5 different ways to raise capital for your startup at the idea stage
Starting up your own venture requires a brilliant idea, industry-knowledge, perseverance and, of course, funding. Funding is the lifeline of any business, as without seed money it will be challenging to turn an idea into a reality. While entrepreneurs show vigour and passion, most of them lack the know-how of startup funding. The general consensus is that the core offering is enough to sustain a business, but that’s far from the truth. Great ideas can only go as far as they are backed by stable investment. If you are struggling to raise capital, here follows the five proven ways to fund your startup at the idea stage.
Although you shouldn’t expect to cut a big check, there are several grants available, offered by both government and private bodies in the interests of promoting entrepreneurship, boosting the economy, generating employment opportunities. These financial injections can help you set up the operations, purchase manufacturing equipment, and provide salaries to employees. However, winning grants can be tedious, time-consuming, and overall a complex process. In India, the government offers startup grants as part of its Startup India’s FFS (Funds of Funds) initiative.
Pursue venture capital firms
If your startup is at the idea stage, venture capital funds are your best bet. Once restricted to the Western world, VCs or venture capital funds have come an integral part of India’s startup ecosystem. Comprising an extensive network of angel investors, HNIs and corporates, VCs provide funding along with mentorship and networking opportunities to emerging businesses. While approaching seasoned investors and convincing them about the scalability of your startup can be tricky, you can get large funding unlike from VCs, unlike grants.
Opt for crowdfunding
The concept of crowdfunding originated from the West, but India has started warming up to it. With dozens of crowdfunding platforms available today, it’s perhaps one of the quickest ways to raise funds for your startup. All you need is a compelling pitch that reflects your startup’s scalability and growth potential. The biggest advantage is that you don’t need to pay back the capital, and also gives you a platform to create a buzz about your business even before it is established. The main challenge, needless to say, is the fierce competitiveness of such crowdfunding campaigns.
Reach out to an angel investor
Angel investing in India has gained momentum only recently, but is now generating interest across sectors. Not only HNIs (high net-worth individuals), but corporate employees and high-salaried professionals also qualify as angel investors. Keep a track on angel investors who’ve had a history of backing startups, and find the one who will provide you with funding, industry knowledge as well as mentorship. You can reach out angel investors through investor meets, online networks and personal connections. The only downside is that angels typically offer less capital than banks or VCs. Also, getting your voice heard in the competitive startup environment can be heard.
Take help from family and friends
Self-made entrepreneurs often refuse to seek help from their family or friends. However, many of the world’s top business tycoons have admittedly borrowed money from their closed ones early in their entrepreneurial journey. Hence, you shouldn’t hesitate to do the same. Taking short-term or long-term loans from family or friends doesn’t usually require you to pay added interests. In some cases, you don’t even need to pay them back. At the same time, it’s advisable that you only take a part of the total required funding from your family and friends in order to reduce the burden.
The author is Dr. Apoorva Ranjan Sharma,
Co-Founder and Managing Director – 9Unicorns.
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