Aspiring entrepreneurs are coming up with innovative ideas for start-ups every year in India. As per the NASSCOM report, over 1000 tech start-ups have been added in 2017, thereby showcasing a growth over 7%. With this, India continues to be the third biggest start-up market in India, behind US and UK. Some of the major startup hubs in India are in Bengaluru, NCR and Mumbai. Establishing startups by young aspiring entrepreneurs are certainly going to impact the Indian economy in the coming future.
But not every startup is successful. There are many that fail and subsequently shut-down within the first year itself. There are several reasons for their failure, lack of funding being cited as one of the main reasons. So how does a businessman get funding for startup?
There are several different ways to acquire funding. Some of them are:
When it comes to startup funding, self-financing (also referred to as bootstrapping), is a great way to get backing, particularly when you are just setting up your business. First-time entrepreneurs usually have trouble acquiring funding without showcasing some traction and a detailed plan to achieve potential success. Entrepreneurs could choose to invest from their own savings or they could get friends/family to pitch in. Self-funding or bootstrapping should be regarded as the first financing pick due to its advantages.
This is one of the most popular ways to find investors online. It has recently acquired popularity and is one of the newer means to fund a startup. How does crowdfunding work? An entrepreneur will display an elaborate description of his business on the crowdfunding platform. He/she will mention the objectives and goals of the business, plans for realizing profit, how much funding is required and for what purposes.
Potential donors can read up about the business and choose to donate if they see merit in the business. Crowdfunding is an exciting option for funding because it can produce interest and aid in marketing alongside financing. Apart from common people, it also has the potential to draw venture-capital investment if a firm has a successful campaign.
Who are angel investors? They are the people with extra cash and an avid interest in investing in new startups. They can also operate in groups of networks to jointly scan the proposals prior to investing. Some are known to offer advice or mentoring alongside capital. Angel investors have played a crucial part in kick-starting several noteworthy companies, such as Alibaba, Google and Yahoo. This alternative type of investing usually happens in an organization’s initial stages of development, with investors anticipating upto 30% equity. They typically take more risks in investment to get higher returns.
These are just some of the ways to acquire funding for your startup. Some of the other means include venture capital, funding from business incubators and accelerators, bank loans, government programs and so forth. Funding is usually the first step in your startup kit. There is a long way to go before turning a potential startup into an established successful business.