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Which of the following statements about Crowdfunding is/are correct?
1. Crowdfunding is solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project.
2. Small and Medium Enterprises (SMEs) are able to raise funds at lower cost of capital without undergoing rigorous procedures.
Explanation
Statement 1 is correct: Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the internet. It utilizes web-based platforms or social networking sites to solicit funds from multiple investors for specific projects, startups, or social causes.
Statement 2 is correct: Crowdfunding serves as an alternative financing method that allows Small and Medium Enterprises (SMEs) and startups to raise capital without undergoing the rigorous, time-consuming, and expensive regulatory procedures associated with traditional bank loans, venture capital, or Initial Public Offerings (IPOs). This often results in a lower cost of capital and easier access to funds for early-stage businesses.
PROVENANCE & STUDY PATTERN
Guest previewThis is a straightforward economy question testing basic financial terminology. Both statements are directly covered in standard economy texts like Vivek Singh and Nitin Singhania. If you missed this, your foundational reading of alternative financing mechanisms is weak.
This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.
- Explicitly defines crowdfunding as raising small amounts of money from a large number of people for a project or new venture.
- Identifies the mechanism as using internet or social media portals to act as intermediaries between investors and entrepreneurs.
- Highlights the role of vast social networks in expanding the pool of potential investors beyond traditional circles.
- Describes P2P lending as a form of crowd lending where online platforms pair individual lenders with borrowers.
- Explains the mechanism where borrower profiles are displayed on digital platforms for investors to assess risk and interest rates.
- Confirms that repayments and fund processing are handled through the intermediary platform.
- Identifies Initial Coin Offerings (ICOs) as a specific type of crowdfunding used to raise funds for projects.
- Notes the use of blockchain technology and virtual currencies as the medium for this specific fundraising mechanism.
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SIMILAR QUESTIONS
With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ? 1. They can sell their own goods in addition to offering their platforms as market-places. 2. The degree to which they can own big sellers on their platforms is limited. Select the correct answer using the code given below :
With reference to 'Stand Up India Scheme', which of the following statements is/are correct? 1. Its purpose is to promote entrepreneurship among SC/ST and women entrepreneurs. 2. It provides for refinance through SIDBI. Select the correct answer using the code given below.
Consider the following statements : Statement-I : Syndicated lending spreads the risk of borrower default across multiple lenders. Statement-II : The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line. Which one of the following is correct in respect of the above statements ?
With reference to World Bank and International Monetary Fund, which of the following statements is/are correct ?
1. The World Bank and International Monetary Fund were set up together and are popularly known as Bretton Wood Twins.
2. Headquarters of International Monetary Fund and World Bank are located at Washington D.C. and New York respectively.
Select the correct answer from the code given below :
Code :