How to Get Funding for Your Startup

8 Oct, 2021 20:34 IST|Sakshi Post

Funding for Startup: It's a bit of a cliche to claim that startups are the rage. One of the hottest issues on and off the internet in the last decade or two has been startups flourishing or mushrooming (depending on which side you're on). According to the National Organisation of Software and Services Companies (NASSCOM), the main non-profit trade association of India's IT and business outsourcing industry, there were 7,200 startups in India alone at the time of the latest count. So, don't allow a lack of funds to prevent you from following your goals.

If you want to start your own business but lack the necessary funds, there are several options available to you.

Means and Methods

From personal funds to venture capitalists, there are several ways to fund your company. Take a peek around.

  1. Make A Thorough Business Strategy.

Before you do anything else, you must have a firm grasp on how you intend to run your company. To put it another way, getting financial assistance for your business requires a disciplined strategy. The prerequisites for your success include a solid grasp of the options accessible, a thorough study of appropriateness, and your ability to pitch impressively.

  1. Banks And Financial Institutions

Visit the banks where you do your personal banking or look for an online company willing to invest. You can also acquire a business loan to help you get started.

Banks are by far the most conventional source of finance, and they are seen as a more secure and comparatively faster way to acquire cash for businesses. The banking industry has also opened up with novel plans and regulations to support the economy's startup ecosystem.

Banks can provide faster and more cost-effective financial solutions because of their extensive network and well-honed human resource skills. One of the most significant advantages of bank funding is the borrower's near-total lack of funding costs. However, the sector's cautious stance is a drawback.

Another advantage of borrowing money from a bank is the variety of options available. Working Capital is a term used by banks to describe how they support a borrower's day-to-day operating expenditures. It benefits the entrepreneur because the institution pays for the business's monthly overheads. Without being constrained by financial restrictions, the business owner may concentrate more on the essential operations.

Banks are also funding the entire project, including the capital cost. Before they invest in a startup, they perform a thorough examination of the product's viability, the service's market prospects, the credentials of the business owner, the financial stability of the business promoters, and a case study of comparable commercial operations.

  1. Friend Request/Family Business:

Friendships provide a safety net. They're approachable, sympathetic, and quite confident in your skills. They should be tapped. Reach out to all of your friends and acquaintances with zeal. The key to success is communication. Talk, chit-chat, and share!

You can ask them for a low-interest loan or an interest-free loan. Again, there would be no long, winding legal processes or documents involved in supporting your demand at this level. And, unlike an unknown agency, it's a pretty helpful source.

Consult family relatives, and seek advice from the recognised circle of winners. Carry out your research and understand what it means to you and your family. Don't sell yourself and your family on pipe fantasies. Go forward if your finances are sufficient to take your business to the next level without jeopardising the quality of your family's life. The best thing is that no legal paperwork is required. It's best for first-time entrepreneurs and small businesses.

  1. Venture Capitalists

Before going public, nearly every startup should explore this resource. VCs are brimming with cash, expertise, hands-on understanding of many industries, and subject matter specialists — it's a veritable cornucopia of talent. Venture Capital companies give money as well as recommendations for the growth of businesses. They are very discriminating and objective. To reach a decision, they consider the founders' and their team's talents, as well as the product/traction.

  1. Angel Investors

They are high-net-worth people or groups who operate on the high-risk, high-reward premise. Angel investors provide fair finance, are impartial, and are well-versed in new sectors and technology. A typical angel investor would like to pull equity out of the business and work directly with the founders.

When an angel investor expresses interest in the business and invests in it, the founders will have to give up the luxury of operating independently. That is a more than reasonable trade-off, as the startup will not go broke.

  1. Crowd Funding

This is what the majority of businesses and individuals working on social issues do. It was a great hit on social media. For a charge, there are several crowdfunding facilitators (platforms) that can perform your work. A few popular crowdsourcing platforms are Kickstarter, Gofundme, and Indiegogo. This is a very hidden route in the sense that none of the potential investors knows the business founder personally and is only affected by the product/service being pitched for.

  1. Self-help: Bootstrapping

Put yourself in completely, but not to the point of exhaustion. Most company entrepreneurs choose it as their first option for self-funding without sacrificing their personal lives. Before committing to creating a self-check for oneself, consider the quantum needed and your capacity to fund it.

