If you want to launch your startup or want to scale it for that you need startup funding.
Do you know every year 50 million startups are being started, out of the 100 – 90% of startups fail!
There are several factors which affecting Startups to lead failure, funding is one of them.
If you just get started you have an idea and MVP( Minimum Viable Product) then seed funding is the best way to raise funds for your startup.
Currently, startups are booming, everyone wants to start their own startup, but you need to understand it’s not a fancy thing.
Just be serious about what you are doing. Startups are risky so before jumping in this risky world, learn and improve your skills to do better.
If you already started your startup and Currently operating in a city and you want to expand other cities for that you need equity Based (series ) round Funding
Are you a founder of a startup company?
What’s In it For Me?
- Why you need startup funding?
- 4 Stafe of Startup Funding
- 14 different ways to raise Startup Funding
- Pros and cons
- Example of Different types of Funded startup!
I m assuming there are 3 reason to reading :
- You already have an idea, now you looking for funds to launch it.
- just reading For knowledge Purpose so that you can start your own startup in upcoming days?
- You are a founder who currently operating their ( started selling products/ services to Customers) startup now you require more funds to improve your product, process, People quality and want to get sustainable.
This blog is for you guys, Just keep reading till the end.
Why You Need startup Funding?
As we discussed at starting Point in the blog you need Funding For Main 2 reasons one is To get started ( early stage) and the second one is to Scale and Improve your Process, people, product.
Now let’s discuss in detail Why Most startups raise fund : (whether in their early-stage or Mature -stage
Here are Some Key Factor behind Fundraising –
These are some reasons behind startup funding.
2.License and Certifications
3.Raw materials and equipment
4.Working capital (Funds For day to day working operations)
6.Registration and legal requirements
These are some reasons behind startup funding.
“Before raising funds get your goals Clear why you want to raise Funds?”
Let’s discuss one by one:
MVP, Product Development ,website/App development –
You already have an idea, now you want to build MVP you can call it sample so that you can test it in Market and Gather Feedbacks from potential customers.
Or your startup is something that will operate through a website and app and you want a build that w website or app.
Another thing development this is similar to MVP but it’s not a sample, now it’s full proof concept or product which you want to build.
Marketing and Sales
This is the Very vital art, everyone needs to Market their produce vice to right customers.
License and Certifications
You need to complete some Licenses work, every local government has some rules, you need to do research what certification and license you need according to your product/service or Company.
For example, if you planning to open a Food startup, for that you need an FSSAI license. Similarly, research on what license you need to launch your product.
Raw materials and equipment
Do you need any kind of raw materials and equipment to develop your product/service.
it’s all about Your total current debt minus current asset. Working capital is accountable for the liquidity levels of companies for managing day-to-day expenses and covers inventory, cash, accounts payable, accounts receivable, and short-term debt that is due.
Its self explained, everyone needs office space to start their work. You can also raise funds For this, Or you Can Go with Co-Working Spaces.
Registration and legal requirements
To open any Company you have to register that and need to Complete some legal requirements.
To register a company there are different Firms available like OPC ( one person company), Sole Proprietorship, LLP, and Private Limited.
Better you should go with PVT LTD Company if you want to raise Funding. Investors Prefer PVT LTD registered Company.
4 stages Of Startup Funding
4 stage Of Startup Funding explained:
- Ideation/ Pre- Seed Stage
- Seed Stage
- Series round Funding ( A, B, C)
- IPO( Initial Public Offering)
Ideation/Pre- Seed stage
In this stage you might only have an idea or you want to build Prototype .
Basically this a totally raw idea, now you want to Convent that Concept to product and For that you need Funds. Then this is called the Pre-seed stage.
Usually you can raise Pre-seed funding from Family and Friends and Collateral- Free Debt.
In this stage your Product/service launched in the Market.
Now you want to build team and setup office and want to Fully Operate your startup for this you need seed – Funding, little bigger amount than Pre-seed stage.
You can raise seed Funds From Angel investor, collateral-free debts.
Series round Funding ( A, B, C)
This is funding for those startups who want to scale their operation, usually, series funding took when product/service gains traction, and You already have a big Consumer base.
this funding you will able expand your operation to Different location and Can Provide much more Bette quality on Product/service.
IPO ( Initial Public Offering) is a way to Make your Company Public. You will able to list your Company in the Stock market and can raise money from retail Investors ( Normal people’s).
This is the saturation point of Startup Funding, investors who invested they will get their return on this stage from startup.
This is required when Established a customer base and stable revenue. Their 2 chance may be startup can raise funding through IPO or any big corporation Acquire that startup.
14 different ways to raise Startup Funding
There are lots of ways to raise funding Now days For New and Existing Startups.
Check out here :
1.Friends and Family
When you just have an idea and you want to do Market research and want to build Prototype Friends and Family can help you to complete it.
You can raise a good amount in return they can have your company shares or raise money through collateral or debt.
2.Bootstrapping can be a option
Putting all Savings in your startup . Personally I love the Bootstrapping , its gave you maximum results because you are putting your hard earning money it will force you to think again and again before doing anything.
That Investment can comers from personal savings, personal computing equipment, and own space.
3.Win Contest and Raise Money
Yes you heard right, you can win money by Winning Competition , there are lots of organization who organize Competition for new startup and entrepreneurs.
You need to pitch your idea or show you B-Plan if you do it well there is more chance to get selected . Winning Competition can also give you media Traction .
