Raise Funds for Startup India
New businesses called start-ups were established with the goal of creating an original good or service, marketing it, and making buyers find it hard to refuse and unbeatable.
A start-up, which is rooted in innovation, strives to address flaws in current products or develop whole new categories of goods and services, upending long-established methods of thinking and conducting business for entire sectors. Because of this, many companies are referred to as “disruptors” in their respective sectors.
You might be most familiar with start-ups in big tech—think Facebook, Amazon, Apple, Netflix, and Google, sometimes known as the FAANG stocks—but start-ups also include businesses like WeWork, Peloton, and Beyond Meat.
A company wants to develop a completely original template. In the case of the food business, that would entail providing meal kits, such as Blue Apron or Dinnerly, to give the same service as restaurants—a chef-prepared meal—but with convenience and variety that sit-down establishments can’t match. Because of this, restaurants now have access to tens of millions of potential clients instead of just a few hundred.
Start-ups strive for growth and speed
Another important characteristic that sets start-ups apart from other businesses is their rapid development. Start-ups want to swiftly develop on concepts. They frequently use an iterative process called feedback and use data to constantly enhance goods. A company will frequently start with a minimum viable product (MVP) that is the bare bones of a product that it will test and refine until it is prepared to go to market.
Start-ups often want to quickly increase their consumer bases while simultaneously improving their offerings. This assists them in gaining steadily higher market shares, which in turn enables them to raise more money, which in turn enables them to expand their product offerings and customer base.
Usually, all of this rapid development and innovation is being done to further a single, overarching objective: going public. An “exit” is what is referred as in start-up jargon when a firm allows for public investment, which gives early investors the chance to cash out and profit.
How Are New Businesses Funded?
Start-ups typically raise capital through many rounds of funding:
The founders, their friends, and family invest in the company at a stage called bootstrapping.
The next step is seed capital from so-called “angel investors,” wealthy people who invest in start-up businesses.
The following fundraising rounds include Series A, B, C, and D, which are often headed by venture capital firms and invest tens to hundreds of millions of dollars in businesses.
Last but not least, a business may choose to go public and accept investment through an initial public offering (IPO), a special purpose acquisition company (SPAC), or a direct listing on a stock market.
A public firm is open to investment from anybody, and the start-up founders and early supporters can sell their shares for a significant profit.
It’s important to note that the Securities Exchange Commission (SEC) feels that authorised investors’ high incomes and net worth’s assist insulate them from potential loss, therefore the early phases of start-up funding are only available to individuals with very deep wallets.
According to a paper written by UC Berkeley and Stanford experts, the overwhelming majority—about 90%—of companies fail. While everyone desires the more than 200,000% return Peter Thiel witnessed on his investment into a little firm named Facebook, the vast majority—about 90%—of start-ups fail. This means that early-stage investors very much risk receiving no return on their capital.
Funding your start-upbusiness in India
Are you launching a company?
You know you will succeed because you are holding on to a brilliant concept and also the determination to do it!!
Have you ever considered the money or finance needed to realise your dream?
No matter if the start-up is a huge corporation or an MSME of any kind, it requires financial investment. Funding gives your company projects a solid foundation and aids in their expansion and further growth. Finding money for a start-up firm may occasionally be a difficult and time-consuming endeavour. However, to make things easier for you, we have developed a list of several crucial financial strategies that will aid you in obtaining funding.
Self-Finance Your New Company
The best kind of finance employed by many new businesses is self-financing or personal investment. How much cash will you be investing in your start-up? is a question that is asked regardless of whether you take out a loan, approach a venture capitalist, or ask a government agency to give funding for your business. The wisest course of action for new business owners is to invest their own money. Lenders won’t have a justification to reject your request for a business loan while your company is in its latter phases since they will take into account the stability of your company as a low-risk criterion.
The idea behind crowdfunding is to raise money from a large number of investors using online channels like social media and business-focused websites. Online crowdfunding web sites collect money for a range of different causes, organisations, projects, events, disaster or difficulty assistance, etc. This particular idea supports both the cultural and social reasons while simultaneously earning money for new businesses or first-time entrepreneurs. Kickstarter, Ketto, Catapooolt, FuelADream, Fundable, Indiegogo, Milaap, Wishberry, and others are some of the top crowdfunding websites in India.
