Impacts of Crowdfunding in Startups

Impacts of Crowdfunding in Startups
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4.0 Chapter 4: Finding and Analysis
The study has been conducted taking into account secondary research and 2 pertinent
interviews. Start-ups often aim at attracting equity crowd-funding, which has started since 2011
in the India. Crowdfunding can act as a catalyst for creating new funding for bringing equity
investment into mainstream business (Gerber & Hui, 2013). Analysis of scope of crowdfunding
has revealed several advantages and disadvantages of crowdfunding as being the impacts from
the same. The findings have been arrived at from 2 interviews conducted one from an Indian
startup Riot Solutions and another a UK startup called Technocon. The name of the first
interviewee was Adra and name of second interviewee is Puneet Singh The first company in
India offers e-Monitor and the second company provides services to Siemens Company products.
The following are some of the findings of the study;
Findings 1: Providing Access to Capital: Crowdfunding has gained prominence amongst Indian
startups. There are a number of startups that have been established in the India in recent years.
Some of the platforms includes SEEDRS, fantoo, escape the city, estatesdirect.com,
eMoneyUnion, Rushmore, HAB and so on. From the interview-1 it was understood that HAX
crowdfunding was used which helped the company to collect US$140,000. The Indian startup
could not opt for other crowdfunding startup as it was not available. Another company had made
use of Kickstarter and was successful in raising $150,000.
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Figure 1: Startups Platforms
Source: (Dunsby, Retrieved on 4th September 2018)
The crowdfunding projects that have succeeded in recent years can be understood from
the figure below as well. The capital that had been raised successfully from the projects has
already been depicted.
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Figure 2: Crowdfunding Projects
Source: (Richter, Retrieved on 4th September 2018)
Findings 2: It provides hedging against risk: Crowdfunding allows collecting money from
smaller number investors and not from a single investor at a time. Resorting to a large number of
investors allows startups to defer redemption at one go and hedge against risks.
Table 1: Risk Profiling of Crowdfunding
Type of Risk Risk Category
Avert Manage Mitigate Risk Profile/ Impact
1. Repayment
risk
Manage Medium
2. Timeline risk Mitigate
over long
period
Medium
3. Credit risk Mitigate High
4. Overall Risk Manageable
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Findings 3: Crowdfunding serves as a marketing tool: As crowdfunding is collected from a
large number of people, it also helps generate consumers of products or services. Crowdfunding
serves as a marketing tool for a greater number of investors/consumers. The interviews revealed
one from tech company and other service company, had to hire marketing agents to promote
their company but the crowdfunding in itself acted as a marketing platform.
Table 2: Investor Profiling of Crowdfunding
Source: Author
Investors
Low Income Group
Middle Income
Group
Higher-middle
Income Group
High Income Group
Findings 4: It provides proof of concept: Gathering fund from a large number of investors
allows proving the concept of business in itself. Investors supporting the business acts as a proof
of the success of the concept. The first interviewees concept was not knew in the Western
markets, however it was a new idea in Asian markets. The concept of e-monitor being relatively
new and the product being pricy. In another interview service for Siemens products was
relatively an old idea.
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Findings 5: Crowdsourcing allows brainstorming of ideas: Investing in crowdfunding has a
brainstorming impact, as investors need to be convinced through the certain idea. Both the
companies conducted nerve rattling marketing promotions for their companies.
Findings 6: Crowdfunding allows prospective loyal customers for the business: Investors once
convinced for the business, can become prospective clients for it as well. Convinced investors
can also act as investors for the business, which is reflected through several business ideas.
Bothe the interviewees was able to attract client towards their businesses.
Findings 7: Provides easy of attracting funds compared to traditional methods: Traditional and
debt related businesses funding ideas often require complicated procedures to get accepted.
Regional breakdown of some crowdfunding initiatives depicts crowdfunding is very young and
the exchange is small. Looking for all the offers in 2011 and the first half of 2014 to get an
overview in the form of annual fluctuations. The increase in purchasers' purchases has an impact
on the distribution of regional companies. Crowdfunding platforms focus on London and the
south. The crowd fleet is more prominent, it was launched to the southwest (which is the source
of funding for such a region), which has recently expanded to London. London has many other
important places, such as EIS and EIS seeds, and the Cambridge Annual General Meeting.
London is an undisputed leader in scouting in the UK both in business and in investment.
London companies received 102 bids, while in Southeastern 25 and the other. London companies
also received £ 24.3 million, while the southwest was £ 7.6 million. From 2013, the gap between
London and other regions has increased significantly. Formerly a regional unit and in 2011, the
southwest was the largest bid although all investments were still in London. Crowdfunding
London's strength is the most prosperous position in the UK's investment and capital corporation.
In the first half of 2014, the 2014 London Finance Cooperation Agreement noted a lower
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