As India has become a financial hub, a lot of new and established companies have popped up, and as many as 50% of them have not been able to attract investors for their initial public offering.
The process for acquiring equity in a new company can be quite tedious, expensive and cumbersome.
One can only hope that, after the completion of their initial round, they will be able to find an investor willing to take the risk and fund their business through their own money.
But the more risky, and the more challenging, the business might be, the more likely it is that they will fail.
This is why a number of entrepreneurs have started looking at crowdfunding to get their business off the ground.
There are a number different types of crowdfunding, but all of them are meant to be simple, low risk and very efficient.
The goal of any crowdfunding campaign is to raise capital from an investor who has invested in a particular business or a particular asset.
As an entrepreneur, it is your responsibility to make sure that the business is ready for the start of operations.
For this, you will need to have a website that you can host on and that can connect with other investors who have participated in the process.
If you are not a registered promoter, then the only option is to sell the business on its own.
This will mean that you will be taking the risk of losing money on the project.
There is no doubt that many people have been inspired to start their own businesses, but few have succeeded in getting the business off of the ground successfully.
But how do you make sure your crowdfunding campaign works?
Here are some tips that will help you navigate the entire process of launching a crowdfunding business:1.
Understand what the crowdfunding campaign entails2.
Create a website with a simple and easy to use interface3.
Identify the crowdfunding platform4.
Build a campaign5.
Launch your campaign6.
Verify the success of your crowdfunding project7.
Sell the business9.
Profit from your crowdfunding effort10.
Be clear about the requirements of your investor1.
Read the rules.
You will need some basic knowledge of the Indian crowdfunding rules to be able see how the process works.
In case you are looking for a way to raise funds from an angel investor or a venture capital firm, here are some of the guidelines that you should be familiar with:2.
If the company is under 10 years old, it can be funded by the government3.
The company should have a net worth of at least Rs 100 crore4.
The crowdfunding campaign must be organised within one month5.
The investor must have an equity in the company that exceeds 50% in the project6.
The funding amount must be under Rs 100 lakh7.
The project must be in a certain stage8.
The investment must be at least two years old9.
The funds must be made available within three months10.
The venture must be an accredited investment company11.
There should be a clear separation between the investors and the project12.
The business must have a minimum annual turnover of less than Rs 5 crore13.
The fund must be managed by a certified and licensed advisor14.
The target of the fund should be at the level of Rs 1 crore15.
The total amount of the crowdfunding contribution must be between Rs 5 lakh and Rs 100 crores16.
There must be a minimum of two investors.17.
The investors must have invested at least $500,000 in the business18.
The campaign must end within six months of the launch19.
The startup must have at least a minimum gross revenue of over Rs 1 lakh in the first six months20.
There can be no more than five investors21.
The fundraising amount must not exceed the maximum amount for the project22.
The equity in your startup will be invested in an eligible company23.
Investors must have made investments in Indian companies24.
The money must be deposited in a bank account in India25.
Investors have to provide their details in the campaign.26.
You can only sell the equity to the investors through the crowdfunding website27.
You cannot sell the shares directly to the public.28.
Investors can only buy shares through the public market.29.
The companies you are aiming to raise money from cannot be the same as the company listed on the crowdfunding portal.30.
You must include a clear statement of the type of investment that you want to fund31.
The amount of funding will be made public by the crowdfunding company.32.
There will be a period of two years for the company to come online.33.
You should provide a clear prospectus for the investors who will participate in the crowdfunding.34.
There has to be an investor profile.35.
Investors will be allowed to deposit cash only.36.
The platform is not to be used for the sale of shares, but only for the fundraising of equity in any entity that is accredited or registered under the Investment Industry Regulatory Authority of India (IIRRA).37.
Investors are not