How to get Startup Funding in India
Startup Funding has become essential for startups and small businesses to grow and attract new clients. Many startups get stuck in a phase where they need more money to hire employees or expanding business overseas etc. As a result, entrepreneurs and startups usually quit what they have started.
Yes, 95% of startup get failed at the initial stage of operation. Money works like bloodline for any business. To cover the exciting yet painstaking journey from the idea to revenue generated business requires money fuel. Because of this, entrepreneurs always face the difficulty and ask themselves – How do I get funding for my startup?
Here are some important factors to guide you in raising capital for your business. In fact, these key points will evolve your startup into the full-fledged organization.
Key Points to Attract Startup Funding
Follow these crucial points to attract investors or money lenders and will help to know your startup profile before going out to pitch them.
1. Strong Team
A Successful business builds on the foundation of a strong team. Startups need a structured team to sustain in the long run. A powerful company operates best when employees work with a team mentality, each maintaining their key roles and accomplishing long-term goals.
The structured team mainly focus on rules, respect each other goals, communicate effectively in the team, and celebrate those successes and failures together.
When the investors or lenders see a successful work team, they feel confident to invest their money into your business.
2. Clear & Concise Business Plan
Business Plan, a ladder to lead your steps towards success. Startup Funding comes under your biggest goals. To bag funds, you need a clear and impressive business plan.
A business plan describes the operational, financial and marketing goals of your idea. This further helps potential investors to understand why your business concept could be a win-win situation for both the parties.
3. Investor Centric
Startup funding is usually get attracted by the careful strategy and futuristic solutions for challenges your company would face.
Here, you would clear the vision to deliver profit to investors by providing benefits of investing in your idea. The complete idea explains itself what problems you are solving, how your product/service better than your potential customers and how much benefits an investor will get after investing in it.
4. Robust Prototype
Many startups need investment in the prototype phase. A Prototype to attract startup funding. At this point, startups work on the design, each version of the prototype will be refined and advanced. Further, some beginners take their prototypes on the road to share them with investors.
A robust prototype is a tangible form of your idea. You might have this question “why do I need a prototype for startup funding?” Because money lenders take you much seriously when you go out with a working product instead of vague ideas.
5. Win-Win Model
It’s already mentioned above to create a win-win situation for you as well as investors while pitching out them for investments.
Making Investors your company’s shareholders and designate them as board advisory can help you in potentially growing your business.
Sources for Startup Funding
1.Bootstrapped Funding
Bootstrapping is the process of using existing resources, such as personal savings and unused space to start your company. Any entrepreneur can start a business with less money or no money.
Initially, new startups have trouble getting funds without any traction and potential plan for success. So you can invest a small amount of your savings or talk to friends and family for the contribution to your business.
Foremost, it should be considered the first option for funding your startup because of its advantages. When you spend money from your pocket, that time you are tied to complete your goals and focused on the business.
In fact, business consultants advise people to invest a small amount from your pocket. It makes you confident enough to know that your startup would require funding or not. Hence, it gives you all the freedom to be your own boss.
2.Venture Capitals
Venture capitalists are the big shots for startup funding where they invest professionally managed funds on small businesses and startups. These ventures mainly spend on potential ideas.
Venture capitals also bring expertise, mentorship, and evaluation program for checking out the sustainability and scalability of the business. This option is only for those businesses who are already generating revenues and beyond the startup phase. The venture capitalists are more interested in spending on those with a strong team and good traction. Along with this, you must be flexible and compromise a little to maintain relationships with venture capitalists. Whatever fund they have invested, it can often recover within three or five years.
3.Angel Investors
The angel investors have business minds looking to invest their money for the huge potential. This startup funding option looks for earning interest out of business success and may expect as high as 30% equity as well. Angel investors can be professional such as doctors and lawyers or business associates such as executives, suppliers, and customers etc.
They are more likely to persuade by an entrepreneur success, persistence, and discipline.
Therefore these investors have high-interest expectations with the company shares but do lesser-investment than the venture capitalists.
4.Incubators & Accelerators
At the early stage, a startup can consider becoming incubated in the incubation centers. Incubation centers nurture the business providing infrastructure and training and network to a business. Accelerators so more or less the same thing, but an incubator assists the business to walk while accelerator helps to run a giant leap.
For startup funding, they will guide where to invest and how to invest your money. These incubation centers run fellowship programs for 4-8 months. In fact, You will also come in contact with mentors, investors and other fellow startups under a ceiling.
5.Bank & Financial Institutions
Bank can provide capital in two types: first, in the form of a working capital loan and second, funding for the business.
The working capital loan is a good source of capital for small and medium enterprises (SMEs) to sustain when they don’t have sales and maintain liquidity (cash flow) to meet their operational goals.
Funding involves the process of writing and sharing a business plan and along with the valuation details, based on which the loan is sanctioned.
6.Government Funding Schemes
The Government of India has introduced 50+ startups schemes in the last five years. These schemes have encouraged 5,000 startups and funded them for potential growth in the ecosystem. There are different schemes in different states of India such as MUDRA( PradhanaMantri Micro Units Development and Refinance Agency ) Yojana Scheme, Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Centre for Entrepreneurship Development, and Rajasthan Startup Fest, etc to encourage small businesses.
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