Starting
from scratch is the most difficult part, but is the strongest ever foundation
for any company than a taken over company. Entrepreneurship is all about finding
solutions and makes life comfortable for humankind, so that it improves the
life style of others. And if you think you have a successful idea, there’s no
point burying it inside you. Most entrepreneurs always need financial support
to power up business. Many startups can’t cop up because of this. All you need
is to learn about various sources of startup funding in India and choose the one that suits you.
In this article, we
will be talking about various ways of getting your startup funded. We have also
given some interesting ideas for getting your startup financed.
There
are 4 sources of startup funding in India
Startups in India had
boomed over the last decade, but many of them are no longer in operation. You may
avoid this end result by making sure you have sufficiently financed as needed
for the business. Here are four possible sources of startup funding in India.
1. Govt. loan scheme (5 ways available).
2. Crowdfunding.
3. Angel investors.
4. Venture capitalists.
Once you’ve gone
through our list, you will walk away with the steps you have to take for
improving your chances of getting the fund you wish for.
Funding
can make all the difference
Recently, KPMG released a
report on the Indian startup ecosystem. It states that since 2008-2009 FYI, the
number of startups has gone from 7,000 to 50,000 approx. in 2019-2020 FYI. That
is a growth of 7 times.
But did all the
startups thrive? No, most didn’t. More than 90% of startups fail within
the first five years since inception. One of the most common reasons behind
small business failure is lack of funding.
Are you not willing
to get into this list? Of course “Yes”. Here are 4 ways to get your startup
funded.
- Govt. Loan schemes
· Many
big businesses today were once small and ultimately got nurtured into the giant
companies that they are today.
· Government
of India (GOI) understands the importance of emerging businesses and their challenges
in raising the required finances. Therefore, the GoI is making all efforts to
provide hassle-free government loans for small business in India.
· With
a supportive government and so many loan scheme options available, finance
should not be a reason for you to stop. These loan schemes are definitely the fuel
for vehicle. Explore the best government loan scheme for your business and
focus on the growth of your business.
5 government loans for
small business in India
Here are the top five
government loan schemes offered by Government of India (GoI) for small
businesses:
1. The Credit Guarantee Fund scheme.
2. Small business loans in 59 minutes.
3. Micro Units Development and Refinance Agency.
4. Credit Link Capital Subsidy scheme for
technology upgradation.
5. Stand-Up India scheme.
Whether you’re just
starting a business or need funds to grow, consider one of these loans.
- Crowdfunding
Top on our list of
startup funding in India is crowdfunding. In a nutshell, this is a way of
collecting funds from a number of investors rather than just one.
There are three types
of crowdfunding:
·
Reward
crowdfunding. In this category, the investors receive a product sample or gift
in return for the investment made.
·
Debt
crowdfunding. As the name suggests, you get a loan from investors that you are
required to return under a given deadline.
·
Equity
crowdfunding. Here you need to hand over some portion of your business to the
investors for the investment made by them.
Here are a few
crowdfunding platforms to look at:
·
Kickstarter
·
Indiegogo
·
Crowdfunder
·
Patreon
·
GoFundMe
Crowdfunding has
gained a lot of popularity in the past few years and the process involved is
simple. You need to put forth your startup details, business description and
vision in front of potential investors using a crowdfunding platform. The crowd
will tell you if your idea is worthy of support.
- Angel investors
Individuals with
surplus money and those who are willing to invest in promising startups are
called angel investors. In addition to providing money, they also mentor you
for a sustainable future.
Top-tier companies
like Google, Alibaba and Yahoo all raised funds through angel investment.
This form of
investment typically occurs in the initial stage of a startup’s growth, with
investors generally demanding up to 30% equity.
Angel investments
have their own disadvantages: in comparison with venture capitalists, angel investors provide less money.
Angel
investors back all kinds of startups. All it takes is a terrific idea and a
solid plan.
Here is a list
of top 45 angel investors in India.
- Venture capitalists (VC)
Here come the
top-tier investors who fund startups that possess the highest growth potential.
VCs mostly invest in a startup in exchange for equity when there’s an initial public offering (IPO). They also provide
entrepreneurs with:
- ·
Mentorship
- ·
Connections
- ·
Evaluation
of the startup’s sustainability and scalability
However, venture
capital investment is reserved for startups that have crossed the initial phase
and are generating enough revenue. Also, just like angel investors, VCs have
their own shortcomings.
Generally, venture
capital investment comes with a short-term plan like three to five years. So,
if your product needs more time to build a market for itself, VCs might not
invest in your startup.
Here is a list of 47
most active venture capital firms in India.
What
is Venture capital and angel investment?
Not sure of the difference
between venture capitalists and angel investors? Here are the major differences
between them:
·
Angel
investors just invest in early-stage startups; VCs prefer developed companies.
·
Angel
investors are individuals, whereas venture capitalists are part of a company.
·
Venture
capitalists invest considerably more than angel investors.
·
Angel
investors primarily provide financial support and sometimes even advice. VCs
provide every possible help to grow a company.
Now that we are done
with types of startup funding sources in India, let’s check out some tips for
attracting the right kind of investors for your startup.
How to get funds approved from investors?
Create
an appealing business model
The first thing that
any investor would expect to see is a business
plan, including your target market and the business model you’ve selected. They are interested to invest only
when your business model is highly profitable, scalable and sustainable.
Memories the term “APEM”
v Appraisal
v Planning
v Executing
v Monitoring
Build a team
Investors need to
feel confident about the brains behind your startup. Build a team of experts
who can turn your idea into reality. List their credentials and experience in
your business plan.
Make 1st investment your investment
Before looking for
investors for your startup, you need to invest at least 20% of the total needed
from your own pocket.
Present financial projections
Create a five-year
revenue plan that shows the expected profit for your business. You have to do
some math on predicting future sale and income.
Latest
trend is to do online marketing and brand promotion
By seriously promoting your product or service online, you make investors trust your business even more.
Moreover, it also helps you to build an audience, some of whom might become
customers.
Gone are the days when great ideas were let down
because of the shortfall of capital. It’s the time when investors can easily be
approached. The only things that an entrepreneur needs to focus on are
preparing a solid business plan and building a team to back it up. Create
something that adds value and keep approaching investors with revised ideas
until you make it happen.
Tips
for attracting the right kind of investors
Your
chances of getting funded are better if you’re already selling products or
services.
Getting startup
funding using one of these options won’t be easy there are thousands of other
entrepreneurs who also want to be funded. Here are a few steps you can take to
improve your chances.
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