Crowdfunding in India: A Misnomer?

Abstract

SUMMARY India continues to be one of the most vibrant and lucrative commercial locations for start-ups.With a steeply rising competitive sphere amongst start-ups in the B2B technology sector, more predominantly in the ecommerce, healthtech, and fintech sectors, India has capped its position as the third largest start-up ecosystem in the world. To keep the steady growth of start-ups, a key parameter, besides the innovative quotient in the scheme, is to strengthen investments into start-ups. For decades, globally, crowdfunding has proved to be a successful tool in pooling resources for innovative start-ups, with a promising future on investments. In India however, the scope and prospects of crowdfunding have been underutilized. The Securities Exchange Board of India, which is the securities market regulator in the country, has yet to recognize the uncompromised benefits that regulated crowdfunding bestows on the innovative endeavours of start-ups. In this article, the author analyses the success and effectiveness of equity crowdfunding in building a robust start-up and investment ecosystem in India, by juxtaposing it with the jurisdictions which legally recognize and regulate crowdfunding. In the first segment, the author draws a broad picture of the crowdfunding market. Next, the wavering opinions of the Indian securities market regulator and the unparalleled need to legally recognize equity crowdfunding as a viable investment option are analysed. Towards this objective, the author advocates the creation of a statutory framework which can effectively control and regulate the Indian crowdfunding market.