Crowdfunding - A Brief Overview Of The Regulatory Framework

Crowdfunding is solicitation of small amounts funds from multiple investors through a web-based platform or social networking site for a specific project, business venture or social cause.¹ This process is being practiced all over the world as an alternative to traditional funds raising. It is an alternate source of finance which facilitates interaction of entrepreneurs and prospective investors on an online platform where the former 'pitch' their business ideas and plans with an objective of attracting investments from the latter. Crowdfunding is beneficial as it widens the reach of entrepreneurs beyond the conventional circle of friends, relatives and venture capitalists.

It can be broadly divided into four categories: donation crowdfunding, reward crowdfunding, peer-to-peer lending and equity crowdfunding.