How to raise funds for Startup?” And Different ways to raise Capital for Business

Do you want to start a Business? You have a fantastic idea, the determination, and the assurance that you will succeed, but have you considered how much money or finance you will need to accomplish your dream? Whether the start-up is a small firm or a giant company, all Businesses require funds to get started. Funding establishes a strong foundation for your Business and allows it to expand and grow. Finding capital for a Startup firm can be a difficult and time-consuming endeavor. In this article information on how to raise funds for Startup, ways to raise capital for Business and information on Startup funding is mentioned.

Introduction

When it comes to achieving a Company’s vision, funding is a critical factor. Funding and fund-raising are two important current Business scenarios that help a firm expand. The first round of investment, also referred to as seed funding, it’s the foundation of how to raise funds for Startup.

There are three steps to the Seed financing. That is A, B, and C, to be precise. While seed money usually refers to the first round of funding, series A, B, and C differ in terms of the Business maturity and the investors engaged. By providing targeted cash at vital phases, series capital supports the growth of a startup into a full-fledged company.

• Series A: Startups are required to have a plan for creating a business model in a Series A round, even if they have not demonstrated it yet. They will also be expected to use the funds to boost income.
• Series B: The Series B investment was raised to help the company not just obtain more clients, but also to expand its team so that it can better support that growing customer base.
• Series C: Companies that reach the Series C investment level are performing extremely well and are poised to grow into new areas, acquire other businesses, or develop new products. Let’s have a look at what constitutes a startup in India.

What is a Startup in India?

The Government of India has launched a program called Startup India. On January 16,2016, the Startup India program was inaugurated. The goal is to create a robust eco-system in the country that fosters innovation and Startups, resulting in long-term economic growth and large-scale job possibilities.

Informative Read: All about Startup India Scheme and Startup India Portal

How to raise Funds for Startups in India?

Whether it’s fulfilling working capital requirements, investing in office space or equipment, adding staff, or anything else, every facet of running a Business necessitates continuous infusions of funds.

The government-backed ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)’ would begin with a corpus of Rs. 20,000 crore to support about 10 lakh small Businesses. You must submit a business plan, which must be reviewed before the loan is issued. You are given a MUDRA Card, which functions similarly to a credit card and can be used to purchase raw materials, as well as other charges. Three types of loans are provided under the promising scheme: Shishu, Kishor, and Tarun. Below is the list of different ways to raise capital for business in India.

Ways to raise Capital for Business

• Venture Capitalist for Startup Funding

Venture capitalists are a sure choice for huge bets since they offer professionally managed funds that are seeking for Startups with a high chance of success. The best part about venture capital investments is the knowledge and oversight that comes with them. VCs (Venture Capitalists) frequently invest in stock and then depart after the company is acquired or goes public.

Typically, venture capitalists seek out firms with sufficient traction and a competent team. However, if you pick venture capital investment, you must be willing to accept their recommendations and adhere to their tight guidelines.

• Bootstrapping for Startup Funding 

Self-funding, often known as bootstrapping, is a good approach to get money for a Startup, especially if you are just getting started. First-time entrepreneurs have a difficult time collecting funding if they do not have any traction or a plan for success. You can invest from your money or enlist the help of relatives and friends. Due to less formalities and compliances, as well as cheaper raising expenses, this will be simple to raise. Most family and friends are willing to negotiate an interest rate with you.

Self-financing or bootstrapping should be considered as a first funding option due to its advantages. You are intimately bound to the corporate world once you have your own money. At a later time, investors will see this as a positive feature. However, this is only appropriate if the initial requirement is limited.

• Crowdfunding for Startup in India

On a basic level, the concept of crowdsourcing is comparable to that of mutual funds. This decision involves more than one investor, each of whom contributes a predetermined amount of money based on your goal, business idea, profit-making goals, and plan of action. All you need is a group of people that are enthusiastic about your business concept.

Crowdfunding is growing in popularity since it ensures that other experienced participants in the market believe in your idea as well. Crowdfunding might also help you in obtaining critical money at the concept stage. You can raise funds through crowdsourcing from friends, family, and entrepreneurs that believe in your business concept and have the financial means to support it.

• Angel Investment for a Startup in India

Angel investors are individuals with extra income and a strong desire to invest in new Businesses. They also collaborate in groups of networks to screen proposals jointly before investing. In addition to funding, they can provide advice or mentoring.

Many well-known companies, such as Yahoo, Alibaba, and Google, were founded with the support of angel investors. This type of investment is most common in a Company’s early phases of development, with investors expecting up to 30 percent equity.

Conclusion

Because of the multiple funding choices available to entrepreneurs, India has risen to become the world’s third-largest Startup ecosystem. The goal of these finance and fund-raising tools is to help Businesses expand. To stay competitive in the market, you must constantly switch your funding sources. This gives you some flexibility and reduces your reliance on a single source of cash.