Here are some contests :
These are some startup contests, you can participate here and showcase your idea and Business plan to encourage organizers to give you prizes. So that you will able to invest that money in your startup.
4.Government schemes for Startups
The government has also been taken some schemes and initiatives to help Startups to grow.
Through this scheme you can easily start and scale your startup and also you will get big reference from experts and industry leaders.
Here are some government schemes For startups:
- Venture Capital Assistance Scheme
- International Patent Protection in Electronics & Information Technology (SIP-EIT)
- Stand up India scheme
- Single point register scheme
- Extra mural research funding
And many more , to know all schemes go to startup India website.
5.Get money From bank and Financial Institution
Most of Entrepreneurs go with bank to kick start their startup. Every bank has some kind of attractive facilities.
Government loans by bank:
To Know more about these , please visit to your nearest bank .
6.Get funding through Angel investor
Angel investment is always being Popular for startups , Angel investors helps to get seed funding . This is the first step for startups In funding world.
Basically they are high net worth individuals who looking to put their money on startups and take stakes.
They mentor founders and also help them to plan their overall Business STRATEGY. Usually, Angel investor takes 30% stakes in return.
7.How to reach Angel investor?
You can reach them by LinkedIn.
Look for startup and Business events. Go there build networks, discuss your startup idea some people will give the reference.
8.Raise Funding From Incubators
This a also way to Start and grow your startup.
Startup Incubators help very early-stage startups ( from ideation stage) they help for office space, management, Mentorships, funding, Product development and marketing, sales.
They back a startup and help them to grow form zero to hero.
There are 100 s Of Incubators In India
Here I mentioned Top 5 INCUBATORS
Indian Angel Network
You can apply in these Incubators vial their website or Mail Address.
9.Try an accelerators
Do you already have MVP, Product, Full Proof business plan, and you already tested your products/services in Market you got some traction from customers?
Now you can go with accelerators, these organizations are more focused on scaling the Business.
Here are Some startup accelerator In india:
10.Raise Funding through Crowdfunding
What is crowdfunding, The crowd means group of people, here you are raising money from a group of people?
Concept is Going Popular Now days .
Most of international startups grow their startup with crowdfunding. In India the concept is quite unclear. Still lots of startups started through it.
SEBI and the Indian Government passed strict rules on crowdfunding. There are some rules announced By SEBI to use crowdfunding as a source.
There are 3 types of Crowdfunding :
- Donation Based
However equity-based crowdfunding an illegal in India. Rewarded based and donation-based are allowed.
Here are some reward based Crowdfunding platform.
You can create Campaign here set your fundraising goal, explain your startup story in detail like what that big problem you going to solve. What reward will you give?
11.Raise funding From Venture Capitalist
Venture Capitalists are also high net worth Peoples they heavily invest in startups, also in return they take a good amount of Stakes. In one year mostly they Invest in 5 to 6 Companies.
Usually they invest in well known Companies who have strong team background with good Product.
Downside of Vcs they always thrive for exit.
Either startup will do their IPO or any corporation will acquire. This is the only 2 Way for VCs to get their return.
Here are some reputed Vcs firm
Sequoia Capital, Accel Partners,Nexus ventures.
12.Product Pre -sale as a Fundraising option
You can use this method to raise funds from individuals, you will sell your products before you launch that in return they will give you money.
Tell your story to Peoples to align them into your vision. It can be done manually , make sure you choose right audience For that.
13.Crowd lending Option
Just like a bank loan in this process, you Raise Money from individuals. basically it’s called P2P lending (peer to peer).you have to return that money along with interest.
There are Platforms who match Borrowers and Lenders.
Then the process goes usually what happens, banks interest are high for a loan so people don’t want to take a loan and another side who want to save their money but need good return with minimum or no risk that doesn’t exist in banks, they likely give 6-7% interest in savings.
Now Crowd lending comes into the picture. This platform will match the borrower and lender and both can Enjoy a win situation.
Borrowers will get loans on low interest and Lenders can get Better interest rates than banks. Note there are some Risk factors involved in it, so before you choose this option make sure you analyze it.
Here are some Crowd-lending platforms :
14.Corporate Investors Funding
Corporate Investors are big companies who invest in startups and take over their half of stakes to Manage them properly, you can try it totally depends on you.
Here are some corporate Investors India:
The Times Group
Pros and cons
Here I mentioned some pros and cons do check out and also ask your self these questions :
- Is this investor someone who does have the same vision as me?
- How much control should I give up?
- Question existing startups who raised investment from that particular investor, listen are they talking good or complaining?
- Do they good track record?
- Will they give unrealistic Goals and daily tasks?
Example of Different types of Funded startup!
Raised Funds through
Fellowship, Angel investment , Series round Funding.
Sources: Petter theil , Sequoia India, Soft Bank.
Seed funding, series funding
Sources: Ant Financial, Info Edge India, Vy Capital, Sequoia Capital and Singapore-based Temasek.
Seed funding, series funding
Sources : sequoia capital ,tiger global.
Only Boot Strapping.
To identify this you have to consider some questions!
- How much control do you want to give your investors?
- Your decision making chances will more or less?
- Do you have More stakes than your investors?
I love Bootstrapping because you have full control over your startup, the downside is all Financial risk on you if tomorrow Company will go down for some reason you have to bear that loss. It totally depends upon you and your startup, choose accordingly.
You can use these 13 Different Methods to Raise Funds For your Startup. Always Choose wisely.
That’s it for this blog. Best of luck for your startup Journey I will see you in the next Blog.
People With Passion Can Change the World.💡