Crowdfunding Legality in India
There has been a lot of buzz about crowdfunding India being illegal in India and it is okay to have doubts about raising funds through crowdfunding. There is no good reason to be scared of crowdfunding. Recently, the Sahara group was sued for taking money from the crowd and paying it back with interest and as per The Companies Act, a company cannot have more than 50 shareholders unless it goes for a public offering. So it totally makes sense if companies cannot raise capital by borrowing from a large number of crowds. Until our government finds a fix to this, there are other forms of crowdfunding you can choose which are a 100% legal and risk-free.
One such, legal and no risk method of crowdfunding is Reward-based crowdfunding. In the past, reward-based crowdfunding has been successfully used for making movies, funding various inventions, software development projects etc. Reward-based crowdfunding is also known as Non-Equity Crowdfunding.
All about Reward-based crowdfunding
Under Reward-based crowdfunding, funds are raised from the crowd and in return the crowds paid back through tangible or intangible ways. The crowds are usually repaid with movies tickets, discounts, special offers. The crowds of reward-based funding initially include personal contacts but gradually they grow beyond your local region. The best part about raising funds through reward-based crowdfunding is that it allows you to have a greater reach and this means than your product or service will have a greater impact. The main catch in reward-based crowdfunding is the reward or the return. The end reward is the only thing which keeps the funders interested and motivated. In reward-based crowdfunding, funders are very hopeful about so you should keep in mind that the rewards you offer appeal and engage the crowd.
To conclude, I genuinely think that reward-based crowdfunding is the most risk-free method of crowdfunding for the crowd and for the company. This is because there is lesser wastage as the business processes are not started unless a good amount is raised.