Top 6 Ways to Fund Startup | No one will Tell you About

 

According to a recent survey, about 94 per cent of new firms fail in their first year. One of the most common reasons is a lack of funds and not knowing about ways to fund startup.

The lengthy and difficult road from idea to revenue-generating firm requires a fuel called cash. 

As a result, entrepreneurs ask themselves, "How can I finance my startup?" at practically every step of their business.

When you need money is primarily determined by the nature and type of business. 

But, to get access to any funds, first, you have to apply for company registration online and make sure that your startup is legally registered.

Only after that, you can access the funds lawfully.

However, after you've determined that you need money, here are some of the numerous financing options accessible.

This detailed guide includes 6 ways to fund startups that will assist you in raising funds for your company. 

 

1. Bootstrapping

Self-funding, often known as bootstrapping, is a good approach to getting money for a startup, especially if you're just getting started. 

Without any traction and a plan for possible success, first-time entrepreneurs have a hard time securing capital. 

You can invest from your personal money or enlist the help of relatives and friends. 

This will be simple to raise due to fewer formalities and compliances, as well as lower raising costs. 

In most cases, relatives and friends are willing to work with you on the interest rate.

Because of its benefits, self-financing or bootstrapping should be considered as a first funding alternative. You are bound to business once you have your own money. 

Investors will consider this a beneficial aspect at a later date.

However, this ways to fund startup is only appropriate if the initial requirement is limited. Some firms require funding from the start, and bootstrapping may not be an option for them.

Bootstrapping is also about maximising the use of resources, both financial and otherwise. 

 

2. Crowdfunding

Crowdfunding is a relatively new method of funding a startup that has recently gained a lot of traction. 

It's the equivalent of getting a loan, pre-order, contribution, or investment from multiple people at the same time.

It is how it works with crowdfunding – On a crowdfunding platform, an entrepreneur will post a detailed description of his firm. 

Consumers can read about the business and donate money if they like the idea. 

He will state the aims of his firm, strategies for turning a profit, how much funding he needs and for what reasons, and so on. 

Those who donate money will make online commitments in exchange for pre-ordering the goods or making a donation. 

Anyone can donate money to help a company that they believe in.

Why should you consider crowdfunding as a funding source for your company?

The best part about crowdfunding is that it may also stimulate interest, which aids in product marketing as well as financing. 

It's also helpful if you're not sure whether the product you're working on will be in demand. 

By putting money in the hands of ordinary people, this technique can eliminate professional investors and brokers.

If a company conducts a very successful campaign, it may also attract venture capital investment in the future.

Also, crowdfunding is a competitive area to get cash. 

So unless your firm is extremely solid and can attract average consumers with only a description and a few photographs on the internet, you might not find crowdfunding to be a good fit for you.

 

3. Angel Investors

Angel investors are people who have extra money and a strong desire to invest in new businesses. 

They also collaborate in networks to review proposals collectively before investing. In addition to funding, they can provide mentoring or counsel.

Many well-known companies, such as Google, Yahoo, and Alibaba, have benefited from angel investors. 

This type of investment is most common in a company's early phases of development, with investors expecting up to 30% equity. 

For bigger profits, they prefer to assume more risks in their investments.

Angel investment as a source of capital is not without flaws. Compared to venture capitalists, angel investors make smaller investments.

 

4. Venture Capital

It is where the large wagers are placed. Venture capital funds are professional ways to Fund Startup that invest in high-potential businesses. 

They frequently invest against the equity in a company and exit when it goes public or acquires. 

VCs give knowledge, and coaching, and serve as a litmus test for where the company heads, assessing the company's long-term viability and scalability.

A venture capital investment may be ideal for small enterprises that have moved past the startup stage and are already profitable. 

Fast-growing companies like Flipkart, Uber, and others that have an exit strategy can generate tens of millions of dollars to invest, network, and develop their business swiftly.

However, there are a few disadvantages to using Venture Capitalists as a source of finance. 

When it comes to corporate loyalty, VCs have a short leash and frequently want to recoup their investment in three to five years. 

If your product takes longer than that to reach the market, venture capitalists may be less interested in investing in you.

They are often looking for larger, more stable prospects, as well as organisations with a strong staff and high traction. 

You must also be flexible with your business and occasionally give up some power. 

So, if you have not interest in a lot of mentorship or compromise, this may not be the ideal option for you.

 

5. Incubation and Acceleration Funds 

Incubator and accelerator programmes can help early-stage enterprises get funding.  

These initiatives, which can be found in almost every large city, help hundreds of new firms every year.

Despite being used interchangeably, there are a few key distinctions between the two names. 

Incubators are similar to a parent to a child, nurturing the business by providing shelter, resources, training, and a network. 

Accelerators are similar to incubators. 

However, an incubator helps a firm walk, whereas an accelerator helps it run/take a great jump.

These programmes typically last 4-8 months and demand time commitment on the part of the business owner. 

Using this platform, you will be able to connect with mentors, investors, and other company founders.

 

6. Startup India Fund

This is one of the best ways to fund startups in India.

In the Union Budget 2014-15, the Indian government announced the establishment of a 10,000 crore Startup Fund to strengthen the startup ecosystem in the country. 

The government has launched the 'Bank Of Ideas and Innovations' programme to support innovative product enterprises.

The government-backed 'Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)' would commence with an Rs. 20,000 crore fund to support about 10 lakh SMEs. 

It is must to submit a business plan along with a company registration online certificate, which must be reviewed before the loan may be issued. 

You will have a MUDRA Card, which functions similarly to a credit card. You may use it to purchase raw materials, as well as other charges. 

Three types of loans are provided under the promising scheme: Shishu, Kishor, and Tarun.