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The dramatic proliferation of CFP (CrowdFunding Platform) is due not just to technological developments but also, in part, to the aftermath of the recession. Banks, VCs and other institutions are still loath to lend to pre-revenue businesses. Angel investors are inundated and reject 99% of the applications they receive and demand a big slice of equity from the 1% in which they are interested. “Friends and Family” are wary and have little if any spare cash. The continued financial depression and lack of growth plans on both sides of the Atlantic are making the difficulties of funding more acute. However, life is also tough for high-street investors as banks continue to offer unattractive rates of interest to savers. At the same time, the development of the internet and social networks has reduced degrees of separation from six to fewer than two, and considerably increased potential marketing reach for new businesses. Crowdfunding may offer a potential escape from both of these key issues.

There is much ignorance in the marketplace regarding both CFP and entrepreneurs setting up CFPs, and those intending to enter the market should seek guidance from professionals who deal with these issues on a daily basis.

How to start crowdfunding business in india


To date there are three fundamental crowdfunding business models which prevail, namely Reward, Equity and Loan. The terms “Alternative finance”, “Peer to Peer Lending” and “crowd investing” are often used to refer to the Equity and Loan models, indicating that the investor expects or, at least, hopes to receive a financial return on its money.





Business Revenue Model of crowdfunding platforms

The business model of crowdfunding platforms typically involves charging a fee or commission on the funds raised by the campaign creators.

There are generally two main types of fees that crowdfunding platforms charge:

In addition to these fees, some crowdfunding platforms may also offer premium services to campaign creators for an additional fee. These services may include marketing and promotion, campaign management tools, and access to a network of investors or backers.

Overall, the crowdfunding platform business model relies on providing a convenient and accessible platform for campaign creators to raise funds, while also generating revenue through fees and additional services.

Issues those are really threatening for above crowdfunding platform models

Business model of crowdfunding platforms
  • Financial Regulatory Compliance
  • Aml
  • Legal Exposure, Terms And Conditions (“t&c”)
  • Jurisdiction For License
  • Business Structure Vs Legal Exposure
  • Taxation
  • Crowdfunding Platform Usage Rights, Intellectual Property Rights (“IPR”) and Branding.

How To Get Crowdfunding License in India

Crowdfunding platforms in India are required to obtain a license from the Securities and Exchange Board of India (SEBI) to operate as an "investment crowdfunding platform" under the SEBI (Alternative Investment Funds) Regulations, 2012.

To obtain a crowdfunding license, the crowdfunding platform must meet certain criteria, including:

The platform must be registered as a company under the Companies Act, 2013 or under any other relevant law.


To obtain a crowdfunding license, the platform must have a minimum net worth of Rs. 2 crores.


The crowdfunding platform must have a board of directors with at least two-thirds of the members being independent directors.


The platform must have a sound technological infrastructure and adequate risk management systems.


To obtain a crowdfunding platform license, the platform must comply with Know Your Customer (KYC) norms, Anti-Money Laundering (AML) guidelines, and other applicable regulations.

Once the crowdfunding platform license is obtained, it can facilitate investments in alternative investment funds (AIFs) through its platform. However, the platform cannot raise funds from the public directly and must act as an intermediary between the investors and the AIFs.

It is important to note that there are different types of crowdfunding platforms in India, including donation-based, reward-based, and peer-to-peer lending, which may have different regulatory requirements. It is recommended to consult with a legal expert to ensure compliance with applicable laws and regulations.

Worldwide Crowdfunding Statistics
by Category

Since crowdfunding is still a relatively new phenomenon, there is not always consistency in how different terms are used and defined within the research. However, crowdfunding can generally be divided into four main categories:

Debt based Crowdfunding
Equity based Crowdfunding
Reward based Crowdfunding
Donation based Crowdfunding
Starting a crowdfunding platform

Where last year’s worldwide crowdfunding statistics showed a market in rapid growth in all regions of the world, a recently published report displays a more varied situation. The three countries dominating the world’s crowdfunding market are still China, the United States, and the United Kingdom, but where the US and the UK still show impressive growth rates of 42.4% and 30.7%, respectively, the Chinese funding volume has dropped by -39.9%. However, China is still the market leader worldwide with a market share of 70.7%, followed by the US with 20.0%, and the UK with 3.4%. Next on the list, we find countries like the Netherlands, Indonesia, Germany, Australia, Japan, France, and Canada – all with significantly smaller market share.

