Raising Funds for an Emerging Startup

Many thinkers, investors, and entrepreneurs may come up with a business idea that can make a change on a great scale. New products and services may be able to take this world to newer heights of sophistication. Every startup idea should be considered with great attention as big things can come from a small spark of thought. You could build low-cost tools for improving education or a platform to connect small communities to larger bodies. The Indian government has made the Startup India initiative to nurture the startup culture in our country. It gives many benefits like tax benefits, simple compliance, IPR fast-tracking, and much more. You may have a great startup idea but it may need the necessary funds to get the ball rolling. This article will help you to learn more about stages and different ways to raise funds for your startup.

Also Read: Top 10 Upcoming IPOs in India

Investments from close networks

It is much easier to borrow some money from your family, friends, and close relatives and networks who trust you than investors or banks. They will believe in your idea and will trust you enough to be able to fund your startup. Getting advice on legal matters from your family and friends can be a very good idea if you want to take a loan from them. The benefit of a startup funding method is that you can give the money back in a flexible way. However borrowing money may cause friction sometimes and create a bad climate for the family or friendship. So, as an entrepreneur, you should be totally transparent with your folks and maintain the promise of putting in your best efforts and repaying the money.

Government Schemes

The Indian government has started various loan schemes to benefit start-up companies. It has come to understand how important startups are for innovation and economic growth. It keeps supporting women in business, educated youth, and individuals from SC/SC categories, villages, and rural areas. All of this boosts India’s economy. Many ministries and departments have now developed schemes to offer financial, infrastructural, and regulatory support for startup companies. Below you can note some of these schemes started by the Government of India –

• Smart Farm Challenge by STPI.
• Startup India Initiative.
• Dairy Entrepreneurship Development Program.
• Pradhan Mantri Mudra Yojana.
• Startup India Seed Fund.
• Digital India Bhashini.
• ASPIRE
• Startup Leadership Program.
• Qualcomm Semiconductor Mentorship Program.
• Aatmanirbhar Bharat App Innovation Challenge.
• STPI
• Samridh Scheme.
• Digital India Genisis.
• Drone Shakti

Finding angel investors

There may be people who have excess funds and they are interested in investing in a good venture like a startup with an innovative idea. These people will invest in your startup in return for equity. They are called Angel Investors. But getting funds from these kinds of people may be a little risky sometimes. This is because they are normally expecting to get higher returns as a profit. There are many popular Angel Investors in India like Ratan Tata, Kunal Shah, and Sanjay Mehta. Startup owners can make a direct relationship with these investors for funding. Though they mostly expect a high return on investment, they are generally motivated to invest if your idea is unique and promising. So, you should always make sure to research and prove the value of your idea thoroughly before them. It should show a clear path to profit with innovative approaches.

Venture capitalists

Venture capitalists play a great role in the startup culture of any area. They fund early-stage companies that are showing high growth potential. These people are normally drawn to those startups that can clearly express their long-term ambitions. These companies come with a strong business model, competent teams, and a great capacity for growth. These capitalists will invest their money in promising startups expecting to have high returns in return of equity. Unlike angel investors, these people are there for long-term partnerships. They will align their own success with the startups side by side. These people may sometimes avoid investing in the early and later stages of startups when there is high competition. They contribute capital and strategic guidance for business development.

Bank Loans

Many banks in India will give traditional loans to startups based on how much their creditworthiness is. They will also take note of how strong their business plans are before giving the loans. Banks give two types of funding for startup companies – loans and working capital loans. The entire process for these types of funds may be a little lengthy but securing them will give you a good amount of stability. This will also allow the entrepreneurs to keep full ownership of their company. But you have to remember that getting loans from private or public sector banks can get a bit challenging if you do not have a good credit score or financial history.

Crowdfunding

This is a method that allows you to get funds from many investors. You can do this through many platforms like social media sites or web-based platforms to collect funds for different purposes including a startup. Other causes may include social matters, disaster relief, charities, and others. In India, there are many such web portals available, like Indiegogo, Ketto, Milaap, GoCrowdera, Catapult, FundRazr, Kickstarter, GoFundMe, Fuel A Dream and Impact Guru. This is a democratized model for funding your startup. It has great scope for bringing in a diverse investor base with validation for your cause.

Strategic Partnership

If you have the resources and contacts or the ability to create them, you can also use this method for funding your company. You can collaborate with established companies to get benefits on a mutual basis. You can thus together infuse funds and resources into startups. These kinds of partnerships can bring in new markets and technologies. However, aligning your separate goals and always keeping up the balance in a partnership may get a little difficult sometimes. You should always make careful negotiations and communicate clearly in this case.

Conclusion

Getting a startup idea with promising innovation is not an end in itself. To make this dream into reality, you have to explore many sources and opportunities for funding. Different sources like family investments, loans, government grants, and partnerships offer different benefits as well as challenges. To achieve success with your startup, you should choose wisely and make the best of your funds.