## Contemporary Sources of Funding

### 1. Crowdfunding

Raising small amounts from a large number of people, typically via the internet.

Used for projects, start-ups, social causes
Platforms may charge processing/transaction fees

Three parties involved:

Party	Role
Fund Raiser	Project/startup seeking funds
Mediator Platform	Online platform facilitating the raise
Investors / Donors	Contributors of funds

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### Types of Crowdfunding

#### a) Equity Crowdfunding

Investors receive equity shares in exchange for investment
Each investor gets a stake proportional to amount invested
Popular among start-ups
Platforms: SeedInvest, StartEngine, EquityNet

#### b) Donation-Based Crowdfunding

Donors contribute without expecting any financial return
Used for medical, educational, or charitable causes
Platforms: GoFundMe (medical/education), Ketto (India — medical), FuelADream (social impact)

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### 2. Peer-to-Peer (P2P) Lending

Unsecured loans from individual lenders to borrowers via online platforms
Borrowers repay principal + interest
Lenders (investors) assess risk and expected return before lending

Indian Platforms: Faircent, Lendbox, i2iFunding, RupeeCircle

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### 3. Startup Funding via Crowdfunding

New companies use crowdfunding to:

Validate their business idea with real market feedback
Raise equity or debt capital
Avoid traditional bank procedures and documentation requirements

Worked example

### Example 1

A cancer patient's family raises ₹10 lakh from 2,000 donors via Ketto — no repayment is promised to donors. This is an example of: → Donation-based crowdfunding (GoFundMe, Ketto, FuelADream are key platforms).

### Example 2

A tech startup raises ₹50 lakh from 500 individuals online; each investor receives equity shares proportionate to their contribution. This is: → Equity crowdfunding (platforms: SeedInvest, StartEngine, EquityNet).

### Example 3

Rahul lends ₹1 lakh to a small business owner through Faircent, expecting 12% annual interest. This is an example of: → Peer-to-Peer (P2P) Lending — an unsecured loan facilitated by an online mediator platform.

### Example 4

Name the three parties in any crowdfunding arrangement. → (1) Fund Raiser — seeks funds; (2) Mediator Platform — hosts/facilitates; (3) Investors/Donors — provide funds.

⚠️ Common exam mistakes

Confusing equity crowdfunding (investors get shares and ownership stake) with donation-based crowdfunding (donors get nothing in return).
Thinking P2P lending involves secured loans — P2P loans are typically UNSECURED.
Forgetting there are exactly 3 parties in crowdfunding: fund raiser, mediator platform, and investors/donors.
Listing only equity crowdfunding as a type — donation-based crowdfunding is equally important and distinctly different.

Reference:

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Crowdfunding, P2P Lending, Startup Funding

Worked example

⚠️ Common exam mistakes