The start-up wave in India has accelerated and mushroomed due to the recent favourable policies of the government. If someone is looking forward to starting a new venture, there are several start-up accelerators, retail investors, mentors to provide pieces of advice as well as supporting the venture through monetary means.
Having said this, there is also a flip side. As per a recent survey, 90% of the start-ups fail in the very first year and there are a number of reasons to it. The most notable one is the lack of funds. Money is the lifeline of any business. No matter how good and unique the idea of the business is, if the entrepreneur does not have sufficient funds to bloom it in the market, it is just not worth it. You took great efforts to come up with such an amazing idea, now you need to work further to accumulate the fuel called capital for your business. Entrepreneurs today are always running to fund and sponsor their business.
There are several channels through which you can fuel up your business engine but, the successful journey of your business will depend upon, where and when you utilise the funds. Here we provide you with some methods to raise funds for your business:
Bootstrapping is nothing but self-funding your business. Before you take your business prospects to the outer world, it is good that you have something of your own. With your savings and by asking money from friends and relatives, you can take your business to a considerable level. When you have created a good base for your business, it will be easier for you to procure funds from outside sources.
Bootstrapping has a number of advantages against the other sources of finance. First of all, you are not liable to anyone and when you know that your money is invested in the business, you are more faithful towards it.
Lately, crowdfunding has gained a lot of popularity in the market. it is one of the newest methods of fund raising and it means taking loan, pre-order or contribution from more than one person at a time.
For an example, an entrepreneur puts up his whole business plan at the crowdfunding platform. He will provide the plans of his business and the way he wants to flourish the business in future. He will also put up his financial requirement of the business so that people know how much they need to invest in it. People are free to fund the business either as a donation or with an online commitment to buy some product of the business.
#3. Angel Investment
Angel investors are those individuals who have surplus of funds are quite keen to invest in the start-up ventures. The angel investors work in clusters so that it is easier for them to judge the prospects of the new business idea. Along with the monetary help, they can also offer pieces of advice to the entrepreneur.
Behind the success of Google, Alibaba and Yahoo, angel investors are present. The investors expect 30% on the equity of the company and this occurs generally in the early stage of the business.
#4. Venture Capital
The venture capitalists invest in the businesses, which have huge prospects for future. The venture capitalists make big bets by providing finance to a company. These investors invest in a business for an equity stake and they exit when there is an acquisition of IPO.
Venture capitalists are experts and they provide business advice, runs mentorship programmes for the budding entrepreneurs and they act as a litmus test for the business.
#5. Getting hooked with Business Incubators and Accelerators
The new businesses can look for help from business incubators and accelerators. These incubators are found in all the major cities of the country and they assist hundreds of start-up businesses every year.
Often people take incubators and accelerators as one and the same but there is a significant difference between the two. An incubator is like a parent to the business and it helps to nurture the business while an accelerator helps the business to take big leaps in the market.
#6. Bank loans
Taking a loan is an easy option to fund your start-up. Banks is the first option; the budding entrepreneurs have in their minds. The banks provide two options for the start-ups:
- Working capital loan
Working capital loan is needed to run a complete cycle of revenue generating operations and the limit of this loan is decided by the hypothecating debtors and stockist. For funding, you need to share the complete business plan and the valuation of your business with the bank.
There are more ways to raise funds for your start up. You need to play smart and convince your investor and create an enticing proposal for them.