Raise Funds for Startup India

Last Updated on February 28, 2024 by Kanakkupillai

New businesses called startups 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 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 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.

Startups 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 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), which is the bare bones of a product that it will test and refine until it is ready to market.

Start-ups often want to quickly increase their consumer bases while 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 referred to in startup jargon when a firm allows for public investment, allowing early investors to cash out and profit.

How Are New Businesses Funded?

Startups 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, often headed by venture capital firms that invest tens to hundreds of millions of dollars in businesses.
• Last, 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 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 risk receiving no return on their capital.

Funding your startup business in India

Are you launching a company?

You know you will succeed because you are holding on to a brilliant concept and the determination to do it!!

Have you ever considered the money or finance needed to realise your dream?

Whether the start-up is a huge corporation or an MSME, it requires financial investment. Funding gives your company projects a solid foundation and aids their expansion and further growth. Finding money for a start-up firm may occasionally be difficult and time-consuming. 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? This question is asked regardless of whether you take out a loan, approach a venture capitalist, or ask a government agency to fund your business. The wisest action for new business owners is investing 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 consider your company’s stability as a low-risk criterion.

• Relyon crowdfunding

Crowdfunding is to raise money from many investors using online channels like social media and business-focused websites. Online crowdfunding websites collect money for various causes, organisations, projects, events, disasters, difficulty assistance, etc. This idea supports cultural and social reasons while simultaneously earning money for new businesses or first-time entrepreneurs. Kickstarter, Ketto, Catapult, 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 several loan programmes to help new businesses, SMEs, MSMEs, 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

Banks are considered the top priority for start-up businesses since they are a more dependable and practical funding source. The two types of financing that banks offer to new businesses are term loans and working capital loans. Almost all public and private sector banks in India 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.

Obtaining loans from private or public sector banks will be challenging 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 contact a microfinance institution or non-banking financial company. Compared to PSU banks, NBFCs and MFIs provide relatively higher interest rates.

• 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 as 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 transaction. Borrowers receive money 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 lenders and borrowers, the RBI regulates peer-to-peer lending organisations. Peer-to-peer lending is a sort of financing for new businesses, but it becomes an investment for the lender.

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 claim accredited investor status regardless of your income or net worth.

But solutions are still available if none of those criteria apply to you. Anyone may spend a little on crowdfunding websites like We Funder or Seed to invest in return for a stake in a firm. The investment minimum for making a Seedinvest is $500, which totals above Rs. 39,000, 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. For a business to prosper, many factors must come together, and important questions must be resolved.

• Is the team sincerely committed to their concept? 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 struggle to succeed if they aren’t prepared to give an idea for 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 adept at breaking the code?
• Size of the market? The scope of an opportunity for a start-up is determined by its market size. 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 be able to join the 10% of early-stage firms that survive if it can successfully respond to all of these questions.