Markets

UK tech body to lobby SEBI for equity-based crowd-funding

Priyanka Pani Mumbai | Updated on December 07, 2014 Published on December 07, 2014

bl08_idea.jpg





The UK-based community and workspace for technology entrepreneurs TechHub will directly lobby with the Indian government and market regulator SEBI to permit equity crowd-funding, a move that will boost the start-up ecosystem.

TechHub, which opened its centre with the help of the UK government in Bangalore this year to help create 1,000 start-ups in the next five years, has already written to the UK India Business Centre regarding this. The UKIBC provides support, advice and networking for UK businesses across sectors, with a specific focus on tech-rich sectors.

Stewart Noakes, co-founder, TechHub Bangalore, told BusinessLine, “In India investors are being very cautious and hence putting money in all the big and proven businesses such as Flipkart and Snapdeal. They are looking at scale and not innovation. We need to change that early stage funding scenario in India. Equity crowd-funding is an excellent tool for start-ups.”

He said equity crowd-funding has got better chances in the Indian market due to the extended family culture that the country has. “It is disruptive and will supplement the angel investors too,” he added.

However, there are few ventures such as Catapooolt, Letsventure, and Indiegogo amongst others in India, those who do only crowdfunding and not equity-based since that falls under SEBI’s jurisdiction. The market regulator had early this year issued draft regulations to govern this domain which said that only SEBI-registered entities, be allowed to participate in crowd-funding activities. Such investors would include institutional investors, companies, HNIs and financially-secure retail investors advised by investment advisors or portfolio managers.

Besides, the crowd-funding investment of retail investors would be capped at ₹60,000 or 10 per cent of their net worth.

The crowdfund ventures have, meanwhile, written to SEBI, which has acknowledged the potential role of crowdfunding in fuelling start-up ecosystem and it is expected that regulations with respect to equity crowdfunding should be issued soon. SEBI is expected to further issue guidelines in few months.

Satish Kataria, Founder of Catapooolt, says that crowdfunding is definitely growing largely in the country since last one year, wherein the market witnessed deals worth over ₹15 crore closed through various models. The market is estimated to cross ₹100 crore within next two years, he said.

The key challenge related to crowd-funding in India is the conceptual understanding.

“In western markets, crowd-funding has grown by leaps and bounds on account of larger risk appetite and number of potential seed investors and also a wide based consumer attitude which likes to ‘discover and participate’ in new upcoming creative and start-up projects. Such an attitude in Indian market will still take some time.

One could say that as a new concept life journey – crowd-funding in India is today where e-commerce was four years back,” Kataria added.

Published on December 07, 2014
This article is closed for comments.
Please Email the Editor