Top 9 Easy Ways To Fund Your Startup

Having an idea for an innovative business is a big deal, but getting that business from an idea to a reality is a complex and difficult process. Building a business from the ground up is tough, as to start a business, one needs to obtain funds and capital. 

In this blog we have broken down the different methods a startup can use to get funds.

The following ways are how an entrepreneur can acquire money to fund their startup and begin their business:

Self Funding/Bootstrapping

If it is difficult to convince other investors or lenders to fund a startup, entrepreneurs can invest their own savings or capital into their business. This is known as self-funding or bootstrapping. 

Although it may take longer to gather enough funds, the advantage is that the entire business is yours to control and you don’t have to give up any equity.

Friends And Family

An easy way to get funding for a startup is to acquire money from friends and/or family. They are easier to convince when compared to investors or banks. There are lesser formalities with friends or family when it comes to raising funds and in such situations, interest is also flexible. 

Although, if one is borrowing money from friends or family instead of them investing or gifting it, then it is a fast way to affect one’s relationships with them. Hence it is advisable that both sides get proper legal advice before any exchange of funds takes place.

Angel Investors

Angel investors are individuals of high net worth who provide funds and capital to businesses or startup businesses. They usually invest in exchange for ownership equity. Such individuals possess surplus funds and they also possess an interest in startups. Angel investors usually provide backing to startups in the initial time of the business when the risks are fairly high. They may provide either a one-time investment or provide recurring support to push the company through its risky early stages. They are also known as informal investors, angel funders, private investors, or seed investors.

Venture Capitalist

A venture capitalist is a private equity investor who invests in companies with high growth potential or companies who demonstrate high growth. They can be individual or professionally managed firms that invest capital in exchange for an equity stake. Although they can provide huge amounts of funds, they do expect to recover their capital in a short time frame, usually 3-5 years. Venture capitalists also exit when there is an IPO or an acquisition.

Incubators And Accelerators

Startups can employ the services of incubators and accelerators as means to acquire funding or as a means to find aid in starting a business. They are organisations and programs that aid startup enterprises in growing and scaling.

A startup incubator is a programme or organisation that helps emerging businesses flourish. Incubators assist entrepreneurs with overcoming some of the challenges that come with starting a business by offering workspace, initial capital, coaching, and training.

A startup accelerator is an organisation that provides coaching, funding, resources and connections to investors and business partners. It is intended for select startups with promising MVP’s [minimum viable product] which enables them to compress what would normally be several gradual years of growth into a few short months.

Some well known organisations are Amity Innovation Incubator, AngelPrime, CIIE, IAN Business Incubator, Villgro, Startup Village and TLabs.

Contests

There exist many contests and initiatives that help startups grow and support entrepreneurship. They help startups by exposing them to potential investors and providing them with opportunities to get funding alternatively. 

Such competitions and contests motivate entrepreneurs and startup businesses to create business plans to set up their own businesses. They need to have a product or a business plan to present in the contest. 

Winners of such contests are awarded funding and support and all the businesses who are participating may also get exposure if the contest has media coverage. Even without that, the startups get exposed to potential investors present in the contest. 

Some popular contests in India include Microsoft BizSpark, NASSCOM’s 10000 startups, Lets Ignite, etc. 

Government Grants

There exist many different government grants, loans and schemes that provide startup enterprises with the capital they need to fund their business. The schemes are initiated by the government and are supported by public or private financial institutions like banks, NBFCs, etc. 

The government of India has many different schemes to support startups like the MUDRA loan scheme under Pradhan Mantri Mudra Yojana (PMMY), Start-up India, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Stand-up India, Atal Innovation Mission, Make in India, Trade-related Entrepreneurship Assistance and Development (TREAD), etc.

Loans

Loans are some of the most common methods to fund a startup enterprise. Almost all banks provide funding to startups in the form of either term loans or working capital loans. Although qualifying for a loan can be challenging as startups need to have a good credit history or they need to possess assets for collateral. There are also some banks that specialise in lending to small firms that can be approached. 

The Interest rates, loan amount, and repayment tenure will of course vary from bank to bank.

Almost all the banks of India provide loans to startups including Axis Bank, Bank of Baroda, etc.

Peer-To-Peer Lending

Peer-to-peer lending is a kind of money borrowing where there is no middleman or intermediary involved between the borrower and lender. The startups can directly acquire money from individuals who are interested in lending money. It is also known as social lending or crowd lending.

P2P investors are individuals looking to get higher returns on their investments as compared to savings accounts, etc. They lend money to startups as a form of investment while for startups who are the borrowers it is a loan or capital. 

On A Concluding Note

My Valuation is a business valuation firm that helps businesses calculate the worth of their assets and determine their valuation. We are an IBBI registered valuer that provides services like corporate valuation, company valuation, valuation advisory services, valuation of private company shares, and more.

Identifying the valuation of your company helps plan for future growth. It provides an accurate industry benchmark and may make obtaining finance from lenders and financial organizations easier. To know how we can help you determine the valuation of your business, visit our website: https://myvaluation.in/