Skip to main content

Risks in Crowd Funding

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

In December 2012, Srini Swaminathan, a Chennai- based teacher, planned to raise ₹ 2 lakh for Teach For India, an entity that works in the field of education, to help his students buy books. He cycled 1,000 km and ran 200 km to raise funds. Swaminathan is also the city director for Teach for India in Chennai.

"So far, I have raised funds for 16 library kits," he says. After designing a fund- raising page and testing it himself, he composed tweets with a specific web link and requested for re-tweets. He clarified he was accountable for the donations and donors could ask him for project updates. " To keep it financially clean, I do not accept any donations in my personal account. Either online crowd funding platform Wishberry. in, handles all transactions or donors directly pay Pratham Books ( an NGO that publishes affordable books for children)," explains the 32- year- old.

Crowd funding is not new to India although it is at a nascent stage. The idea became noticed after filmmaker Onir raised part of the funds for his film I Am through this route. " And, in 1976, Shyam Benegal collected ₹ 2 lakh from 500,000 farmers to fund Amul's ad film Manthan," says Anshulika Dubey, co- founder & COO at Wishberry. in.

Today, there could be various reasons to consider crowd funding — entrepreneurial ventures, social cause, higher studies, music albums or videos, gigs and festivals, publishing books, mega events or college projects. Some use crowd funding to support their existing venture pick up and/ or, to reach out to the targeted audience. There are different types of crowd funding available ( see box). However, in India, the most popular way of securing it is the rewards or returns based funding, apart from approaching friends and family for money. Promising rewards seems to be more effective in attracting donors. Here, a campaign gives out exclusive tangible or non- tangible incentives such as VIP access to events, signed merchandise, producers credits on a project and so on. " Also, a reward based fee structure can cater to a wide range of funding requirement, from ₹ 1,000 to ₹ 10 lakh and beyond," says Rinkesh Shah, founder of Ignite Intent, another crowd funding platform.

The legal and regulatory infrastructure required to enable equity or revenue- based crowd funding in India is complicated and almost unsuitable for a project owner and the contributor. It is not advisable for a first- timer. Approaching a crowd funding platform for help is the latest route to get funds. Of course, there is afee you pay for the services, either from the time of pitching the idea or once your project takes off. " Pitching (an idea) is free ( on Ignite Intent's site).

Ignite Intent levies charges depending on the amount generated. Charges could be anywhere between seven and 20 per cent varying from platform to platform," adds Shah. Crowd funding platforms also help with marketing strategies, mentorship, consulting and legal advice.

However, securing a bank loan could be easier at times, say experts.

Therefore, do not fall for it just on hearsay. Question yourself before taking this route – what is the mass appeal of your project? Will the crowd like to get associated with it? Are you agood salesman to draw people to your project? While the upside of this route could be numerous, here are the possible negatives you should keep in mind before jumping in to the fray.

Says angel investor Vishal Gondal, "The project owner needs to first be clear and passionate about his project idea. He needs to communicate the same very clearly to supporters / backers, stating the project horizon and the money required for it. He should know why he thinks he requires the amount he plans to raise. It is a difficult task convincing so many people to invest money in you." Also, because you may have to pay them back.

Investors might lose confidence in you if you revise target amounts or any other aspect of the project. According to Ruchi Dana, founder of PikAVenture, a crowd funding platform, one big risk is the entrepreneur might miscalculate the amount required. " To avoid this risk, make sure the platform you use is credible and the projects on the platform have been carefully vetted," she says.

Delivery is another problem for project owners. Once a person has gone to the crowd/ public to ask for funds, he better deliver within the timeline promised. Crowd funding makes you answerable to the people who have contributed to your project, says Dubey.

Crowd funding helps collect small amounts from a large number of investors/ donors. That might be disadvantageous for a small business.

Given that small investors may help with small amounts, there are chances you won't get the desired amount generated to get the project off the ground. Instead, bigger sums from fewer investors might work.

If you aren't able to generate enough money in the stipulated time through a crowd funding platform, you might not get the money at all. You might need to extend your deadline and restart with convincing more investors. Crowd funding would be a better idea for a one- time special project.

However, for a long- term funding strategy, it is just not viable. An angel investor or venture capitalist may be a better idea, although the two can't be directly compared to crowd funding. Crowd funding could also expose your business to risks. For instance, it requires you to give project details to investors or online. In a way, it could mean feeding ideas to competitors about your business.