Request loans through government programmes
The Indian government has introduced a number of loan programmes with the goal of helping new businesses, SMEs, MSMEs, as well as women business owners, educated young, SC/ST persons, Small Scale Industries (SSIs), villages, people living in rural and urban regions, etc. The MUDRA loan programme under the Pradhan Mantri Mudra Yojana (PMMY), Start-up India, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Stand-up India, Atal Innovation Mission, make in India, Trade-related Entrepreneurship Assistance and Development (TREAD), etc. are just a few of the loan programmes launched by the Indian government to aid new businesses.
Obtain Loans from Banks in the Public and Private Sectors
For start-up businesses, banks are viewed as the top priority since they are a more dependable and practical source of funding. The two types of financing that banks offer to new businesses are term loans and working capital loans. In India, almost all public and private sector banks provide loans for new businesses. The interest rate, loan size, and payback period given, however, will differ from bank to bank.
Take out a small business loan from an MFI or NBFC
It will be challenging to obtain loans from private or public sector banks if you are new to lending and lack any credit history or score. To apply for a start-up loan, check your credit score and then get in touch with a microfinance institution or non-banking financial company. In comparison to PSU banks, NBFCS and MFIs provide interest rates that are relatively higher.
Make use of business credit cards
Since start-up businesses have become more prevalent in recent years, the use of credit cards for commercial purposes has increased. Using credit cards for transactions and promptly returning the balance may help you avoid debt and extra interest rates paid in the form of penalties if your start-up does not initially require big sums of cash.
Self-Help or the Peer-to-Peer Lending
Peer-to-peer lending is a sort of money borrowing in which there are no middlemen during the entire transaction. Borrowers receive money at their disposal to invest in their start-up from lenders who lend money to them as an investment. As a result of the greater interest rate given in this procedure compared to banks, NBFCS, and MFIs, lenders may profit from the borrowers. For the benefit of both lenders and borrowers, the RBI regulates peer-to-peer lending organisations. Peer-to-peer lending is a sort of financing for new businesses, but for the lender it becomes an investment.
How to Make Start-up Investments
Unfortunately, the general public does not have easy access to start-up funding.
You must be an accredited investor to get access to the most attractive early-stage firms or venture capital funds with the highest potential for first level profits. Simply put, this indicates that you have a net worth of at least Rs. 1 million, excluding your principal house, or an annual income of at least Rs. 200,000. If you are a registered investment adviser, you can also be allowed to claim accredited investor status regardless of your income or net worth.
But there are still solutions available to you if none of those criteria apply to you. Anyone may spend a little amount on crowdfunding websites like We Funder or Seed invest in return for a stake in a firm. The investment minimum for making a Seedinvest is $500 which totals to above Rs. 39,000, which is fifty times less than the normal check anticipated from qualified investors wishing to enter the start-up investing market. The company also claims pre-vetted prospects.
How Can Start-ups Be Successful?
Although a lot of start-ups may eventually fail, not all do. Many factors must come together for a business to prosper, and important questions must be resolved.
- Is the team sincerely committed to their concept? The execution is everything. Even a great idea might fall flat if the team isn’t willing to go above and beyond to support it.
- Do the founders possess industry knowledge? The founders ought to be experts in the field in which they work.
- Do they have the time to put in the effort? Early-stage start-up workers frequently have demanding work hours.
- According to a 2018 poll by MetLife and the U.S. Chamber of Commerce, start-up founders put in days with more than 14 hours of labour. A team may find it difficult to succeed if they aren’t prepared to give an idea the majority of their waking hours.
- Why now and why this concept? If this is a novel concept, why hasn’t someone attempted it before? If not, what makes the start-up’s crew so adept at breaking the code?
- Size of the market? The scope of an opportunity for a start-up is determined by the size of its market. Businesses that are fixated on specialised technology may outperform their competitors, but for what reason? Financials that are too tiny to sustain may result from too small marketplaces.
A business may have a chance of joining the 10% of early-stage firms that survive if it can successfully respond to all of these questions.