  1. Micro Financers

Microfinance institutes, like NBFCs, are a form of a banking institution that provides microcredit on affordable terms. Their exposure, on the other hand, would not be great and would be spread out among a big group of people. Microfinance firms are an excellent choice if the startup's funding needs are modest.

  1. Incubators

This is the place to go for startup assistance, as the name implies. Not only do they offer to finance (something they do not do on their own), but they also provide the food that startups require during their newborn period.

They are early-stage development boosters that provide a variety of support services ranging from office space sharing to financial access. The greatest location for a business to develop its pitching skills and learn how to attract investors.

Several organisations from various fields have established incubators to improve the startup environment positively. There are numerous incubators for companies to contact, ranging from the Ahmedabad branch of the Indian Institute of Management's CII IIMA (in partnership with the State government of Gujarat and the Indian government) to the Indian Angel Network's IAN Incubator.

  1. Accelerators

While Accelerators work in a similar way to Incubators, they have a more defined objective and programme structure.  They usually provide short-term assistance with hands-on advice from experts and mentors in a variety of disciplines, including business, technology, and finance.

  1. Go Private

Reach out to people you've never met before. This necessitates a certain amount of creativity. In the pre-crowdfunding period, it was known as "Private Placement." When it was put to the test in the early 1990s, it was a huge success. Make a clear business plan; target high-net-worth individuals who visit renowned clubs in your city, members of prestigious trade and business houses, and stockbrokers (remember, their customers are regular investors in public shares).

You also have the advantage of being "identifiable" with these people, which is not the case with the corporations in which they invest. It provides investors with a sense of security. Engage the services of a legal professional to assist you with the necessary papers.

  1. Government-Sponsored Programs

Enrol in government-sponsored interfaces such as Investor Hubs, Startup Hubs, and so on. They provide excellent exposure to new and innovative ideas. A boost in exposure, particularly in a similar setting, is an excellent driver for your startup's fundraising efforts.

  1. Non-Banking Institutions

These organisations are as effective, and in most cases, their processing times are faster than those of traditional banks. Non-banking financial firms (NBFCs) are the impoverished cousins of bank behemoths, yet they are well-capitalized to successfully serve their restricted clientele.

Paperwork or legal work is also very straightforward for them, and they are known to take a more holistic approach to startup funding when it comes to the startup ecosystem.

Another distinguishing feature of accelerators is that they give seed funding to businesses on their own. To be eligible for their financing, you must pass a rigorous screening procedure. Most accelerator programmes last 90 days to six months, giving companies enough time to understand the ins and outs of the company.

  1. Competitions

Even though it is a relatively remote route, it can sometimes be the most effective for companies. A variety of online tournaments with substantial prize money are available. Checking, participating, and trying your luck are all good ideas.

  1. Bridge Finance

This is only a stopgap arrangement, a foretaste of the eventual flood! This resource is perfect for entrepreneurs who are "so close yet so far" from achieving their goals. Depending on the amount necessary, the lender may be anyone — from a friend to a financial institution. Or perhaps taking advantage of the credit card's allowed limitations. This is a high-voltage route that should only be used if you're certain you'll be able to satisfy your responsibilities on time.

  1. IPO

The Initial Public Offering (IPO) is a 'last resort' for companies looking to raise capital for their businesses. The procedure is lengthy, involving a slew of legal requirements and procedures. This path is very helpful and practicable for high-growth businesses with a proven track record of profitability and reputation.

To navigate the IPO process, eligible companies can seek the advice and direction of seasoned IPO specialists like consultants, merchant bankers, and brokerage houses. Based on their investment level, participating investors are awarded stock in the business. A successful IPO will elevate the startup to a higher level of business, allowing it to operate in a larger market.

Not every path is appropriate for every company. Before reaching the last step, it is necessary to do a thorough investigation and impartial analysis. In addition, the options vary based on the stage of the business. Finding startup capital for your company should not be a trial and error process.

Bonus Tips:

  • Find a strategic partner.
  • Attempt to keep your startup expenditures as low as possible.
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