Crowdfunding for Startups in Nepal

Crowdfunding is the go-to approach for any startups to validate the idea, raise capital or just make a dream come true in the west. While this industry is a billion dollar industry in the west, crowdfunding is still an arcane concept in Nepal. Before taking a dive into Crowdfunding for Startups, let us first understand what crowdfunding is and when you should opt for crowdfunding.

Crowdfunding

Crowdfunding is the process of raising many small sums of money from a large number of well-wishers and/or supporters of the project via internet. A crowdfunding platform like Kickstarter, Indiegogo or Grasruts aids in the crowdfunding process by already integrating a payment gateway, monitoring the fundraising process, and it gives security to the supporters' money, too.

One of the iconic examples of crowdfunding in the history was the monumental base of the Statue of Liberty in New York, which was actually built with the crowdfunded money when the government failed to provide funding for the same.

In crowdfunding, there are four major types:

1. Reward-based Crowdfunding

In this mode of crowdfunding, a reward is given in exchange for the money that the supporter contributed to a project. The reward could be anything. For example, if I have a product or service that I am crowdfunding then the possible rewards could be the product or service that costs cheaper than the market price.

This is the most popular mode of crowdfunding, and is also the legal type of crowdfunding that can be done in Nepal.

2. Donation-based Crowdfunding

In this mode of crowdfunding, the supporters may not get anything in return for the money that they have contributed except for some self-satisfaction. This is also legal in Nepal. Platforms like Indiegogo, GofundMe and Grasruts support this crowdfunding mode.

3. Debt-based Crowdfunding

In this mode, the person who contributed money will get their money back along with an interest. This is also legal in Nepal, but it needs a huge upfront capital which makes it not very feasible for startups. Platforms like Kiva follow this approach.

4. Equity-based Crowdfunding
   

This is a new crowdfunding mode. It is rising in popularity. In this mode of crowdfunding, the person who contributed will get certain equity in the company. This is still illegal in certain countries, and is illegal in Nepal, too. Platforms like Indiegogo support this crowdfunding mode.

Benefits of crowdfunding

While most people think of the benefit of crowdfunding as an instrument of raising money, only because the word itself involves the term ‘fund’, yet this is only partially true.

• A major benefit of crowdfunding is its ability to function as an idea validation tool,
• It also acts as a free marketing tool,
• It will also grow your public relation, and
• It will help you to crowdsource ideas for your product.

When to crowdfund?

Crowdfunding is a hot topic in the startup world. Just because it is a hot topic, it does not necessarily mean that your startup will need it. If you have an investor then crowdfunding may not be a good choice for you because it is really hard to raise money via crowdfunding. It takes time, and general public will determine the fate of your product.

You should only crowdfund in these cases:

• You do not have any investors.
• You want to test your idea. You want to check if people will love your product before you spend any time or money on it.

FAQ’s of Crowdfunding

Who will contribute money to my crowdfunding campaign?

It usually are your friends and family. Then, it will be the community that thinks that your idea will have some impact on their lives.

How do I raise money via crowdfunding?

First, you need to choose a nice crowdfunding platform. If you have friends abroad, then you can use international platforms like kickstarter or indiegogo, but if you do not then you can use Grasruts.

After that, you create a campaign in the platform with all the details about your idea. You will also have to set rewards for the supporters in exchange for their funding.

Then, you start sharing the campaign with your friends and families. Your friends will share your campaign on social media, and interested strangers will contribute to your campaign.

What do the supporters of the campaign get?

Depending upon the crowdfunding mode, if it is reward-based, then they will get the rewards that you have promised.

What can I crowdfund?

You can crowdfund basically anything, but it is highly advisable to only start crowdfunding campaign for those projects that have a strong community behind them.

Writer: Sushant Bajracharya ( Sushant is the Co-Founder@ of Grasruts and also the Student of People's Campus)

Editor-in-Chief: Edna Shrestha

FYI: Grasruts is a crowdfunding platform in Nepal. If you have any queries on crowdfunding, feel free to reach at contact@grasruts.com.