How to Raise Fund for your Startup in India ?

Here is a detailed guide listing 10 funding options to raise startup capital for your business. Some of these financing solutions are for Indian sector, but similar solutions are available in different countries.

How to Raise Fund for your Startup in India ?

Here is a detailed guide listing 10 funding options to raise startup capital for your business. Some of these financing solutions are for the Indian sector, but similar solutions are available in different countries.

1) Bootstrapping your start-up business:

Self-financing, also known as bootstrapping, is an efficient way to raise startup capital, particularly while you're just starting your company. First-time startups also have difficulty getting financing after first showing any momentum and a possible success strategy. You can contribute with your own savings, or you can make a donation to your family and friends. This would be quick to increase due to fewer formalities/compliances, plus lower prices. In certain cases, families and associates are flexible with interest rates.

Self-financing or bootstrapping can be viewed as the first funding choice because of its advantages. You're linked to business when you have your own capital. Investors deem this to be a positive point at a later date. But this is only acceptable if the initial requirement is minimal. Any companies require capital right from day 1 and bootstrapping might not be a good idea for those companies.

Bootstrapping is all about extending capital – both financially and otherwise – as much as they can. Check out these 30 ideas to conserve money and boost your cash flow.

 

2) Crowdfunding as a fundraising option:

Crowdfunding is one of the newer methods to raise startup capital that has gained a lot of attention lately. It's like getting a deposit, pre-order, donation or expenditure from more than one individual at the same time.

This is how crowdfunding operates – an entrepreneur would place a thorough overview of his company on a crowdfunding site. He can mention the aims of his company, strategies to make a profit, how much support he wants and for what reasons, etc., and then customers will learn about the company and donate money if they like the concept. Many that donate money will make on-line commitments to pre-purchase the product or make a donation. Anyone should donate funds to support a company that they truly believe in.

Why you should accept Crowdfunding as a fundraising choice for your business:

The great thing about crowdfunding is that it will still create demand and thereby continue to promote the commodity alongside financing. It's quite a plus that you're not prosecuted if there's some interest for the commodity you're working on. This mechanism will cut off professional investors and traders by placing funding in the hands of average citizens. That may even draw venture capital funding down the road if the business had an especially good campaign.

Also bear in mind that crowdfunding is a competitive way to raise money, so unless the company is totally rocked solid and can attract the interest of ordinary customers with only a summary and some web photos, you may not find crowdfunding to function for you in the end.

Indiegogo, Wishberry, Ketto, Fundlined and Catapooolt are some of the famous crowdfunding sites in India to raise startup capital

Kickstarter, RocketHub, DreamFunded, Onevest and GoFundMe are prominent crowdfunding sites throughout the US where you can raise startup capital.

 

3) Angel investors funding to raise startup capital

Angel investors are people with excess cash and a strong interest in engaging in potential startups. They also work in network communities to mutually screen plans before investing. They may also provide mentoring or guidance alongside money.

Angel investors also helped to set up a variety of influential firms, including Google, Yahoo and Alibaba. This alternate method of investment usually exists in the early stages of development of a business, with investors expecting up to 30% equity. They choose to take greater investment chances with higher returns.

Angel investors, as a finance choice, still has its limitations. Angel investors are spending fewer than venture capitalists (covered in the next item).

Here's a list of prominent Indian Angel Investors – Indian Angel Network, Mumbai Angels, Hyderabad Angels.

Also check out the list of individual Angel Investors in India, some of these active Angel Investors have invested in a variety of popular startups.

 

4) Get Venture Capital to raise startup capital

This is when you make a major bet. Venture Capital is highly run assets that invest in businesses with tremendous promise. They typically engage in a company and leave sector when there is an IPO or an acquisition. Venture Capital offers experience, mentorship and serve as a litmus test on where the company is headed, measuring the enterprise from a viability and scalability point of view.

Venture capital funding could be suitable for small companies that are outside the startup's process and already produce sales. Fast-growing companies like Flipkart, Uber, etc., with an exit plan already in motion, will rise up to tens of millions of dollars that can be used to spend, network and expand their businesses rapidly.

