Best Ways to Raise Funds for your Start up

Top 3 things to keep in mind "

# Develop financial projections that are rooted in verifiable assumptions

# Write paychecks that don't bounce, but increase as the business grows

# Get your clients to compete to be first

According to a recent study, over 90% of new businesses fail during first year of operation. Lack of funding turns to be one of the common reasons

Types of Fund Raising

  1. Angels / Seed Funds

  2. Venture Capital

  3. Crowdfunding

  4. Loans / Debt etc.

Best ways to raise Funds

  • Bootstrapping your startup business:

Self funding, also known as bootstrapping, is an effective way of startup financing, specially when you are just starting your business. First-time entrepreneurs often have trouble getting funding without first showing some traction and a plan for potential success. You can invest from your own savings or can get your family and friends to contribute. 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 As A Funding Option:

Crowdfunding is one of the newer ways of funding a startup that has been gaining lot of popularity lately. It’s like taking a loan, pre-order, contribution or investments from more than one person at the same time.

This is how crowdfunding works – An entrepreneur will put up a detailed description of his business on a crowdfunding platform. He will mention the goals of his business, plans for making a profit, how much funding he needs and for what reasons, etc. and then consumers can read about the business and give money if they like the idea. Those giving money will make online pledges with the promise of pre-buying the product or giving a donation. Anyone can contribute money toward helping a business that they really believe in.

  • Get Angel Investment In Your Startup:

Angel investors are individuals with surplus cash and a keen interest to invest in upcoming startups. They also work in groups of networks to collectively screen the proposals before investing. They can also offer mentoring or advice alongside capital.

  • Get Venture Capital For Your Business:

This is where you make the big bets. Venture capitals are professionally managed funds who invest in companies that have huge potential. They usually invest in a business against equity and exit when there is an IPO or an acquisition. VCs provide expertise, mentorship and acts as a litmus test of where the organisation is going, evaluating the business from the sustainability and scalability point of view.

  • Get Funding From Business 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.

Raise Money Through Bank Loans:

Normally, banks is the first place that entrepreneurs go when thinking about funding.

The bank provides two kinds of financing for businesses. One is working capital loan, and other is funding. Working Capital loan is the loan required to run one complete cycle of revenue generating operations, and the limit is usually decided by stocks and debtors. Funding from bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is sanctioned.

  • Govt Programs That Offer Startup Capital:

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. You are supposed to submit your business plan and once approved, the loan gets sanctioned. You get a MUDRA Card, which is like a credit card, which you can use to purchase raw materials, other expenses etc.

If you are a early-stage startup in India then Angels / Seed Funds or Crowdfunding is something you can go after.

Why choose Crowdfunding instead of Angels / Seed Funds ?

  • You don't have to give away your equity, which matters a lot in early stages.

  • You get early adopters for your product.

  • People who back your campaign tend to become your loyal customers forever.

  • Helps in marketing, as people share the campaign on social media.

  • Helps in market validation of your idea/product.

  • Gives you the capital to jump-start your project and take it to next level.

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