Question

Identify the correct statements about Crowdfunding.
(P) Funds are raised from high net-worth individuals.
(Q) Small contributions are raised from a large group of individuals.
(R) Funds are secured through the stock market.
(S) Funds are sourced from Reserve Bank of India.

• A. Only (P) and (Q)
• B. Only (Q) and (R)
• C. Only (R) and (S)
• D. Only (S) and (P)

Hint:

There are four main types of crowdfunding: Reward-based, Donation-based, Equity-based, and Debt-based (Lending)!

Answer 1

The Correct Option is A

Crowdfunding is a method of raising funds for a project or venture by collecting small contributions from a large number of people, usually via the internet. Let's analyze the given statements about crowdfunding:

1. Statement (P): "Funds are raised from high net-worth individuals." - This statement is partially correct. While high net-worth individuals can participate in crowdfunding, it is not exclusive to them. Crowdfunding is typically characterized by receiving small contributions from a large number of people, not just wealthy individuals.
2. Statement (Q): "Small contributions are raised from a large group of individuals." - This statement is correct. Crowdfunding involves collecting small amounts of money from a large number of people, often through online platforms.
3. Statement (R): "Funds are secured through the stock market." - This statement is incorrect in the context of crowdfunding. Crowdfunding does not involve securing funds through the stock market; it typically happens on online platforms specifically designed for this purpose, separate from traditional financial markets.
4. Statement (S): "Funds are sourced from Reserve Bank of India." - This statement is incorrect. The Reserve Bank of India does not provide funds through crowdfunding. Crowdfunding relies on contributions from individuals rather than institutional funding.

Therefore, the correct statements are (P) and (Q), as they are the closest to describing crowdfunding, considering that high net-worth individuals can contribute, but the essence of crowdfunding lies in gathering small contributions from a large audience.