Playing to the Crowd
Five graduates from IIT Delhi and Delhi Technological Univer-sity developed a wearable technology, called Safer, using the money they had won in a competition. But their aim - to make women and families in India feel safer - required an additional monetary push. While they developed the final product, they were left with no funds for production. The young minds at Leaf Wearables decided to run a crowdfunding campaign on Ketto.org. And they were not disappointed.
"We started our campaign in August 2015 and invited people to pre-order the wearable jewellery, which was delivered to them only after a couple of months. We received over 200 pre-orders in just a month and managed to raise a funding of over Rs 5,16,670, against our target of Rs 5 lakh, which helped us get into production," says Paras Batra, Co-founder and Director of Sales and Marketing, Leaf Wearables. Post the funding, the product was launched on December 1, 2015, and has sold over 5,000 units since.
How it Works
Crowdfunding, as the name suggests, is a platform where you can raise money from a group of people - friends, family, investors - for a business idea. There are numerous crowdfunding websites in the world that allow you to post details of a project to a large group of users or potential investors who may then fund your project and spread the word. Oculus Rift, the name that revived the virtual reality industry, started its journey through crowdfunding and was later acquired by Facebook for $2 billion. However, it is not as easy as it sounds.
Akhilesh Tuteja, Partner and Head, IT Advisory Services, KPMG in India, explains, "In India, the concept of crowdfunding is fairly new and, at the moment, is more inclined towards social cause donations, healthcare and more. As the founder, you have to work really hard to get your campaign fuelled by your network; only then will other people start believing and investing in you. At the time of launching a campaign, you have to enter a minimum and maximum amount that you wish to raise. If your campaign fails to generate the minimum threshold, you will not receive any funds."
Yet, the potential is huge. Varun Sheth, CEO of Ketto, avers, "Globally, the crowdfunding industry is worth $35 billion and expected to reach $100 billion by 2018. Although personal is one of the biggest categories as of now, there is an upward trend in crowdfunding for technology. In 2012, approximately $50 million had been crowdfunded for technology and in 2015 the number was close to $1 billion." Unlike international websites, technology campaigns aren't really popular in India yet, and only few see the light of day. However, there is no dearth of crowdfunding platforms to raise money. Here are some of them:
Indiegogo: Founded in 2008, it is the largest international crowdfunding platform with technology as one of its most popular categories. And it is open to anybody from any country and continent. To start a project, you need to enter the title and the fund amount you wish to raise, and sign up. It has an InDemand optional feature that allows any successful campaigner to keep raising funds even after their campaign ends, and grow the community and reach new audiences. While Indiegogo has tied up with PayPal for payments, it also offers flexible funding and fixed funding options. Under flexible funding, you will be entitled to receive all the funds raised even if the campaign was not successful. Indiegogo believes it is suitable for almost all the campaigns as any amount of money can be helpful in reaching the campaign objective. The only catch here is that you end up paying a higher fee to Indiegogo - close to 9 per cent. For fixed funding, Indiegogo charges a 4 per cent fee from every raised fund and 3 per cent fee is charged as credit card processing fee. There is also a $25 wire fee for non-US campaigns.
Kickstarter: This popular crowdfunding platform is behind many of the innovations we see today. However, it has a strict policy of allowing citizens of only a select few countries to run a campaign. At the moment, project creation is available only to individuals in US, UK, Canada, Australia, New Zealand, the Netherlands, Denmark, Ireland, Norway, Sweden, Germany, France, Spain, Italy, Austria, Belgium, Switzerland and Luxembourg. But that should not stop you. If you find a suitable partner that meets the parameters and requirements of Kickstarter, you are ready to go. For instance, Hyderabad-based BulBul Apps, a start-up that focuses on software development and production of its IP, successfully raised $2,010 with 63 backers on Kickstarter. Submission is easy as you just need to sign up and put in a detailed description about the project. This is reviewed by the crew who then determine whether the project can be accepted. Kickstarter charges a 5 per cent fee for every successful project. As the funds are received using Amazon Payment, a charge of 3 to 5 per cent is applied on credit cards by Amazon, too.
Ketto: Founded in 2012, this is a crowdfunding platform based out of Mumbai. Within the first year of its operations, it managed to raise Rs 45 lakh for 18 campaigns. While you can create a campaign for free and share it online, Ketto charges 8 per cent of the funds raised or Rs 2,000 (whichever is higher), along with the payment gateway charges. It has advantages, too. With very few people willing to donate cash online, Ketto offers cash pick-up facility and provides the donor with a receipt. The funds raised are later transferred through net banking to all the successful fundraisers. Ketto started by raising funds for non-profits, but now does so for personal projects, too. It also offers social media and e-mail promotion tools that help in marketing and creating social awareness about the programmes to the relevant audience, allowing campaigners to spend more time on creating social impact.
Wishberry: This Indian crowdfunding platform claims to have raised Rs 6.6 crore till date. You can submit your idea, which, if accepted, is turned into a campaign. The campaign requires a pitch video, a set of interesting rewards and more information about the project and the team members involved. Wishberry provides a coach to each creator to help them create the pitch video, rewards list as well as PR and social media plans. It allows a maximum of 60 days to raise the funds. If the crowdfunding goal is not met, the creator gets nothing and the money collected is returned to backers.
Wishberry charges an upfront non-refundable fee of Rs 2,500 plus taxes once the project is approved. It also charges a commission of 10 per cent of the funds raised, of which 7 per cent is Wishberry's fee and 3 per cent is the payment gateway fee.
Start51: Based out of Ahmed-abad, Start51 allows a maximum funding time of 51 days, after which, if the campaign is unsuccessful, the funding is returned to the contributor. It charges a 5 per cent fee on the contribution collected once the project is successfully funded and a process fee of 1.25 to 2.5 per cent. This one, too, offers donation-based funding and no financial return or equity. The users (or donors) are allowed to donate as little as Rs 51 for which they get a reward in return. The platform follows an 'all or nothing' funding policy, which means that if the campaign's target is to raise Rs 2 lakh but raises lesser, all the money is returned to the donors and the campaign is declared unsuccessful.
