Indian regulator to issue crowdfunding guidelines

"We are coming out with guidelines on crowd-funding soon, because we want to encourage young entrepreneurs to raise capital. Our aim is to help young people raise capital very smoothly," U.K. Sinha, chairman of the Securities and Exchange Board of India (SEBI), told an investor conference, the Press Trust of India reported.

He expressed concern at a slowdown in funding for companies via the public markets, noting that in the last three years INR600 billion worth of approvals and intentions to raise money have either been withdrawn or allowed to lapse.

Several India-based start-ups have succeeded in raising capital through overseas crowdfunding platforms, which match small entrepreneurs with seed investors globally, but India itself has no formal standards.

Last year SEBI did introduce the Institutional Trading Platform, which allows small and medium-sized enterprises to list without an IPO. Only qualified investors such as PE and VC firms and angel investors are allowed to support start-ups through the platform. Sinha said three companies had listed within six months of the guidelines being issued.

The International Organization of Securities Commissions recently called for greater regulatory oversight of crowdfunding products to avoid potential systemic risks. As the model moves from "gift givers" such as Kickstarter - a that offer investors tangible awards for backing entrepreneurs - to professional investors that seed start-ups and then help them raise further capital from the crowd, several markets are putting rules in place.

In the US, for example, the Securities and Exchange Commission has proposed that companies be allowed to raise up to $1 million through crowdfunding offerings over a 12-month period.

Investors, meanwhile, are permitted to invest up to $2,000 or 5% percent of their annual income or net worth, whichever is greater. If their net worth or annual income exceeds $100,000 they can in invest up to 10% with a cap of $10,000 in a 12-month period.

Crowdfunding is also filtering through to other Asian markets. SeedAsia, a Hong Kong-headquartered web-based platform, offers small-cap angel investors the chance to back a pre-screened group of Chinese and Southeast Asian technology start-ups that have already gained traction.

Australia has been particularly proactive in this area. The Australian Small Scale Offering Board (ASSOB) claims to have facilitated more than $135 million in start-up funding last year and it has since been joined by OurCrowd and VentureCrowd, with M.H. Carnegie & Co. shortly expected to launch The Crowd.

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• Topics
• Early-stage
• Venture
• South Asia
• SEBI
• India
• Crowdfunding
• seed
• Venture