising on crowdfunding platforms, this chain of events will adversely affect the psyche of the investors who will most likely doubt any venture that uses equity crowdfunding, if at all crowdfunding is legalized. Crowdfunding platforms have to work extra hard to convince them of the legitimacy involved in the process. The same effect is felt in other forms of crowdfunding where the number of online hoaxes has forced crowdfunding platforms into taking their due diligence very seriously.
Thorough verification of every fundraiser is extremely important. Each platform has a different due diligence method rooted in thorough verification. The platforms should also ensure that they know how to handle fraudulent cases, if any breach does occur, the value of their brand will certainly plummet. Battling fraudulent campaigners and navigating through possible competition are two aspects that can be quite challenging.
Indians are not particularly inclined to ask for help, particularly financial help. Asking for financial help is considered to have shameful social repercussions. Somehow it makes a person less worthy in the eyes of society. Therefore, even when a person needs financial assistance, they would rather go to their Mahajan, a moneylender likely to be exploitative and cruel than start raising money through fairer channels. Changing this mindset will take a lot of time and as this changes, the business of crowdfunding in India is expected to boom.
There are plenty of options for people who want to start fundraising. There are around 52 different crowdfunding platforms available to crowdfund and many of these are based in India. The crowdfunding market is set to grow and one cannot forget the fact that the competition between various crowdfunding platforms will only intensify in the coming years. Ultimately, the customers are at the receiving end; with increasing competition comes the increasing need to diversify, to perform better in order to have more customers than their competitors.