Are you interested to explore various ways of funding startups in India? If so, read this article to know more about different ways of funding a small startup business in the country.
Congrats if you have conceived a startup with a new business idea. However, a mere idea will not help you in taking off. Today as a startup entrepreneur you have to understand the startup ecosystem. Here are some ways for aspiring entrepreneurs can make their idea happen through the various options mentioned below.
Top 10 Funding Options to Raise Capital for a Startup Business
1. Use your Own Savings
The best and recommended way of financing a startup business venture is self-financing. Though there is an unlimited financial risk involved in it, it is normally observed, entrepreneurs starting their venture with their own money have a success percentage more. The reason perhaps is that injecting his or her money of their own makes an entrepreneur more serious and committed to their business ventures.
Check your savings and figure out how much money you can inject into the business. Take care, you have a balance for at least coming 12 months to take care of the financial requirements for yourself and your family.
2. Use your Credit Cards
Using your credit cards in a smart way is another popular way of financing small business initiatives. However, you must be careful about spending money on credit cards as you have to pay a hefty amount of interest in case the repayment remains unpaid. You can check our post on the best business credit cards.
3. Bank Loans
Banks are the most popular go after destinations for entrepreneurs looking forward to starting and growing their small businesses. Broadly, banks provide two kinds of loan. One is term loan and another is working capital loan. If you want to know more about loans and loan providers, check our detailed post on the best business loans for small-scale businesses.
4. Get Fund by Winning Contests
Recently many organizers are hosting funding contests. Here, you need to present your product or business plan in front of investors looking to invest in startups. If you can convince the investors worth investing in your business project, funding is not going to be a problem anymore. You can check organizers like NASSCOM’s 10000 startups.
5. Startup Incubator
Business incubators differ from research and technology parks in their dedication to startup and early-stage companies. Research and technology parks, on the other hand, tend to be large-scale projects that house everything from corporate, government or university labs to very small companies.
Most research and technology parks do not offer business assistance services, which are the hallmark of a business incubation program. However, many research and technology parks provide house incubation programs.
6. Startup Accelerator
An accelerator is almost similar to the incubator, except for a few variants. Normally the association is limited to a specific duration, ranging from a few weeks to a few months. An application process normally is required for startup companies with a new business idea.
Accelerators acquire the stake in the startup, from around 5 to25% of the equity when you are coming up with the new business idea.
7. Angel Investment
As Wikipedia puts it, “An angel investor or angel (also known as a business angel or informal investor or angel funder) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies.
8. Seed Capital
This capital is required at the very early stage of business. You can call it a conceptual stage or idea stage. Normally this fund comes largely from promoter assets or his/her known friends and relatives. Few of the popular seed capital providers in India are Seedfund, Kae Capital.
9. Venture Capital
Venture capital (VC) is financial capital provided to early-stage, high-potential, growing startup companies with the new business idea. Normally, venture capital fund earns money by owning equity in the companies it invests in.
Crowdfunding is a new way of financing startups. Crowdfunding is basically sourcing small amounts of capital from a large number of individuals to finance a new business. The most popular ways of sourcing crowdfunding are donation based, reward based and equity-based. Crowdfunding Sites: Kickstarter, Indiegogo are very popular crowdfunding sites worldwide.
In addition to this list, peer-to-peer (P2P) lending is getting popular means of funding startups. It is a mechanism where individuals can get or invest money without no financial institution facilitating in between. Popular Peer to Peer Lending sites is Upstart, Funding Circle.