Crowdfunding Platforms in India for Tech Start-ups
A review and opinion
About a week ago, a Bangalore start-up named Lumos launched a crowdfunding campaign to raise money for Aster, a backpack designed for cyclists. Lumos has been selling a solar-panelled backpack for a few years now. Aster is a new product but as with anything new you need resources to take something from concept to product. Back in the old days, you either took a loan from a bank or persuaded angel investors; or you used profits from your established cash cow to channel into the new project. As a start-up, any of these approaches might be difficult. So, Lumos took the route of crowdfunding on Indiegogo.
Indiegogo, and its more famous competitor KickStarter, are crowdfunding sites that connect backers with makers. Crowdfunding is not just about raising money. It's also about validating one's idea and getting an early commitment from customers. This is actually a smart thing to do. As an entrepreneur you are in fact sharing your risk with investors and customers. You are testing your idea in the marketplace long before the product comes out. While both Indiegogo and KickStarter platforms are foreign, what options do Indians have to crowdfund projects locally?
Crowdfunding is nothing new as a concept. Indians have been building temples by collecting funds from residents in the neighbourhood. It's common to collect funds from neighbours to celebrate festivals such as Ganesh Chaturthi or Diwali. The modern avatar of such collections is to digitize the concept. It's no longer your neighbourhood. Your backers could be anyone, anywhere. They could be relatives and friends, but they could also be complete strangers who believe in your idea. Internet and crowdfunding platforms are the enablers.
The fact that Lumos has chosen to go with Indiegogo is an indication that even Indian start-ups are not keen to crowdfund via Indian platforms. It's not that India lacks its own crowdfunding platforms. I expected at least a couple but I was surprised to find more than a dozen! I did a quick review and found that many of them are funding projects in the area of arts and crafts, movies and theatre, sports and recreation, social and community. There were a few tech projects put out by start-ups but they were often not meeting their goals.
Among the crowdfunding platforms in India are the following:
- Fund for Unity: For civic projects such as building a blood bank or constructing the world's tallest statue. This platform does not appear to have much support. It's a closed platform in the sense that public cannot initiate their own campaigns. Current campaigns are mooted by Sardar Vallabhbhai Patel Rastriya Ekta Trust (SVPRET).
- Ketto: Many projects are about child welfare, education, health and women empowerment. Celebrities lend their star factor towards collecting money for disaster reliefs: Chennai floods, J&K floods, Nepal earthquake. They do have a technology section featuring some student teams seeking funds for their projects but most projects in the tech section are poorly funded.
- BitGiving: A wonderfully designed website with plenty of features to inspire you to consider it for your next crowdfunding project. This site specifically caters for social causes targeting non-profits, societies and trusts.
- Catapooolt: There is a section for start-ups but none of the ideas are attractive and none have been well funded. Only a couple of names stand out: Mean Metal Motors and Greensole.
- Dream Wallets: There isn't much going on here other than a listing of a few projects. Many of them are of social causes but only a couple of art projects have achieved their targets.
- Fund Dreams India: They have about 40 projects in all listed but most of them are at 0%. The only project with some donations is to support victims of acid attacks. Stories with emotional impact attract donors.
- Ignite Intent: Only a handful of projects are listed and there's very little to attract newbies to the platform. This is one among many that will surely lose to others who have better design, features and more users.
- Impact Guru: For social causes for non-profit. Start a free fundraiser.
- India for Sports: Support for Indian athletes. Goals are modest in the order of one to few lakhs and yet many are not reaching their goals.
- Milaap: This is a platform for social and individual causes. A whooping Rs. 63 crores have been raised on this platform, which would make it perhaps the most successful platform in India. Lot of projects are about funding medical care and procedures for patients. This is the go-to platform for healthcare if you cannot afford it. They raise money for victims of accidents and natural disasters. There are projects about education and environment.
- Pikaventure: Website is offline. Perhaps they have realized that's difficult to monetize when there are already so many other sites doing the same thing. Perhaps they need to crowdfund their own venture!
- Start51: Among the tech campaigns, three caught my attention of 100% funding: Career Khojj, Student Desk and Sign Speaks. The bulk of the site caters to design, film, music, arts and so on. Even here targets are modest, mostly a few lakhs and the number of successful funding campaigns are limited.
- The Hot Start: In the space of technology, student teams seek funds to design and prototype a car. This seems to be a common thing across many other crowdfunding platforms in India. Performing arts and film are common themes. The number of campaigns achieving their goals is limited.
- Wishberry: A cool design to match its cool name, this is one I liked. Design, arts, photography, dance and film are common genres. Punyakoti is a notable example, raising Rs. 42 lakhs to make an animated film in Sanskrit. There are a few cases of engineering student teams raising money to build a car and participate in international automotive competitions. They have successfully raised up to 3.5 lakhs.
With so little going for tech start-ups, it's not surprising that Lumos went with Indiegogo. There is also a strong precedent that it may be better to go outside India. Gecko, Fin and Brahma are three notable Indian products funded via either Indiegogo or KickStarter. For crowdfunding to happen in the Indian tech space, a complete ecosystem must be in place. Maker spaces are only just coming up and manufacturing in volumes is still a problem. Perhaps most start-ups are taking the route of direct investment via angel investors and accelerator programmes. Perhaps we are still risk averse when it comes to hardware start-ups.
Then there are the legal questions that remain as unanswered or lingering doubts. What happens if the tech start-up fails to deliver the product? What happens if they mismanage the funds or exceed original budget? What happens if the product is of poor quality? What if they delay the release by a long way? Most platforms don't talk about the progress of a project after it's funded. It's not their concern but surely backers need to know. SEBI has came up with a consultation paper in 2014 but a complete legal framework must be in place to address the concerns of backers. There's also the National Crowdfunding Association of India (NCFA) but its role is unclear. They seem to be inactive since 2014.
The crowdfunding ecosystem is at an intermediate stage. There are lots of platforms but we can expect some consolidation and only a few notable ones will remain. There will be more awareness about crowdfunding and we can expect more users contributing actively. Meanwhile, there will some jolting news of crowdfunded projects going AWOL, which will nudge the government to enact clear laws and procedures.
- How to make the millions as an Indian startup
- The Maker Movement in Bengaluru
- Bringing a Hardware Product to Market
About the Author
Arvind Padmanabhan graduated from the National University of Singapore with a master’s degree in electrical engineering. With fifteen years of experience, he has worked extensively on various wireless technologies including DECT, WCDMA, HSPA, WiMAX and LTE. He is passionate about training and is keen to build an R&D ecosystem and culture in India. He recently published a book on the history of digital technology: http://theinfinitebit.wordpress.com.