Are you a startup at the seed stage wanting to grow a tree of investment, growth, and opportunities? Here are some interesting points for you that can work wonders for you and your startup! Procuring funding for startups can be a challenge for entrepreneurs. But before that, we need to understand what funds are. And why are they necessary for every business.
In simple words, funds are the money requirements for the functioning and operating of a business, often known as business capital or venture capital. Funding supports the activities of various departments. It includes hiring resources, operational support, marketing for products or services, promotion-related activities, and much more. Not only this but funding also helps to transform your product into a brand.
There are many challenges that a startup faces while raising funds. However, an even major challenge for them is to find out the resources to get funds. Choosing the correct venture capitalist or an investor plays a crucial role later. It directly affects the financial model of the company. Therefore, it is necessary to gather all the information and possess a sound knowledge of the investor market. A little research and labour can do wonders for your startup and get you the funding you require.
To make this process easier for entrepreneurs, here are some crucial points to consider. Knowing about these can give you better insights to make the best decision for your company. Read on to learn more.
How Can We Get Funds for our Startup?
Below you can find several ways to get funding for startups:
- Pitch to the Venture Capital:-
Venture capitalists help startups by providing venture capital and professionally managed funds with high growth potential in exchange for an equity stake. Once the company releases its IPO, its role comes to an end, and it quits. The capitalists mostly get payments for their capitalist venture services through management fees or carried interests for startups. They can be an Associate, Principal, or a partner in the company. In short, VCs give funding to startups at their growing stage. It also helps a startup to realize above-average profits.
- Angel Investment:–
They are high-net-worth individuals who fund startups at an early stage in exchange for equity in the company. Angel Investor’s core belief is equity funding. It can be a friend or family member in general. Not only do they foster innovation translating into economic growth but also delegate the ownership of the entrepreneur. Angel Investors usually have a good amount of money to provide and desire to invest in startups. It can be a good opportunity for entrepreneurs to gain funding for startups.
If you want to remain your boss and want complete control over your business, bootstrapping can be your thing. Through bootstrapping, entrepreneurs stimulate a company using their finances or operating revenue as funding for startups. But this process can be a bit financially straining for entrepreneurs. In other words bootstrapping is defined as self-funding. Here, entrepreneurs depend on their own money without any exterior investors for the business. Bootstrapping can be beneficial to retain equity but involves high pressure on entrepreneurs.
The most famous and dreadful way to raise funds is to take a business loan which any bank will provide you happily according to your business plan format. But later, you need to return that amount to the bank along with interest. Banks offer secured loans as funding for startups by mortgaging some property or assets of the beneficiary. Loans can serve various purposes for the company. The objectives may include the purchase of equipment, buying inventory, and paying the salaries of employees. Additionally, other activities like marketing, business debt, administrative meetings, opening a new branch or taking up a franchise need funds.
Depending upon your business plan format, you can also consider an option for taking grants. There are NGOs like Sri Aurobindo Society providing grants and guidance for different projects. Investment grants are of four types: competitive funding, formula funding, continuation funding and pass-through funding. But getting investment grants entirely depends on the business idea. However, it can be an excellent option for entrepreneurs or startups who do not want any liability in their early stages. Many such grant programmes are going on that aim to invest in startups in India.
Investment means putting your capital to use so that its value keeps increasing over time. There are many companies providing capital venture services and bringing investors to invest in startups. So, it is an ideal way to get funded and increase the rate of growth of the business. Investments capitalize money for unrealized future gains. The reason why investments are risky is that no one can forecast the future accurately. But taking risk is a positive gamble because it can have a positive return. That is why it is always good to do some market research before investing in anything.
It is a small amount of money collected from a large group of people to finance venture capital. There are three types of crowdfunding, namely, Equity-Based Crowdfunding, Reward-Based Crowdfunding, and Donation-based crowdfunding. According to the nature of crowdfunding, investors either donate money philanthropically or prefer equity funding. In both ways, funds come from the public or crowdfunding. Prominent examples for crowdfunding can be Kickstarter, GoFundMe, LendingClub, Indiegogo, and many more.
Along with this, business incubators are also there to help. They provide their services to entrepreneurs with the potential to sustain themselves in the market. Their functions are vague, which we can discuss later. But, here we have some key pointers for the entrepreneurs to take into consideration while raising funds.
These are some of the ways to raise funds for your business startups to grow.
Points to remember while raising funds:-
There are certain things that one must keep in mind as an entrepreneur. While raising funds for your startup, these points will help you bring more specifications into your plan. These pointers are going to help you to raise and utilize your funds in a much effective way.
- Budget:- Annual budget of a company always plays a crucial role. In terms of making long-term financial decisions, it is necessary to have a budget. Whether relating to marketing, operations, advertisement, or investments, having a proper budget always makes it more stable. Thus, budget is the steering wheel of your business. It must be controlled and balanced to avoid any jerks, mishappenings, or any loss or accidents. Also, there will be no problem for you to seize any opportunity if you have a well-managed budget.
- Cloud-based Business Tools:- Organize your business by using Cloud-based business tools. Keep all business-related documents on the cloud or online so you can access them anywhere and everywhere. It also ensures complete safety and documents for further use. Furthermore, it can help organize the data in one place for easy access, making the tax filing process simple.
- Automate Bill Payments:- For an efficient bill payment system, every business must have this. Keeping track of all your bill payments and invoices can be time-consuming. All the slips, papers, memos references can create a lot of mess. Also, remembering pending payments for all the creditors as well as debtors can be a challenge. So, software that assists bill payment automation is the best way to organize business capital.
- Select the right Investor:- A right investor will always be a sailor of your ship, no matter whether there is a dark storm or shinny day for your business. The right investors will always look for gains and profits. They can be the biggest motivation for entrepreneurs to put their capital to the optimum level. Finding the right investors can be very tricky, but it is very crucial for growing your startup.
- Credit Score:- Improving credit score can be a game-changer for your startup. A good credit score gives your company a reason to be a good investment for investors. Not only this, but it also attracts prospective investors to your business. The Credit score is the worthiness of an enterprise, defined by the financial institution, suppliers, partners, and even potential customers. So, a better credit score attracts more investors, and it is always merrier.
- Cyber Security:- Every entrepreneur must take action to protect their businesses. Protection of the company server against fraud and cyber security is crucial. In the high-tech era of civilization, everything is done online, from online classes to working from home. So, to ease working anytime and anywhere, the business platforms like Google Cloud and others provide cyber security. Every company is accountable for ensuring client details security by protecting them from any external threats.
- Debts Management:- Before making any finance-related judgments, every entrepreneur must do financial forecasting for their funds. Financial forecasting helps you to estimate the optimizing capacity of your funds. You can accordingly decide upon the debts and the credits. Then you can plan for it so that there will be no pending payments due for you. Late payment and lagging of money in an organization can create a negative impression on your image.
These are a few ways to get funding for startups. However, there are several other ways to raise funds for your startups. The investors’ market is quite broad for startups. It means that you have a lot of options to make a choice. The only thing it requires is some good market research and knowledge to find the perfect funding partner.
Hopefully, this article will be helpful for you to make informative and best capital and investment-related decisions in the future. For more information, you can also visit our social media handles.