Srini Swaminathan, a Chennai based teacher, planned to raise ₹ 2 lakh for Teach For India, an entity that works in the field of education, to help his students buy books

Be sure of your project idea and delivery time, as you might need to pay back your investors

|Equity- based: Investors receive a stake in the company, that is, follow a revenue- sharing model. Angle investors or private equity and venture capitalists follow this model |Lending- based: Investors are repaid for their investment over a period of time, either just the principle amount or with an interest on it. Many times when individuals secure funds from friends, relatives or acquaintances, they could follow this model |Reward- based: Investors receive a tangible item or service in return for their funds. Depending on the amount of contribution, different rewards could be offered like a ' thank you' note or tokens of appreciation, a keychain, contributor's name on the credits. Increasing number of movies are being financed this way |Donation- based: Contributors donate funds mostly for charities and other non-profit organisations /causes. However, this represents a small proportion of overall crowd funding activity

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Rs 14,000 Crore worth of tax free bonds coming soon from NHAI , PFC

  NHAI, PFC file prospectuses, coupon rate not yet decided MORE debt investment options have opened up for investors with AAA rated tax-free bonds worth over Rs 14,000 crore lined up. The National Highway Authority of India ( NHAI ) and Power Finance Corporation ( PFC ) are offering Rs 10,000 crore and Rs 4,033.13 crore worth of tax-free bonds, respectively, as per prospectuses filed with the Securities and Exchange Board of India (Sebi). Of a Rs 5,000 crore issue by PFC, Rs 966.87 crore has already been raised through private placement on September 28 and November 1. Tax-free bonds give investors tax-free return on any amount invested. In another kind of bonds, the long-term infrastructure bonds, investments up to Rs 20,000 are tax exempt, that is this cap amount can be deducted from the taxable income. Accordingly, the NHAI prospectus has clarified that only the amount of interest from -and not the actual investment on -its new bonds will be tax-free. "NHAI's publ...
Read more

Change in Fund Manager for some of HSBC Mutual Fund Schemes

Buy Gold Mutual Funds Invest Mutual Funds Online Download Mutual Fund Application Forms Call 0 94 8300 8300 (India) However, this facility is only available to Unit holders who have been assigned a folio number by the AMC.   HSBC Mutual Fund has announced that the below mentioned schemes shall be managed by the new fund managers as stated in the table. The effective date will be July 02, 2012.   Amaresh Mishra 's will be Vice President and Assistant Fund Manager. Having done a Post graduate diploma in Business Management and Bachelor of Chemical Engineering, he has over seven years of experience in Equities and Sales.   Mr. Piyush Harlalka's designation shall be Vice President- Fixed Income. Qualified as a C.A., C.S. and holding M.B.A.( Finance degree), he has over six years of experience in Fund management and ...
Read more

How EEE and EET Tax affect Retirement Investments

  An important factor while choosing a financial product is its taxation , and for retirement savings, this is even more important as the sums involved are usually life-long savings. Here's a look at the current tax treatment of three major long-term retirement planning products, which are - Employees' Provident Fund (EPF), Public Provident Fund (PPF) and National Pension System (NPS). EPF The tax treatment is EEE, which means your money is exempt from taxes at the time of investment, accumulation and withdrawal. At the time of investment, the tax deduction is under the limit of section 80C of the Income-tax Act , which is currently Rs 1.5 lakh. Partial withdrawals are also tax-free if made after 5 years of continuous service. If withdrawals are made before 5 years of service, 10% tax will be deducted at source. Exceptions have also been provided for transfer of amount and conditions wherein the subscriber is unemployed for more than 2 months or the loss of job was beyond th...
Read more

Personal Finance: You can insure your wedding

But luck may not always be on your side. With the frequency of such attacks, as also other risks and unforeseen accidents growing, a wedding insurance is something you may want to look at if a marriage is being planned in the family. Event insurance plans like this is still in its nascent stages due to low awareness. And given the sacred nature of the ritual, nobody wants to discuss or think negative. But as wedding spends and risks grow, it makes sense to cover the potential monetary loss. The policy in those countries even covers the loss of the wedding ring, the wedding gown not reaching on time and even the expenses/loss due to late or non-appearance of the photographer which may mean staging the event once again for the photograph. In India, most insurance companies — including ICICI Lombard General Insurance, Oriental Insurance, Bajaj Allianz and National Insurance — offer wedding insurance. The policy is tailor made to individual requirements and needs. The sum insur...
Read more

DSP BlackRock MidCap Fund

Best SIP Funds Online   HOW HAS DSP BlackRock Small & Mid Cap Fund PERFORMED? With a 10-year return of 14.61%, the fund has outperformed both the category average (12.34%) and the benchmark (10%) by a good margin. Should you invest in DSP BlackRock Small & Mid Cap Fund? This fund invests predominantly in mid-cap stocks but takes a sizeable exposure in small-caps as well. The focus is on nascent companies with high growth potential. The fund manager places emphasis on quality and avoids inferior businesses even if these look tempting from a valuation perspective. Over the past year, the fund portfolio has grown, having added to some of the underperforming sectors like chemicals and healthcare. Its portfolio churn has come down significantly. The heavily diversified portfolio is run completely agnostic of its benchmark index— most bets are from outside the index—which can at times lead to bouts of underperformance as seen in the recent years....
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now