For almost a decade, 25-year-old Kanishka Pandey had seen his father, Hem Chandra, battle a serious liver condition. But early in 2022, when his situation worsened to cirrhosis, the only hope for survival was a liver transplant. Kanishka was an eligible donor, but the family needed about Rs.25 lakh for the surgery. The family’s health insurance had long been exhausted and there were hardly any savings left to cover such an expensive procedure. That’s when a colleague of Kanishka advised him to start a campaign on the crowdfunding platform Milaap. She had organized a fundraiser earlier to raise money for her father’s cardiac operation.

So, Kanishka logged in to Milaap and submitted all the required medical records. After verifying Kanishka’s cause with the hospital and getting an estimate of the amount he needed, Milaap assigned him a dedicated campaign manager. “This was very beneficial for me as I hardly knew anything about raising funds. My manager would consult with me before executing tasks on my behalf, such as sending a thank you message to all donors,” says Kanishka.

The response was heartwarming as the father-son duo raised Rs.19 lakh from around 400 donors in less than three weeks. “The contributions ranged from Rs.100 to Rs.1 lakh, and all the money was directed straight to the hospital’s account,” says Kanishka. The idea of raising money via crowdfunding has been around in India for more than a decade but awareness about it was low till the pandemic, when such platforms were used extensively by people to raise money for several medical and social causes, from providing oxygen concentrators to giving rations to migrant workers.

Crowdfunding simply means when a large number of people give small amounts of capital to finance a particular need, be it a critical medical need, a social cause like a child’s education, or a new business venture. Crowdfunding platforms use social media to reach out to a vast network of people, who can donate as little as Rs.10 to as large an amount as they want. While crowdfunding is an easy way to ask individuals for donations when a large amount of money has to be raised for a critical cause, people are usually hesitant to take this approach. “Most people consider crowdfunding as a last resort and when the urgency for funds needed is extremely high as people worry about borrowing money from strangers and how to return it,” says Anoj Viswanathan, co-founder, Milaap.

HOW TO START A FUNDRAISER

If you visit the website of any crowdfunding platform, you’ll realize that most people are by nature generous and like to come together for a common cause where they feel they are making a difference in someone’s life. With the right crowdfunding platform and ample promotion, a campaign has the potential to raise quite a lot of money in a very short amount of time. In fact, most campaigns reach their goal in just 40 days, and the bulk of the donations happen within the first week.

If you want to start a campaign, you need to pick the right platform, depending on its expertise and your need (see 10 popular crowdfunding platforms). Once you sign up on the website, you will need to submit required documents and a write-up of why you need the funds. Some sites will assign a campaign coordinator to you who will guide you through the initial phases. The platform will then verify if your need is genuine, which is done in less than two days. “We have a dedicated in-house team of over 50 members to manage a meticulous five-step due diligence. We start with checking relevant documents, such as hospital estimates, bills, diagnosis paperwork, etc, and then we evaluate whether the cost estimates are valid based on the historical data of surgeries on our platform and market intelligence.

Next, we verify KYC documents like Aadhaar and PAN card as well as the genuineness of the medical documents and case via our tele/ field verification team. The fifth and final step is to manage the fund transfers so that most of the money is given directly to hospitals, and reimbursements (if any) are against valid invoices and bills,” says Piyush Jain, Co-founder and CEO, ImpactGuru. Some platforms charge a small upfront fee that ranges from Rs.500 to Rs.3,500, while others will take a commission of 3% to 8% of the total funds raised. A few platforms do not charge any money from the fundraiser but will ask donors if they would like to ‘tip’ the platform while making a contribution or request the campaigner for a ‘voluntary contribution’ after a successful fundraiser. Once your campaign is up, you need to start promoting it online and offline. While the platform can publicize the campaign on social media, you need to reach out to your own social circle.

“When my wife Gopi and I started our fundraiser on ImpactGuru to pay for my bone marrow transplant in October 2018, we shared it as much as possible among our relatives, friends, housing society members and colleagues. I was really surprised when we received contributions from my wife’s international colleagues based in Paris,” says Amit Shenoy who raised Rs.40 lakh in just a week. The couple’s efforts were also aided by a video produced and aggressively publicized by ImpactGuru on digital media. “One of the most touching donations was Rs.60 given by a person who said that that was all he could afford but that he hoped it would help,” he adds. Promoting campaigns individually isn’t everyone’s cup of tea, and here’s where the expertise and reach of a crowdfunding platform comes in handy. They help campaigners with content writing, photographs, videos and publicize the fundraiser.

