Crowdfunding and Crowdsourcing

Crowd funding means  raising of  monetary contributions from large number of people.  An oft quoted example of crowdfunding in India is that of Shyam Benegal collecting Rs 2 lakh  in 1976 from 500,000 farmers to fund Manthan a film on the Amul Cooperative movement at Anand starring Smita Patil. Each farmer contributed less than about 40 paise. There are also many other examples where organisations have resorted to crowd funding: for construction of a hospital, treatment of a patient or even pay the fees of a poor student. Closer home, Sikkim Express sometimes uses crowdfunding to help a poor patient suffering from a serious ailment to meet medical expenses by inviting donations and then as a recognition publishing their names with the amounts contributed.  In India therefore although crowd funding is not a new concept, it still continues to be in a very nascent state. Thanks to the advent of the internet and social media, it is now possible reach larger audience with the touch of a button.

Another term that is loosely used alongwith Crowd funding is Crowd Sourcing. Crowd sourcing is essentially  getting ideas from the public and crowd funding is raising money from individuals but both the terms are used interchangeably. Here at home, the immensely popular news messaging service Voice of Sikkim uses crowd sourcing to keep us updated on what is happening across the state. For instance, a passenger encountering a landslide while travelling to Siliguri, sends a message along with a picture  about the incident to Voice of Sikkim which is then flashed onwards to the subscribers. Another example of crowd-sourcing happening is when the Government invites suggestions from the public for its flagships programmes like SwachBharat Abhiyan etc.  Calling for crowdsourced ideas, information, opinion and analysis has emerged as a viable and enriched resource enterprise data.

Crowdfunding essentially  helps convert an innovative idea into a viable commercial proposition and  transform unique ideas into reality. One important step is to host a vibrant and impressive website. You can  put a donate button on your website but unless your organization is well known you will not be visible and your project may not get  the desired funding  The other option is to take the help of crowd funding websites like  Bitgiving, Milaap, Ketto, start51, Funddreamsindia, Wishberry and Catapult.   Except for Wishberry and Catapult, the other websites do not charge any fees for listing your organization details and  requirement for funds but they keep  5 to 10 percent of the donation received as their commission. No real market survey has been conducted to ascertain how big the crowd funding market in India is but it can safetly be said that it is very minuscule taking a cue from the small business that the various crowd sourcing websites have managed to raise. Between them the crowding funding websites have managed to raise only a couple of crore rupees over the past few years of their existence.

Today, there could be various reasons to consider crowd funding -entrepreneurial ventures, social cause, higher studies, music albums or videos,  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 crowdfunding available. 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.   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 a good salesman to draw people to your project?

However attracting crowdfunding is not has easy as it sounds.  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. 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. 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. Crowdfunding makes you answerable to the people who have contributed to your project.

However to get funding it is not sufficient to have a digital presence and be visible, you also have to be trusted. At a time when there is growing distrust of NGOs across the country the need for a validated and verified identity has become all the more pertinent for non profits .  A new top-level domain exclusively designed for the NGO Community Dot NGO can help to a great extent.

Crowdfunding 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. A 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.

In Sikkim, some areas, I feel,  where crowdfunding  can help are construction of small play grounds for children,  archiving old documents and photographs of Sikkim, documenting the traditional knowledge of Sikkim and setting up of zero waste localities  in environmentally fragile locations : the list is endless.  Local artistes can also resort to crowd funding to put up music shows or come up with music albums.

NGOs, Self Help Groups and Small enterpreneurs  in Sikkim should definitely explore crowdfunding for translating innovative ideas into viable sustainable projects.


(Rajesh Verma is a member of Green Circle a local environment group)