Crowdfunding is an act of funding a project or a venture by raising money from the crowd. Today, the process is either carried out by live events or via internet. The act is basically performed to empower innovative projects, social causes, social awareness, tech products/services etc.
A crowdfund campaign is not only about raising money, it’s more about working towards an idea, a cause, that the people want to see planted in the society. The founder of IndieGoGo Danae Ringelmann once said, “If you’re launching a crowdfunding campaign solely to raise money for your business, you’re missing the point.”
Check out any crowdfunding portal and you’ll find some impressive content. From Ubuntu Edge phone to Oculus VR to comedy drama wish I was here, all of these projects were crowdfunded. India being a country where we’re still working to impart technology to the masses, crowdfunding is still at a very nascent stage in the country. To empower ideas & social causes, create a sense of solidarity among people, DreamWallets came into being.
Founded by Manish Harodia, Nikhil Agarwal and Ravi Mittal, DreamWallets works is a reward based crowdfunding platform where people can register their ideas and get a channel to work towards the cause. Nikhil and Ravi have been investment bankers, where Nikhil has worked with J.P Morgan and SMC Capitals in M&A and PE fund raising, while Manish has been a seasoned entrepreneur and this is his third venture to be precise.
This is the only crowdfunding platform in the country that offers both- Fixed and Flexible funding options. This Jaipur-based startup is basically trying to replicate the model of famous New York based crowdfunding platform Kickstarter.
- Fixed Funding:If the project creators/owners plan to choose this option, they’ll need to raise 100% of the amount mentioned. The platform charges 8% of the funds raised, i.e 5% as a platform fee and 3% for payment gateway charges. If the project fails to raise the target amount, the amount raised, goes back to the contributors but 6% of the total amount is deducted and that goes for the payment gateway charges. So basically the company charges 8% percent of the total amount raised if the project reaches its limit or goes beyond that.
- Flexible Funding: The only thing that differentiates this model from the above is the commission and the raised amount. If the raised amount stays below the stated/desired amount, the project managers still get to keep the money but in this case the commission might go up to 9 percent excluding the payment gateway charges (that is another 3 percent).When asked Manish about the same, he said, “The reason why we encourage people to go for fixed funding is because people in India believe that crowdfunding is free money. That they would just create a project on the platform and think that the whole country or DreamWallets will garner resources for the funding requirements, but that’s not the case.”
Traction & Funding
Manish stated that they typically get around 20 projects everyday from people who want to raise some sort of funds on their platform. He further added, “Every project goes through a very robust process, we have certain guidelines. First we don’t want people to create a crowdfunding campaign which is antisocial and we don’t want any affiliation with any particular political party. Once the project is up, we massively invest in digital media for the project, we have reach to around a million people (be it email, twitter handle, Facebook page etc).”
The company claims to have a four digit number of registered users, where the contributors come from more than 200 locations.
The company is currently being bootstrapped. Manish said, “We have not reached out to investors out of desperation like other startups do. It’s also because of the fact that we’ve saved enough to keep the company running without any problem.”
Dreamwallets, currently have some projects like fund raising for the SEIL progam sponsored by ABVP, a short film on Guru Nanak Dev, Start-Up event by Bihar Entrepreneur Association sponsored by Bihar Government and has a pipeline of very different projects.
The Legal Perspective
Many people confuse crowdfunding with equity based crowdfunding, to be precise equity based crowdfunding is a type of crowdfunding but not the only type. Most of the platforms in India run on reward-based crowdfunding model, where people fund a project in exchange of tangible/intangible rewards. This type is completely legal in India, although, the rules for equity based crowdfunding are not so clear. Though a lot of companies are following this method in India even after knowing they violate the ‘Section 42 of the Companies Act, 2013’. According to a few news reports, SEBI (Securities and Exchange Board of India) is currently making up the rules for equity based crowdfunding in India.Category Startups