“The campaign story plays an imperative role followed by the support it gets from the people. For instance, we hosted a campaign for 20-year-old Kamal Singh, who is the son of an e-rickshaw driver in Delhi, about a year ago. Singh got admission in the English National Ballet School, London, but needed Rs.15 lakh to pay the fees. We helped to advocate his cause, and as his story went viral, celebrities like Hrithik Roshan supported him. Within two weeks, Singh had successfully raised the money,” says Varun Sheth, Co-founder and CEO of Ketto.

While you are running the campaign, keep updating your progress on the crowdfunding page. Posting updates once a week at least, with good quality photos and videos keeps your donors engaged, assuring them that their money is being utilized correctly, and might even motivate them to donate more. Nearly all crowd funding platforms also allow donors to interact and ask questions directly to the campaigner via their website and app, so be prepared to interact whenever needed. If you can’t do so yourself, the platform may assign a campaign coordinator or ask if a friend or relative can do so on your behalf. Another important step during the campaign, and especially after it is over, is that whenever you share every milestone achieved with your donors, you must thank them for their support.

KEEP IN MIND

There is no guarantee that your fundraiser will be successful and that you will raise all the money you will need. In the case of some campaigns, the crowdfunding platform will allow you to withdraw money as and when it is needed, such as for a medical procedure, but in other cases, you will get the money only after the total amount has been raised like in case of a child’s higher education. This is to ensure that the money raised will be used for the purpose it is intended and if the purpose is not going to be accomplished, the money will be returned to the donors.

To ensure that they raise enough funds, some campaigners use multiple platforms at the same time but this can be detrimental to your campaign as it looks more like a paid advertisement than a genuine need. In July 2022, Muskan Bawa went viral for the wrong reasons when she tried to raise money for a Master’s Degree at Harvard University. She ran campaigns on two different platforms but discrepancies in her stories on both platforms drew so much outrage that the campaigns had to be stopped immediately.

“Nobody wants to donate money to what they think is a frivolous cause or will not actually benefit society at large. In fact, most people themselves don’t raise money for what they deem as non-life threatening. This is why you’ll see most medical fundraisers are only for extremely critical treatment and not for surgeries like a knee transplant,” says Viswanathan. An important facet to keep in mind is the tax implication on the funds raised. In the case of donors, some campaigns will specify that their contributions are tax-exempt under Section 80G, and they will get a receipt for the same.

However, in the case of a campaigner, taxation will depend on the type of fundraiser as money raised for a start-up is taxed quite differently from that for a surgery or a social cause. “There is no one size that fits all as rules differ vastly, even for medical cases. For instance, during Covid, the government had a tax exemption of up to Rs.10 lakh for funds raised from other sources. Again, tax exemption differs for disabilities, from Rs.75,000 for a 40% disability to Rs.1.25 lakh for 80% disability. So, we advise campaigners to take the help of an auditor and keep the receipts of all payments to see how the tax burden can be lessened,” says Viswanathan.

Lack of rules, regulations and a compliance framework is a challenge for crowdfunding sites as it leads to a trust deficit among donors. While the government itself has such a platform for rare diseases (https://rarediseases.nhp.gov.in/), little is known about it due to a lack of publicity. This leads some people to think that crowdfunding campaigns may be scams. “We need a code of practice for online charitable fundraising appeals to ensure accountability, legitimacy and transparency. Clarity on regulation and legal accountability will make a big difference in how crowdfunding can help more and more people in the future,” says Sheth. Shenoy seconds that, “As I have benefited from this, I have become an active donor myself. I want to pay forward the kindness other people have shown me.”

TIPS TO RUN A CAMPAIGN

WHAT YOU SAY MATTERS THE MOST

You need to have compelling content to distinguish your campaign from others. Keep your story short and simple, explaining why you need the funds, how they will be used and why this campaign matters so much to you. Emotional anecdotes work best.

