10 Funding Options Start-ups Can Use To Raise Capital.
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A recent research suggests that over 94% of new businesses fail in the early stages. One of the key reasons is the lack of the ability to raise capital. Let us read on what are the methods which start-ups can use to raise capital.
Bootstrapping Your Start-Up Business:
Easy to raise Less formalities and documentation Lesser interest cost Full control on finances and operating expenses Shows that you are serious and committed Investors view this positively. You can invest your money and if required borrow from friends and family.
Crowd Funding As a Funding Option It is similar to taking a loan, pre-order, contribution or investments from more than one person at the
same time. You have to upload a detailed business plan on the crowd funding platform/website Consumers who are convinced on your business plan may either make online pledges, investments, donation or pre-buying your product/service You can access a wide audience of potential investors This will help you in marketing the product as well to the users of the platform This will also help you gauge the demand for your product/service You reach common people and thereby cut out professional investors and brokers At a later stage, if your fund raising campaign is successful then you may attract venture capital investors Indiegogo, Wishberry, Ketto, Fundlined and Catapooolt are some of the popular websites which you can use.
Get Angel Investment In Your Start-up They are individuals or networks with
a keen interest on investing in startups As they will study your business proposal they will also be a valuable mentor and guide in addition to giving you capital They will expect you to share some of your equity(ownership stake) in your company They are high risk-high returns type of investors Top global internet giants like Google and Alibaba are prime examples of initial help given by angel investors Indian Angel Network, Mumbai Angels, Hyderabad Angels are some of the popular networks for you to tap.
Get Venture Capital For Your Business They invest in start-ups by taking equity stake(you have to give up some control of your
company) and divest when you launch a public issue or when you acquire another company They can invest big money. They are professionally managed. Apart from money, they provide their expertise and guidance on an on going basis. They usually have to three to five year investment time horizon. They shortlist based on the track record of the founding team. Nexus Venture Partners, Helion Ventures, Kalaari Capital, Accel Partners, Blume Ventures, Canaan, Sequoia Capital and Bessemer Ventures are some of the well-known venture capital investors for you to tap.
Get Funding From Business Incubators & Accelerators
Incubators act as guiding posts nurturing as well as providing key training and tools and
more importantly the network to your business. While this is like helping you to get on your feet, Accelerators help you to run/take a giant leap. All major Indian cities have incubators and accelerators and they have at rack record of assisting many start-ups They run specific training programs which can last even up to 8 months. They are good meeting grounds with other start up founders to exchange thoughts and ideas Start up village, CIIE , IAN business incubator are some of the well-known incubators
Raise Funds By Winning Contests
ď‚— Popular start ups contests in India are NASSCOM's 10000 start ups,
Microsoft Biz Sparks, Conquest, Next Big Idea Contest, and Lets Ignite. ď‚— These evolve around preparing a business plan or building a product or service. If you are to be innovative and different then your chances of convincing others to invest are bright
Raise Money Through Bank Loans Banks give working capital loans to start-ups. This is the loan required to run
one complete cycle of revenue generating operations. Loan limit is usually decided by pledging stocks and debtors. Bank funding involves the process of sharing the business plan and the valuation details, along with the project report, based on which the loan is sanctioned. Even collateral free business loans are offered by most leading Indian banks and there are many types of loan options available. Bank websites display this information. A visit to the bank will prove useful.
Get Business Loans From Microfinance Providers or NBFCs Micro finance companies offer finance to those borrowers who either do not
have access to bank loans OR those whose loan requirements are small and/or those who have low credit ratings. NBFCs also provide loans to the above segment of borrowers. All details are available on “micro finance institutions network” website
Government Programs That Offer Start up Capital Central government has launched Rs10000crores Start up Fund to help start-ups To encourage innovation they have also launched 'Bank of Ideas and Innovations'
program. 'Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)'has been launched with an initial corpus of Rs.20,000 crores expected to benefit around 10 lakhs SMEs Under the MUDRA program many benefits are available which are listed on its website States have also launched programs like Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Centre for Entrepreneurship Development, Rajasthan Start up Fest, etc. to encourage small and start-up businesses. SIDBI– Small Industries Development Bank Of India also offers business loans. If you comply with the eligibility criteria, Government grants could be a very good funding option. Read about these programs The start up India website contains important information which you can use
Quick Ways To Raise Money For Your Business
Product Pre-sales: Sell your products
before launch to raise money. Apple &Samsung follow this strategy. This increases your cash flow and helps you gauge consumer demand. Sell Assets: Do this to meet your short term funding needs. Once you cross the crisis, you can buy them back. Business credit cards: Use these as a financing tool. Remember to pay before due date else interest cost will hit your finances
Conclusion
Having read all the options you can chose the most optimal. Invest in
good accounting software and keep an eagle's eye on your finances. Every rupee matters for a start-up. It makes financial sense to be responsible and use discretion to draw a line on the amount of money your business “ really needs”.
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