Crowdfunding for business in India

crowdfunding for business in India
Water Finance & Management

Crowdfunding for business in India is still in very rudimentary state in India. Crowdfunding regulations in India is actually managed by a body called SEBI (Securities and Exchange Board of India). Crowdfunding is something which is now a mainstream way of getting funding in the world. Crowdfunding regulations in India is unfortunately comapratively very rigid as compaired to the other countries. Here are some informations about crowdfunding in India.


SEBI defines crowdfunding as “Crowdfunding is a solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project, business venture or social cause.”   


According to SEBI a company is eligible to raise crowdfunding if it has the following features:-

*It is an unlisted public company.

*It should not be more than 4 years old.

*It should not be in real estate business or in activities which is not allowed under Indian Industrial Policies.

* The companies should have no directors who are stated as defaulters by RBI or CIBIL.

SEBI also states that it should not list itself in multiple sites and it should function under a SEBI registered platform.

It should also give provisions for oversubscription.


There are many types of funding like :-

*Donation crowdfunding: It is the giving of funds with out any intention to get any thing in return.

*Reward crowdfunding: It is the giving of funds by some one and in return the investor gets a reward from the organisation.

*Peer to peer lending: It is ussually done on online sites where they match a investor for a particular organisation and the investor gives a loan and the interest is decided by the platform.

*Equity crowd funding: It is the fundraising by an early-stage organization by offering equity interests to investors online. 

Out of these businesses mostly use Peer to peer lending and equity crowdfunding to fund themselves.



*Small sector business are able to raise the required fund without going through any rigid process.

*Crowdfunding facilities provide new funding avenues.



*Risk of Fraud: Many fraud websites showcase many noble ideas and acquire mass funding and defraud investors.

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