Business Model Stakeholders

  • P2P/Marketplace Consumer Lending - Individuals and/or institutional funders provide a loan to a consumer borrower.
  • P2P/Marketplace Business Lending-Individuals and/or institutional funders provide a loan to a business borrower.
  • P2P/Marketplace Property Lending-Individuals and/or institutional funders provide a loan, secured against a property, to a consumer or business borrower.
  • Balance Sheet Consumer Lending-The platform entity provides a loan directly to a consumer borrower.
  • Balance Sheet Business Lending -The platform entity provides a loan directly to a business borrower.
  • Balance Sheet Property Lending - The platform entity provides a loan, secured against a property, directly to a consumer or business borrower.
  • Invoice Trading Individuals or institutional funders purchase invoices or receivables from a business at a discount.
  • Debt-based Securities - Individuals or institutional funders purchase debt-based securities, typically a bond or debenture, at a fixed interest rate.
  • Mini Bonds - Individuals or institutions purchase securities from companies in the form of an unsecured bond which is ‘mini’ because the issue size is much smaller than the minimum issue amount needed for a bond issued in institutional capital markets.
  • Equity-based Crowdfunding-Individuals or institutional funders purchase equity issued by a company.
  • Real Estate Crowdfunding-Individuals or institutional funders provide equity or subordinated-debt financing for real estate.
  • Profit Sharing-Individuals or institutions purchase securities from a company, such as shares, and share in the profits or royalties of the business.
  • Reward-based crowdfunding-Backers provide funding to individuals, projects, or companies in exchange for non-monetary rewards or products.
  • Donation-based crowdfunding-Donors provide funding to individuals, projects, or companies based on philanthropic or civic motivations with no expectation of monetary or material.

  • How To start Crowdfunding Business in India from scratch?

    To start a crowdfunding business from scratch, there are several key steps involve. Here are the fundamental steps to consider:

    Define your business model

    Determine the type of crowdfunding platform you want to create. Will it be reward-based, equity-based, donation-based, or a combination? Clarify your revenue model and fee structure.

    Research the legal and regulatory landscape

    Understand the legal and regulatory requirements to start a crowdfunding business in your jurisdiction, such as licenses, compliance obligations, and consumer protection laws. Consult with legal experts to ensure compliance.

    Develop a business plan

    Outline your vision, goals, target market, marketing strategy, and financial projections. Identify your unique selling proposition and competitive advantage in the crowdfunding market.

    Build a strong team

    To start a crowdfunding business, assemble a team with the necessary skills and expertise, such as technology, marketing, finance, and operations. Each team member should align with your business goals and contribute to the platform's success.

    Technology infrastructure

    Develop or partner with a reliable technology provider to build a robust and user-friendly crowdfunding platform. While starting a crowdfunding platform, ensure the platform supports essential features like campaign creation, payment processing, and investor communication.

    Establish partnerships

    To start a crowdfunding platform, you need to collaborate with payment gateways, legal advisors, and financial institutions to ensure smooth and secure transactions. Form alliances with influential industry stakeholders to enhance your platform's credibility.

    Create policies and guidelines

    Draft comprehensive terms and conditions, privacy policies, and user guidelines. Address important aspects such as intellectual property rights, refunds, and dispute resolution mechanisms.

    Launch and market your platform

    Develop a compelling brand identity, website, and marketing strategy to attract campaign creators and investors. Utilize digital marketing techniques, social media, content marketing, and partnerships to raise awareness and drive user engagement.

    Implement user support and feedback mechanisms

    Set up efficient customer support channels to address user queries and concerns promptly. Actively collect feedback and iterate on your platform to enhance user experience and meet their evolving needs.

    Monitor and improve

    Continuously monitor your platform's performance, user metrics, and financial health. Identify areas for improvement and leverage user feedback to enhance the platform's functionality and usability.

    Remember, starting a crowdfunding company requires careful planning, meticulous execution, and continuous adaptation to market dynamics. It's crucial to stay informed about industry trends, regulatory changes, and user preferences to remain competitive in the evolving crowdfunding landscape.

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