Popular pictorial reference of an Idea, is a light bulb. Do you know why?
No? Neither do I. But if you do know, pray tell. For the sake of this article let us assume there are no bad ideas (well, except Green Tea Latte). At the very core of all startups is an awesome idea brought to life by the founders. The journey from the idea to the product can be quite fascinating from an outsider’s perspective. For the founders, this journey can be rather stressful. Of course, there is the motivation and the learning involved too. Almost everybody I meet has an idea, and many of them have an impressive execution plan as well. The one area where the plan comes to a grinding halt is money. Also known as Funding. You can’t always reach out to an investor or even an Angel without something to show.
There is a one word solution to this problem, and it is called ‘Crowdfunding.’ What is crowdfunding? Crowdfunding is the method which allows you to raise money from people around you. Essentially, you are looking to raise small amounts from people around, rather than a huge investment from one or two players. Today, the concept of crowdfunding is extremely popular mainly for two reasons. One, it gives anybody with an idea the resources and the opportunity to execute. Two, it provides for validation of the idea for future growth and investment. Let’s break down the process of crowdfunding into simple steps:
- Have an Idea. History shows that typically hardware or actual physical products have a higher backing on most crowdfunding sites. This is however not a golden rule, so if your idea is an app or service, go right ahead too. As long as you believe in the idea and you honestly think it solves a problem.
- Identify a crowdfunding platform. There are many to choose from, both locally and internationally. Later in the article we’ll cover some of the popular crowdfunding sites in India. Ideally, you should the platform based on probable users. Potential users of your product or service will go on to become your ‘backers’ or ‘investors’. Make sure you understand the terms and conditions of the platform you choose. Some platforms are free, while some charge a fee. Ask if the platform provides support in creating a marketing strategy. The biggest thing is to understand how the pledging works. Many platforms follow the ‘all or nothing’ system, where, you only get the money if you have met your financial goals. What this means is, if you have set a target of Rs. 10,00,00, you need to meet that goal, otherwise the funds raised will be returned to the respective backers. There are other platforms where you get whatever you have raised. Decide for yourself what works best for you.
- Create a campaign. This step is completely open ended and up to you. Your campaign can be simple, or jazzy, anything you think speaks in the personality of your idea. But this is also the most important step, this is you talking and reaching out to all potential investors. Use this space as productively as possible to get people to believe and back your idea.
- Promote and share. Once the campaign goes live, make sure to promote to family and friends and have them spread the word. Take all the help you can get.
- Use the money raised wisely. Give the backers what they deserve.
A quick list of some of the crowdfunding platforms in India:
- Wishberry. Wishberry is a well known platform in India, that specifically targets creative projects. Projects in the field of Art, Theatre, Dance, Films and the likes are found. Wishberry charges you a non-refundable fixed fee to start a campaign on their site. Additionally they also provide paid Digital Marketing and PR services. The ‘all or nothing’ rule is followed by Wishberry.
- Ketto. With one of the Founders listed as the actor Kunal Kapoor, Ketto offers its platform across all verticals. While setting up a campaign is free, Ketto does charge a transaction fee and payment processing fee deducted directly from the amount of the backer. Ketto will give you whatever funds you have raised, regardless of meeting your goals.
- Bitgiving. This platform charges you a flat percentage of the funds you have raised. They don’t have an ‘all or nothing’ policy, but will deduct extra if you haven’t met your fundraising goals.
- The Hot Start. This platform follows both ‘all or nothing’ and a flexible Funding approach. While registration is free, Hot Start and the payment gateway charge a processing fee – a percentage of the amount contributed by each funder.
- There a few others like, Start51, Fund Dreams India.
If you have any specific questions about crowdfunding and how it works, feel free to write in or comment! Happy light bulb popping!