An introduction to crowd sourcing
Interestingly, the concept of crowd funding is growing its popularity among the active online community for various causes such as natural disasters, education support to under privileged, social impact, even to venture own start-ups or micro finance institutions.To develop a better understanding let us look at few examples in the recent times that have highlighted how more and more people are getting connected to respond or react to a particular cause in real time in the Indian community:
The 16 December 2012 gang rape case in Delhi when millions came on road.
Mygov.in, an initiative of the Prime Minister’s Office, for citizens to engage directly with the government.
The inception of an entire political party AAP is the results of crowd sourcing.
So, we are getting in to a connected world that will make or break the society if this huge platform of crowd sourcing is not used sensitively.
The Evaluation of Crowd sourcing and how it becomes a viable option for small time entrepreneurs:
How many of us go to railway station to buy tickets or to a travel agent for our flight bookings anymore. Gone are those days of queuing for hours, rather, we do things like that in just few clicks on the internet from the comfort of home or while on the move. At the end of the day, time is money.
This would have not been possible without a big picture and awareness about what the technology can deliver? The credit goes to the big pictures that were born and emerged from the young, ambitious entrepreneurship spirits from the first wave of e-commerce businesses which resulted into today’s big companies like MakeMyTrip, Yatra, Naukri, Shaadi.com, Snapdeal, Flipkart, and the list of such once a small time entrepreneurs goes on and on who have now matured and created a trend for the next wave of start-ups serving enterprises. This is a very healthy trend that is taking the shining India to global market with rapid expansion.
The evaluation of crowd funding
I read with great interest about a market research study which showed that only 20% of Indian population is active online user and yet they are the second highest registered Facebook users.
I wonder this data will be far more interesting when that 20% will rise to higher percentage of online user like 50% or so. The number will reach to a half a billion young, energetic, and well informed active internet players. This will certainly make a huge impact on social issues, politics and in the economy.
In a study conducted by the National Association of Software and Services Companies (Nasscom) 2014, India ranked as the fastest growing and the third largest start-up ecosystem in the world. Off course, we are still quite behind and miles to go as the number of start-ups tapping the stock markets has remained low.
Regardless, when we look at the evaluation of crowd funding, it is not a fairly new concept as we have seen since our independence there were many businesses that has explore the opportunity of crowd funding through creative projects. The Reliance industries have raised the capital from thousands of its small investors, and I recollect one of the greatest movies by Shyam Benegal “Manthan” which showed the impact of small contributions from a large number of people.
In an interview with Economic Times (June, 2015), Varun Sheth the founder and chief executive at Ketto.org, an online crowd funding platform for social causes estimates the size of the global crowd funding market to be in the region of $16 billion and is confident of India’s place in it.
So, What’s In It For Small Time Entrepreneurs:
In a recent interview with Business Standard, Rangan Varadan Founder & CEO, MicroGraam states that Crowd sourcing of fund finding greater acceptability now as he is seeing more interest by wealth advisory firms and financial institutions to invest in MicroGraam and expecting the loan portfolio to grow to Rs 50 crore next year, as compared to Rs 12 crore in the past year.(Business Standard, April 2015).
Although the concept of crowd funding is in developing stage in India compared to large markets like the US, China and the UK, but the viability for small time entrepreneurs in this popular trend of crowd sourcing is huge mainly in the wake of emergence of social media as a key platform for such activities. According to the Economic Times (24 June, 2015), Capital market regulator SEBI is expected to come out soon with crowd-funding norms to help young entrepreneurs and small groups of people to raise funds.
This norm would be a welcome step and a promising avenue for small time entrepreneurs as this particular regulatory framework has the following restrictions: The business entities that are already established and listed on an exchange will not be allowed to raise funds through crowd funding.
The business with existence for four years or more would not be allowed to participate in crowd funding activities.
Any business group with turnover of more than Rs 25 crore will be barred from raising funds through crowd funding.
Thus, this will reduce the market complexity and competition from the established business groups and indeed will provide some promising opportunities for small time entrepreneurs to raise more early-stage funds that are needed to fill the gap and support the ecosystem.
Fortunately, this is the time of Young Indian entrepreneurs where we are seeing the favourable market dynamics and we are leading with big picture and momentum on the Indian start-up ecosystem.
The crowd sourcing success on the internet :
After weeks of research in the area of crowd funding- an emerging trend in India, I have come across some fascinating facts that further strengthens the belief that entrepreneurs not constrained to 5-7 year payback windows anymore, rather, they can pursue models with high creativity, democratized invention, and positive externalities in society. Thus, it would be interesting to look at some successful stories that created a huge impact in this space.
Catapooolt –
Catapooolt is founded by Satish Kataria in July 2013 who has more than 14 years of strategic management experience. Satish had a strong vision of enabling much better consumer engagement with project creators.
The Success of Catapooolt:
It helped raise an upcoming feature film ‘Cut-Throat’ an amount of INR 10.20 lakhs, which is still today the record of highest amount raised for a project on any crowd funding platform.
Catapooolt is the official crowd funding supporters for AAP that has contributed to its success during the initial stages of AAP campaigns to spread awareness about the party.
Catapooolt has more than 3,000 registered users within a short span of 2years and is expected to garner strong traction as we unveil series of innovations with respect to the model.
Reference: Jubin Mehta, Your Story, 08th April, 2015,
Helpost -
Amol Goel is the founder of the Chandigarh-based startup Helpost . Helpost is an online network that aims at connecting people seeking help with those who can provide help. Goel describes that the idea came from his real life experience when he was looking for a plumber and tried all the available resourced from Google to Just dial with unproductive results.
The Success of Helpost:
Helpost managed to reach out to two lakh people through their help initiatives, all while still working in their pilot phase.
They are now present in 35 cities across 17 countries.
Helpost received seed funding of $250,000 and is in talks with another investor for another $5 million.
Helpost now has a team of about 150 people, with its headquarters in Delhi housing 25. They are now working to launch an app. Reference: Mehek Chawla, ET Bureau, 8th June, 2015. http://economictimes.indiatimes.com/small-biz/startups/know-how-indian-startup-helpost-is-crowd-sourcing-help-ranging-from-accounting-to-plumbing/articleshow/47583213.cms accessed on 12/07/2015).
WitWorks –
WitWorks was founded by the partnership of three IIT Kharagpur graduates which was launched in 2013. Basically, Witworks picks up the innovative and productive ideas shared by the registered or interested community and then decide on the best 3 ideas to implement. In order to keep the community connected with the projects, WitWorks shares 5% of the final sales with the product’s designer.
The Success of WitWorks :
Within 1 year it has a 1,000-strong community that helps the founders to pick up the best viable projects.
One of the ideas has already been turned into a product. Rewind — a simple device that keeps earphones from getting tangled. The founders realized that this common problem had not been solved yet.
The young firm is targeting Rs 2 crore in revenue this fiscal and is in talks with angel investors to raise funds.
The Crowd funding business model:
1. Donation model – In this model, individuals make a financial contribution to a project without any expectations of financial benefits.
2. Lending model – In this, the investor will loan money to the project with the expectation of being repaid under the terms and conditions agreed.
3. Investment model - The investor receives an equity stake in the project. Conclusion There is no doubt that crowd funding is rapidly being looked upon as a serious way of raising funds for startups and new businesses. An efficient crowd funding system can really play the role of catalyst in bringing the startup ideas into reality.
Conclusion :
There is no doubt that crowd funding is rapidly being looked upon as a serious way of raising funds for startups and new businesses. An efficient crowd funding system can really play the role of catalyst in bringing the startup ideas into reality.
