As your dreams begin to take wings, funding becomes the inevitable wind beneath those wings. You could muster up your own sources for this funding or take outside help. There are various funding options available to startups today than were available in much of history. According to a recent study, over 94% of new businesses fail during first year of operation due to lack of Funding. Money is the bloodline of any business.
Here is a comprehensive guide that lists 10 funding options for startups that will help you raise capital for your business.
- Bootstrapping your startup business:
This is the oldest and most preferred form of financing your startup as it results in no equity dilution. An individual is said to be bootstrapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.
This will be easy to raise due to less formalities/compliances, plus less costs of raising. In most situations, family and friends are flexible with the interest rate.
Crowdfunding is one of the newer ways of funding a startup that has been gaining lot of popularity lately. If you are looking to raise relatively small amounts, then crowd-funding could be for you. Just make sure you choose the right platform to start your crowd-funding campaign. It’s like taking a loan, pre-order, contribution or investments from more than one person at the same time.
The best thing about crowd funding is that it can also generate interest and hence helps in marketing the product alongside financing.
Some of the popular crowdfunding sites in India are Indiegogo, Wishberry, Ketto, Fundlined and Catapooolt.
- Get Angel Investment In Your Startup:
Angel investors are wealthy individuals who will provide funding in exchange for a share of equity in the business. Some 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 considerable amount of money in exchange for equity in the business, and 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:
Early stage businesses can consider Incubator and Accelerator programs as a funding option. Found in almost every major city, these programs assist hundreds of startup businesses every year.
These programs normally run for 4-8 months and require time commitment from the business owners. You will also be able to make good connections with mentors, investors and 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 advent of startup culture, the number of events showcasing startups and startup ideas have multiplied manifold. These contests accept applications from entities with diverse backgrounds. You may be an individual or a company, someone with just an idea or someone whose product is already in the market, choose the right platform to showcase your idea or product.
The prize money is small in most of these events but winning at such contests can give you visibility in media and opportunity to network with investors.
Some of the popular startups contests in India are NASSCOM’s 10000 startups, Microsoft BizSparks, Conquest, NextBigIdea Contest, and Lets Ignite.
Bank loans are a popular source of funding for many startups. Before applying for a bank loan, it’s important to ensure that you are well educated about the various options available, 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.
You don’t have to give up control of your business through this mode.
- High Net-worth Individuals (HNIs):
These are individuals with deep pockets and existing businesses looking for investment opportunities in upcoming ventures. They typically invest for 1-3 years and expect their investment to double or treble. This type of funding is suitable for ventures which have a low gestation period and can start generating positive cash flows within this period.
Specialist government institutions such as SIDBI, NABARD and NSIC have been 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 startup ecosystem in India. In order to boost innovative product companies, 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 different programs like Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Centre for Entrepreneurship Development, Rajasthan Startup Fest, etc to encourage small businesses.