There are, however, a few downsides of Venture capital as a financing choice. Venture capital has a limited leash when it comes to corporate loyalty and mostly seek to regain their expenditure within a three-to-five-year period. If you have a product that takes longer than that to bring on the market, Venture capital capitalists will not be too interested in you.

Usually, they are searching for bigger markets that are a bit more secure, businesses with a big team of employees and a decent momentum. You will need to be pragmatic about your company and often offer up a little more influence, so if you're not involved in too much mentoring or compromise, this may not be your best choice.

Some of India's well-known Venture capital are Nexus Venture Partners, Helion Ventures, Kalaari Money, Accel Partners, Blume Ventures, Canaan, Sequoia Capital and Bessemer Ventures.

 

5) Funding from Company Incubators and Accelerators:

Early-stage companies can view Incubator and Accelerator programmes as a funding choice. Established in virtually every major city, these services support hundreds of startups companies every year.

While used interchangeably, there are some substantive distinctions between the two words. Incubators are like a mom to an infant who nurtures a company offering housing tools and preparation and networking to a company. Accelerators are more or less the same thing, except the incubator allows / assists / nurtures a company to walk, while the accelerator allows run/take a massive jump.

These services typically operate for 4-8 months and entail a time investment from company owners. You'll also be able to create strong relations with advisors, founders and other fellow entrepreneurs through this forum.

In the US, companies including Dropbox and Airbnb began with the Y Combinator accelerator. Here's a compilation of the top 10 incubators and accelerators in the U.S.

In India, the most common names are Amity Invention Incubator, AngelPrime, CIIE, IAN Company Incubator, Villgro, Startup Village and TLabs.

Famous Company Accounting Program – ProfitBooks is now part of Washington-based Village Capital accelerator.

 

6) Rising Funds Through Winning Contests:

The growth in the amount of tournaments has significantly helped to maximize the potential for collecting funds. It helps people with business plans to raise startup capital for own business. In such competitions, you either need to develop a product or prepare a business strategy.

Leading these tournaments will even earn you some media attention. We learned a lot from ProfitBooks when we were regional finalists in Microsoft BizSparks in 2013 and received the Hot100 Startup Award in 2014.

You ought to make your idea stand out in order to boost your performance in these competitions. You may either show the proposal in person or set out into a business strategy. It needs to be thorough enough to persuade everyone that the project is worth investing in.

Some of India's most successful startup contests are NASSCOM's 10000 startups, Microsoft BizSparks, Conquest, NextBigIdea Contest, and Lets Ignite. Check out the new startup programmes and competitions in your city. Here is a calendar of different competitions for the Company Strategy.

 

7) Funds collected by bank loans to raise startup capital

Typically, banks are the first location companies have to go as they hear of financing.

The bank offers two forms of company finance. Which is a working capital loan, and the other is financing. Working Capital Loan is a loan needed to operate a full period of revenue production activities, and the limit is typically calculated by mortgages on inventories and debtors. Bank lending will require the normal procedure of sharing the business proposal and appraisal information, along with a project study, on the basis of which the loan is approved.

Almost every bank in India is providing SME finance across a number of programmes. For eg, leading Indian banks – Bank Of Baroda, HDFC, ICICI and Axis – have more than 7-8 different options for providing collateral-free business loans.

In the US, places like Kabbage will help you get a working capital loan online in a matter of minutes. Unlike conventional lenders, Kabbage accepts small business loans by looking at real-life results, not just a credit score.

 

8) Earn company loans from microfinance companies or NBFCs

What are you going to do because you can't apply for a bank loan? There's always a chance. Microfinance is essentially access to financial resources for those who do not have access to traditional banking services. It is becoming increasingly common for those whose criteria are restricted and whose credit scores are not preferred by the bank.

Similarly, NBFCs are non-banking financial companies that offer banking services without fulfilling the regulatory requirements/definition of a bank.

See the MicroFinance Institute Network for more information. Here's a compilation of the biggest MicroFinance firms in India.

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