REACH OUT TO THE RIGHT PEOPLE

Focus on people you know will be interested in the cause. A focused outreach helps get donations faster than a generic mass appeal. Think of it in the same way as targeted advertising.

PROMOTE YOUR CAMPAIGN ONLINE AND OFFLINE

Sharing your fundraiser online is beneficial but reaching out via personal connections, calls and messages is equally helpful. This is because people feel more connected when you reach out to them directly, and you’ll be surprised at how much bigger your social circle is than you had imagined.

BE SPECIFIC ABOUT HOW THE MONEY WILL BE USED

This is the critical peg of your campaign. Always separate the donations into different giving levels that explain exactly how much of the funds will be used for a particular purpose. This establishes transparency, making the donors trust that their money is being used for something productive.

UPDATE THE CROWDFUNDING PAGE REGULARLY

Post written updates with new photos and videos regularly. This shows that you are invested in your campaign and lets your donors know that you are using their donations for the intended need. This will also catch the attention of new donors.

KEEP YOUR DONORS IN THE LOOP CONSTANTLY

Inform your donors when you reach significant milestones. If you receive a large donation, highlight and thank the supporter publicly. Send reminders to donors when your campaign deadline is close as this usually creates an urgency that can be a motivator for more donations. Always thank the donors after your campaign has ended.

OFFER INCENTIVES, IF AND WHENEVER YOU CAN

This works better in cases where money is being raised for a social cause like children’s education or a business idea. Campaigners can offer rewards to donors depending on gifted amounts.

RAISING FUNDS FOR A BUSINESS IDEA

New entrepreneurs sometimes use crowdfunding as a resource to infuse additional funds in their venture.
Business crowdfunding is a great way to raise money for a new venture or product. There are numerous crowdfunding platforms, many of them dedicated to small businesses or tech innovations, notably Kickstarter and Fundable, in the global landscape. In this segment, there are four different types of crowdfunding: rewards, donations, debt and equity.

Donation-based crowdfunding is when people give money for nothing in return, while a reward-based one is when donors receive something in return, and the rewards may vary by the size of the donation, such as a t-shirt, free subscription, etc. Debt-based donations are when money pledged by backers is a loan that must be repaid with interest by a certain deadline. On the other hand, equity-based crowdfunding allows start-ups to give away a portion of their business in exchange for funding.

The latter is what Gulshan Sharma tried when he ran a fundraising campaign on Tyke, a start-up-centric crowdfunding platform, in early 2022. Sharma founded his company Falhari, which delivers fresh fruit, salads and juices to customers, in 2015. His target was to amass Rs.20 lakh through a community subscription offer plan, which offers donors the same features as equity shares, sans any voting rights. With a minimum contribution amount of Rs.5,000, Falhari managed to raise over Rs.21 lakh from 196 donors. However, business crowdfunding isn’t an easy or free way of making money as it requires a lot of effort to convince backers that your product has value.

So, 100% success isn’t always guaranteed, but it can provide a little financial boost to cash-strapped entrepreneurs. A supplemental benefit is that such campaigns can help increase exposure and build a customer base. Lavanya Sunkari discovered this while running a campaign to raise Rs.10 lakh for her venture Lauriko via Tyke. Sunkari, who has more than 15 years of experience in marketing, founded Lauriko, a company that produces coconut-enhanced wellness shots for skin and hair, in 2021.

“Crowdfunding has not been very rewarding in terms of funds though we did raise the required amount. But, it has been amazing in terms of people engagement, enhancing our customer base, and providing us with good feedback,” says Sunkari, who has also raised over Rs.3 crore from various angel investors. Sharma agrees that this may not always be the best path to take. “Crowdfunding isn’t tax-friendly as the received funds reflected as revenue on our balance sheets and were taxed at a higher rate,” he says.

Also, SEBI rules for the private placement of shares stipulate that within one financial year, more than 200 people cannot be offered equity shares in a company. As 196 people participated in Falhari’s campaign, Sharma has no plans to raise money via this route anymore. However, running a crowdfunding campaign for your product can show you whether there’s a demand for it. If your product is expensive or complicated to create, producing it before testing the market can be financially ruinous. Also, if the campaign sees a lot of interest from potential donors, it might also help you secure larger funding from angel investors in the future.