How to raise Funds for Startup?
How to raise Funds for Startup or Existing Business?
Every Start-Up requires reserves to develop to raise starting stores has continuously been a challenge. We have attempted to display all the choices accessible for raising money in India. All the choices displayed are short-term capital and startup will require to create the trade which is operationally breakeven.
Here are the alternatives for the raise funds for startup or Existing Business, we have attempted to capture many important illustrations with the choices:
Here are the alternatives for the raise funds for startup or Existing Business, we have attempted to capture many important illustrations with the choices:
1) Bootstrapping your Start-Up
This strategy of raising stores has been utilized by numerous brands like BigBazaar (Future Retail Group), where Mr. Kishore Biyani made a realm from bootstrapping(i.e one of type of Funds for Startup).
So, what is bootstrapping? In basic words, it’s self-funding your startup or Business. In this, you’ve got to either utilize your investment funds or subsidizing from companions and family. This model has been effective and has made companies like Zoho, Zerodha, GrabOn and numerous more.
Positive Points :
Founder(s) /Owner(s) have the flexibility to form a choice even during Bad times.
No need to dilute the equity.
Total control over the funds.
Negative Points :
The initial fund requirement has to be small.
Works for little/small scale enterprises.
So, what is bootstrapping? In basic words, it’s self-funding your startup or Business. In this, you’ve got to either utilize your investment funds or subsidizing from companions and family. This model has been effective and has made companies like Zoho, Zerodha, GrabOn and numerous more.
Positive Points :
Founder(s) /Owner(s) have the flexibility to form a choice even during Bad times.
No need to dilute the equity.
Total control over the funds.
Negative Points :
The initial fund requirement has to be small.
Works for little/small scale enterprises.
2) Crowdfunding
Its new option that has gained popularity for raising fund over a few years.
Crowdfunding has been utilized to raise reserves for the cause like community school building, for cancer patients, etc. So what is crowdfunding in terms of fundraising, it could be a sort of taking forthright installment/upfront payment or pre-order or commitment or venture through more than one individual at the same time in return of product or value or profit-sharing. This fundraising can be done through own website or crowdfunding websites like Angelpaisa, Kickstarter, etc.
Few successful brands are Bakeys – Edible Cutlery, The Sepoi, etc.
Positive Points :
Creating marketing if the public shows interest.
· No need for support from a broker or investor for growth.
· If customer demand is there then it will attract investors.
Negative Points :
Tremendous/Huge competition.
The business ideas may be great but having too many players in the portal, the idea might get diluted. May not get single financing/funding but in the future can be a unicorn company.
· No need for support from a broker or investor for growth.
· If customer demand is there then it will attract investors.
Negative Points :
Tremendous/Huge competition.
The business ideas may be great but having too many players in the portal, the idea might get diluted. May not get single financing/funding but in the future can be a unicorn company.
3) Angel Investment or Angel Investor
Who is an angel investor? Angel investor is basically individuals with capital and keen to invest in innovative and/or creative business ideas with an opportunity to grow. Few renowned names in angel investors are Binny Bansal, Abhishek Gupta, etc. Nowadays, angel investors have formed a group of individuals who identifies and scrutinizes business ideas before investing. Few names in the angel group network are Indian Angel Network, Angel Investment Network, etc. Angel investors also offer advisory and mentor the founders along with investment.
Positive Points :
· Willing to take risk.
· Provide mentorship.
Negative Points :
· Provide lower capital against the higher equity
4) Venture Capital
Venture capital (i.e one of type of Funds for Startup) funds are managed by professionals who explore business with great growth opportunities and prospects. VC is the short form for the Venture Capital and they are really big bets for the startup. VCs provide capital, mentorship, and offer assistance to a business scale and create a sustainable business model. VCs invest in a solid business against the equity in the business. They exit when there is an IPO or acquisition of the business. Few reputed names are Nexus Venture Partners, Sequoia Capital, Kalaari Capital, etc.
Positive Points :
· They monitor the business ensuring the sustainability and growth.
Negative Points :
· They take control of a business if a business is not giving the expected returns.
· They look for stability and sustainability.
Positive Points :
· They monitor the business ensuring the sustainability and growth.
Negative Points :
· They take control of a business if a business is not giving the expected returns.
· They look for stability and sustainability.
5) Funds from Incubators and Accelerators
“Incubators” and “Accelerators” are interchangeably used but there is a different characteristic. Accelerators “accelerate” the existing business i.e. help to accelerate the growth of the business. Incubators “incubate” ideas with building a business model and company. In crisp, accelerators focus on scaling the business whereas incubators are more involved in innovations. Few prominent accelerators and incubators are Business World Accelerate, 500 startups, Cisco Launchpad, etc.
Positive Points :
Provide mentorship.
· Network with upcoming startups.
Negative Points :
· Time bounded and required a high level of commitment.
Positive Points :
Provide mentorship.
· Network with upcoming startups.
Negative Points :
· Time bounded and required a high level of commitment.
6) Bank Loans
Banks are continuously a common source of funds. Bank fund in two forms, one is working capital advance/loan and the other is subsidizing/funding. Working capital credit is the credits given to total one full income cycle and hypothecated against stocks and indebted individuals. Whereas subsidizing/ Fund could be a credit towards the business plan and valuation points of interest.
Positive Points :
· Capital is not a constraint.
Negative Points :
· Capital disbursement can be a long process.
· Requires collateral which can be at risk of loss.
Positive Points :
· Capital is not a constraint.
Negative Points :
· Capital disbursement can be a long process.
· Requires collateral which can be at risk of loss.
7) Government of India Offers
Government of India (GoI) launched initiative MUDRA Bank’s plot in which aim is to provide micro-finance, low-interest rate advances/loans to a startup whose founders are from low financial/socioeconomic backgrounds. To avail the MUDRA scheme (i.e one of type of Funds for Startup) required to submit a business plan which covers the source of revenue, jobs created and benefits to the society, once the business plan is approved loan is sanctioned. Other at that point GoI, even State Government has started different programs to promote startup in their regions. Like in Karnataka, Government provides seed funding under “Idea2PoC” scheme in which grant-in-aid is provided limited to INR 50 Lakhs
Positive Points :
· For initial setup the capital influx is huge.
Negative Points :
· Capital disbursement can be a long process.
Positive Points :
· For initial setup the capital influx is huge.
Negative Points :
· Capital disbursement can be a long process.
Conclusion
Funding is for the business whereas business growth is the sole responsibility of the founder(s). And the founder(s) should choose the funding based on your business plan and growth plan. Bootstrapping is the ideal source of funding and create business success story and raise funds when the business is a proven model.
