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SEBI to come out with guidelines for crowdfunding

sebiSecurities market regulator SEBI will soon come out with guidelines for crowdfunding which could set ground rules for the new private funding platform for startups and creative projects, according to PTIreport.

“We are coming out with guidelines on crowdfunding soon, because we want to encourage young entrepreneurs to raise capital. Our aim is to help young people raise capital very smoothly,” SEBI chairman UK Sinha said at an investors’ conference in Mumbai.

Crowdfunding is the process of raising capital by entrepreneurs and creative artists through various online platforms for their projects/ventures from individuals and organisations across the globe. Although this is relatively a new concept in India, some fledgling startups in the country have already raised capital through various overseas crowdfunding platforms to raise capital, which is much easier and less time consuming compared with raising VC/angel funding.

Kochi-based RHLvision Interactive, a Startup Village incubatee that has developed a gesture-based wearable device called Fin, recently raised over $200,000 through Indiegogo, arguably the highest amount ever raised by an Indian startup through a crowdfunding platform.

Last year Bangalore-based Connovate Technology, which offers a Fin-like device called Gecko that can add gesture control to smartphones, raised a little over $135,000 through Indiegogo. Appy Pie, a cloud-based do-it-yourself (DIY) app developing platform, had raised $10,000 from Kickstarter in August last year.

No specific set of standards are followed in India, while in the markets like the US, the regulators follow strict guidelines on crowdfunding. As per US SEC rules, a company would be able to raise a maximum of $1 million through crowdfunding in a 12-month period.

Crowdfunding platforms include Kickstarter, Crowdfunder and RocketHub, among others.

(Edited by Joby Puthuparampil Johnson)