9 Modes Of Funding For Your Startup
According to recent research, over 94% of new businesses fail in the first year of their operation. Lack of funding turns to be one of the main reasons.
With time circumstances have changed. Now business owners and startups both have evolved a lot. With this change in mentality, there are various funding options available to startups than were available in the past.
So, if you are having a problem getting funded, don’t worry.
Here is a detailed guide of the top 10 funding options that will help you raise capital for your business.
Bootstrapping your startup business:
Bootstrapping means utilizing your money to get the business started. This is by far the oldest and most preferred form of financing a startup, as it results in no equity dilution.
Herein, money is less difficult to raise due to fewer formalities/compliances, plus fewer costs of raising. In most situations, family and friends are flexible with the interest rate.
Crowdfunding As A Funding Option:
Crowdfunding is one of the newer ways of funding a startup that has been gaining a lot of popularity recently. If you are looking to raise relatively small amounts, then crowd-funding could be for you. You just have to make sure that the platform you have chosen is right.
Crowdfunding is like taking a loan, pre-order, contribution or investments from more than one person at the same time.
The best thing about crowdfunding is that it generates interest and helps in marketing the product alongside financing.
Some of the popular crowdfunding sites in India are Indiegogo, Wishberry, Ketto, Catapooolt, and Fundlined.
Get Angel Investment In Your Startup:
Angel investors are wealthy individuals who will provide you funding in exchange for a share of equity in the business. Some angel investors work in groups and screen deals together before providing funds, while most work on their own.
They also work in groups of networks to collectively screen the proposals before investing. They can also offer mentoring or advice alongside capital.
Here is a list of popular Angel Investors in India – Indian Angel Network, Mumbai Angels, Hyderabad Angels.
Get Venture Capital For Your Business:
Venture capitals are professionally managed funds who invest in companies that have huge potential. Venture capitalists are investors who put in a significant amount of money in exchange for equity in the business. They get returns when the business goes public or is acquired by another company.
Venture capitalists not only provide funding but can offer expertise and mentorship to help develop the business.
Some of the well known Venture Capitalists in India are – Nexus Venture Partners, Helion Ventures, Kalaari Capital, Accel Partners, Blume Ventures, Canaan, Sequoia Capital, and Bessemer Ventures.
Incubators & Accelerators:
Incubator and Accelerator are program facilities that assist hundreds of startups every year. Early-stage businesses consider Incubator and Accelerator programs as a funding option. These programs run for 4-8 months.
Incubators and Accelerators provide every help that a startup needs, like funding, marketing, mentorship, etc. The only requirement is time commitment from the business owners.
You will also be able to make genuine connections with mentors, investors and will learn a lot from other fellow startups using this platform.
In India, popular names are Amity Innovation Incubator, AngelPrime, CIIE, IAN Business Incubator, Villgro, Startup Village and TLabs.
With the development of the startup ecosystem in India, the number of events related to startups and startup ideas has also increased. These contests accept applications from entities with diverse backgrounds. If you just have an idea or a newly started company, these competitions will help you grow.
The upside of participating in such competitions is visibility in media and the opportunity to network with investors and of course some money also.
Some of the most popular startup contests in India are NASSCOM’s 10000 startups, Microsoft BizSparks, Conquest, NextBigIdea Contest, and Lets Ignite.
Opt for Bank Loans:
Bank loans are a popular source of funding for many startups. Before applying for a bank loan, it’s important to know the detail of each available option and the interest rates that come with each option. These collateral-free loans may range from INR 5 – 20 Lacs and typically carry an interest rate of 17.0% to 20.0%. Secured loans and priority sector loans are significantly cheaper for obvious reasons.
And also, you don’t have to give up control of your business through this mode.
High Net-Worth Individuals (HNIs):
These are individuals with wealth and existing businesses. They look for investment opportunities in upcoming ventures. They typically invest for 1-3 years and expect their investment to double or triple. This type of funding is suitable for ventures which have a low development period and can start generating positive cash flows within less time.
Government institutions such as SIDBI, NABARD, and NSIC are supporting MSMEs by offering loans at lower than market interest rates.
The lending done by these institutes is governed by regulatory requirements. The Government of India has launched 10,000 Crore Startup Fund in Union budget 2014-15 to improve the startup ecosystem in India. To boost innovative product companies, the Government has launched Bank Of Ideas and Innovations program.
Government-backed ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)‘ starts with an initial corpus of Rs. 20,000 crore to extend benefits to around 10 lakhs SMEs.
Also, different states have come up with different startup development programs like Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Centre for Entrepreneurship Development, Rajasthan Startup Fest, etc to encourage small businesses.
You can also send your pitch deck to us. And if your idea excites us too, we will help you get funded.
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