In a country like India, crowdfunding has fast become a preferred medium of fundraising for different social causes and business support. This is because Indian culture has a commendable history of philanthropy, innovation, and community support. Before understanding how does crowdfunding work in India, let’s know what the term means.
You may have heard of “the old adage, ‘every drop makes an ocean’”. Crowdfunding epitomises the saying. In crowdfunding, a group of people come together to fund a particular goal amount. The donors contribute whatever monetary resources they can and help the fundraising individual meet a larger goal.
So, how does crowdfunding work? What is the process, who are the stakeholders? These are pertinent questions to answer if you want to become a part of the online crowdfunding ecosystem, whether it is as a donor or as a beneficiary.
A fundraiser typically involves three stakeholders- the beneficiary, crowdfunding platform, and donors. The beneficiary is the one who starts the campaign and needs the money. Often, a non-profit or another individual can create a crowdfunding campaign on behalf of a beneficiary/beneficiaries. The crowdfunding platform, such as Ketto, hosts the campaign. The donors are those who contribute to the cause through the platform.
In India, there are three types of legal crowdfunding options:
- Peer-to-peer lending
How does one go about online crowdfunding?
Here’s a brief overview of what one needs to do to start a crowdfunding campaign:
- Identify your goal and decide the amount you want to raise? Whom will it benefit? How will it help them? Write the answers to these questions down.
- Choose the crowdfunding platform that is compatible with your goals and budget. Ask yourself what all help you need in running your campaign, and how the platform can help you in that.
- Crowdfunding platforms charge individual fees for hosting, facilitating donations. They can have a hosting fee, transaction fee, and a fee for any other service that they may provide. It is essential to consider these fees when zeroing in on your target fundraiser amount.
- Have a basic idea of how long you wish to run the campaign. Will it be ten days, 100 days? Would you want to extend your fundraiser if goals exceed their initial timeframe? These are questions you need to consider before your campaign goes live.
- What is the story you want to tell about the beneficiary? Your crowdfunding campaign must give some information and facts about the beneficiary to help the audience understand why they should donate to your cause.
- It should make them feel like they can effect change. If you are looking for capital funding, then write about your product or service, and how it is different from other ideas out there. Make your potential donor/funder feel invested. You can add pictures, videos, and links of your work to the story to add credibility and uniqueness.
- Update your campaign with details of milestones. Have you reached half your goal amount? or have you got over 50 donations? Post an update about every milestone no matter how minuscule. Show other campaign visitors that there are people who believe in your cause and wish to help. This may encourage more people to donate.
- Non-profits host a majority of the crowdfunding campaigns. If you are a non-profit with an 80G certificate, then remember to inform your donors that they will receive tax benefits. This can help incentivise donating!
- Depending on the type of platform you have chosen, you will be able to withdraw funds along the way before your campaign ends, or you will receive them at the end of the campaign.
Understanding crowdfunding is easy. So, get your thinking cap on, and make a difference!