Funding Options for Startups in India
Finance is the blood of any business. The extensive scrupulous yet thrilling trip from idea conceiving to revenue yielding business requires energy named capital.
Based on the latest study, more than 94% of new businesses are unsuccessful during their first year of operation due to lack of funds.
Now, when is funding required depends mainly on the nature plus kind of the business. But when you realize that you need to raise funds then go through the funding options for Start-ups as below:
Bootstrapping is one of the best and cheap approaches to g
uarantee a business’ certain cash. This mode of funding implies less cash must be obtained and hence interest costs decrease. Obtaining finance via bootstrapping is cheap because it is only the founders who invest in the company and hence the equity and control of the founders are not weakened.
A startup accelerator helps for fast development of its portfolio organizations. It’s a man-made ideal tempest of mentorship, access to innovation, office space and a creative group, stuffed into a brief timeframe. New businesses are given little seed venture and access to a vast mentor network, in return for a little value stake, normally between 2.0% to 10.0%.
Incubators are commonly institutes which give space and other equipment to startup groups to set the ball moving. You can keep your startup housed at incubators premises for a long time till you feel the need for your own space. They take high stakes than the accelerators, at times even more than 20.0%.
4) Angel Investors
An angel investor or angel is a wealthy person who offers capital for a business start-up, generally in exchange for changeable debt or ownership equity. They finance small to medium amounts to the tune of Rs 5.0 – 10.0 lacs for normally 2-3 years and expect approximately 2 X return on their invested capital.
5) Venture Capitalists
Once your startup has started functioning and begins developing, you will almost look for funding. In case you are hoping to raise INR 5 – 10 Crores, contact early stage VCs/Micro VCs.
Greater VC firms can contribute from INR 15 – 300 Crores. Contingent on the span of venture and the phase at which they enter in a startup, VCs expect returns of 2x – 10x – cash on a cash basis.
6) Private Equity (PE)
PE finances commonly put resources into built up organizations with a stable plan of action in addition to confirmed reputation.
They have a tremendous purchasing force and investment should be possible for scaling up operations or purchasing out the whole stake of existing financial specialists, including owner/founder. PEs could buy a key stake in your venture.
7) Bank Loans
Banks in India offer loans to small businesses’ to technically qualified, experienced as well as trained business visionaries for setting up suitable modern ventures. They additionally offer credits to mid to late stage new companies (around 3 years in business). These security free credits may go from INR 5 – 20 Lacs and commonly convey an interest rate of 17.0% to 20.0%.
8) Convertible debt or debenture
This is a credit that the founders take from angels for a specific timeframe or till the following round of investment occurs. At the point when the next round of investment kicks in, the angels have the choice to either take their cash back at a predefined financing cost or change over their credit to equity. This helps the startup group to get rid of the valuation of their organization at a premature phase.
9) Govt Support
The Indian Government also assists credit schemes for start-ups without any collateral and is known as Credit Guarantee Fund Trust for Micro and Small Enterprises. The target of this plan is to tie up short-term and long-term capital needs for an enterprise with no collateral from a single agency. Advances up to INR 1 Crore can be received by MSMEs under this plan.