If you follow the startup world, you probably have watched Shark Tank India - if you don’t, then probably you’ve watched this business reality show for the high-stakes drama that it brings to television. The new season began on 2 January this year. It’s a heck of a program. The audience demand for the show is way higher than an average TV series, putting it among India’s top 2.7% of all shows.
In our article today, though, we talk about something more serious. Real (ity) finance, if one can term it so. Shows like Shark Tank have spawned a new industry that combines slick marketing, storytelling and online platforms to aggregate and attract retail investors into fundraising campaigns by startups.
Through online platforms such as Tyke Invest and Infubiz, startups offer "investment" opportunities to retail investors with a ticket size as small as INR 5,000 (~US$60) or INR 10,000 (US$120). They do it through Community Subscription Offer Plans, or CSOPs.
"Investors in these instruments do not become shareholders in the startup, and do not have any shareholder rights under the Companies Act, 2013. Yet, thousands are subscribing to these speculative instruments"
We @ Mumbai Multimedia Studio dug deep into the type, size and number of investments on some of these platforms which argues that in the name of a community subscription program, these are essentially Stock Appreciation Rights (SARs), which under securities laws, resemble derivative products and are prohibited unless traded on a recognized stock exchange. In short, with reality investment TV, a new trend is emerging where online platforms are starting to look like stock exchanges but with fewer regulatory barriers and costs—similar to a shadow IPO. As much as India desires more depth in its equity market, the new wave raises concerns about the distribution of risk and protection of retail investors who are influenced by aspirational marketing - YES
