Many times, businesses with great potential fail due to low funding for their start-ups. This is due to a lack of knowledge about the techniques by which start-up funding can be availed in India. We have therefore elaborated the same in writing below, which can come of aid to any entrepreneur looking for a funding means for their start-up.
The following topics have been discussed in this article:
- About Start-up Funding in India
- Techniques to Fund Start-ups
About Startup Funding in India
Several start-ups in India, with a huge potential to succeed, end up failing due to a lack of finance. No matter how unique or grand your business idea is, it seems quite impossible to execute without proper funding. Although there is always an option to raise funds from your family members and close friends, that too is not possible every single time. This raises the question of the other options available to Indian entrepreneurs for raising funds to run their businesses smoothly.
In accordance to a survey, every year around 70% of people go for a start-up but due to the issues of funds, their business starts to fail. As their dreams start to take wings, funding becomes the inevitable wind beneath those wings. Every entrepreneur looks to answer the question of how they can fund their start-up.
Techniques to Fund Startups
We have a few options by which you can get the funds required to start your small business and run it smoothly.
There are six short techniques by which you can fund your entire startup to accelerate operations at the scale that you desire. Although there is no single way for startup funding, you can use multiple ways out of the techniques mentioned below to offer working capital for your company:
1. Bootstrapping
Bootstrapping, also known as self-funding, is a start-up funding technique that entails getting the working capital for the firm from its pocket. In bootstrapping, the concerned business owner has to get the funds through their savings or even through investments via friends and family. The procedure of raising capital from friends and family is quite easy as it has lesser compliance. There are multiple upsides to raising capital for your firm by the technique of bootstrapping.
2. Crowdfunding
Crowdfunding has suddenly emerged to be one of the innovative and newest ways to raise funds for any specific business venture. It is a startup funding technique that involves taking a loan in the form of pre-orders, contributions, and investments. This loan covers the manufacturing costs of the products and resource purchasing for the delivery of services after the production stage.
3. Angel Investments
Angel Investors are investors who are kind enough to invest with their money which is surplus and resources to help your business venture succeed. These are the investors with a vast interest in investing in a few of the interesting and innovative projects. Angel investors have assisted in to start-up of multiple prominent companies, including Yahoo, Google, and Alibaba. This alternative form of investing generally occurs in the early stages of the growth of a business, with investors expecting up to 30% equity.
4. Venture Capital Investments
Venture Capital Investment is one of the fundamental routes that multiple companies take for raising operating capital for their startups. It is when you bet your venture against the market. Venture Capital is a professionally managed fund that is invested by venture capitalist firms in companies with high growth potential. A venture capital evaluation of a company is said to be a litmus test for the direction the company is going to take. Venture capitalist firms offer expertise, and mentorship, and even assist in evaluating the business from the point of view of sustainability and scalability.
5. Business Incubators and Accelerators
Very early-stage businesses can consider Incubator and Accelerators as a method for funding their operations and acquiring the resources for production and service delivery. Incubators are essentially business nurturers who provide shelter tools, training, and networks to grow the businesses. The business accelerator is a similar prospect to incubators but as the name suggests, it is an accelerated procedure that makes businesses take giant leaps of progression. Generally, an incubator program runs for around 4-8 months.
6. Raise Funds through Competitions:
Some technological tournaments are held all across the world for tech start-ups and other startups to prove their worth and excellence in their field by way of competitions. Winning these competitions, which are funded by some of the biggest organizations in the world, could also help the business by assisting it in getting some media coverage for the startup.
