By Vittal Ramakrishna
Given the pervasiveness of technology in our lives, the startup ecosystem has experienced a drastic change. According to Invest India, as of October 2023, India had over 1,12,718 DPIIT-recognized startups spread across 763 districts, making it the third-largest startup ecosystem in the world. Since traditional times, the scope for funding was limited for startups which, as a result, acted as a barrier for many entrepreneurs to launch their startups. However, with the advent of new-age technologies, the landscape of fundraising and investments has shifted dramatically, creating new avenues for entrepreneurs to showcase their ideas and attract potential investors from all over the world.
Among various avant-garde solutions, blockchain technology emerged as a significant one, resulting in the creation of creative solutions that are redefining transparency and trust in fundraising. With its decentralized and immutable nature, blockchain technology provides a secure and efficient platform for entrepreneurs to raise funds and investors to participate in fundraising campaigns. Additionally, smart contracts on the blockchain can automatically carry out terms and conditions by eliminating the need for middlemen and improving accountability and transparency in the fundraising process.
As a result, transparency and trust have become crucial factors in fundraising, as investors now have access to more information about the startup’s progress and financials before deciding to invest.
Here, let’s delve into the way in which blockchain is shaping the future of transparent and trustworthy fundraising in the country:
Traceable and verified transactions: The fundamental feature of blockchain technology is its capacity to provide an unchangeable, transparent transaction record. This feature makes it simple to trace and verify all fundraising efforts in real-time, guaranteeing that each investment can be easily tracked down and subject to an audit. As a result of this advantage, blockchain is certainly revolutionizing the way fundraising is conducted, fostering trust and confidence among investors.
Elimination of intermediaries: Traditional fundraising methods often involve intermediaries such as banks and payment processors. In fact, in that whole process, these intermediaries not only add extra costs but also introduce delays and potential points of failure, delaying the fundraising process. Thus, in order to combat these issues, blockchain technology emerged as a promising solution by eliminating the need for intermediaries. In fact, with the help of blockchain technology, investors can make direct contributions to the startups they want to support, ensuring that their funds are used most efficiently.
Lowered risk of fraud: In today’s era of heightened connectivity, where information is instantaneously shared and global cooperation is merely a click away, fraud has emerged as a recurring issue in the fundraising industry. And honestly, every investor desires to ensure that their investment reaches their intended destinations without being siphoned off by fraudulent actors. Therefore, to reduce the risk of fraud, blockchain technology leveraging cryptographic algorithms emerged as a significant advancement, securing and protecting all data from fraud or hacking.
Smart contracts for enhanced accountability: There is no denying the fact that blockchain is creating new avenues for interaction with investors. This is where the advent of blockchain smart contracts, which are self-executing contracts with the parameters of the trade directly put into code, is transforming fundraising efforts. For instance, an investor can create a smart contract to automatically deliver funds to a startup or organization when particular criteria are met, like reaching a desired result or making progress toward a project milestone.
Blockchain technology: For a transparent and trustworthy future!
In today’s digital-driven world, blockchain is not just a buzzword anymore; it has evolved into a transformative force with the potential to revolutionize fundraising in India. With its decentralized, traceable, and fraud-resistant nature, blockchain ensures that every investment is used for its intended purpose. As a result, in a world where the startup ecosystem has experienced a drastic shift, blockchain technology stands as a beacon of trust, guiding the way toward a transparent and trustworthy future for fundraising efforts in India.
The author is founder and CEO, POD World
