5 Ways to Fund your Startup or Business
According to a recent study, over 90% of new businesses in India fail during the first 5 years of their operation.
Lack of funding is one of the common reasons for such a failure because money is the bloodline of any business and without adequate capital, any business is bound to fail. Money helps a business to operate efficiently even in hard times when the economy is not doing well.
The long journey from the idea to a revenue-generating business needs a fuel called capital or money. That’s why, at almost every stage of the business, entrepreneurs find themselves asking — How do I finance my startup?
When would a business require funding depends upon the nature of the business but once you have established the need for funding. Below are 5 options to fund your startup or business.
1. Bootstrapping your startup business
Self-financing, also known as bootstrapping is an effective way to fund your startup especially when you have just started. Founders can put in their savings or even ask family members or friends for help.
Bootstrapping helps reduce compliance/formalities and makes it easier for startups to raise initial capital. Bootstrapping should be the first option for any founder to fund their startup.
2. Get Venture Capital for your Business
Venture capitals are professionally managed funds or AIFs that invest in companies that have huge potential for growth and can become market leaders in the future. VCs usually invest in a company against equity and exit when there is an Initial Public Offering (IPO ) or merger&acquisition (M&A).
Most venture capital comes from a group of wealthy investors, investment banks, and other financial institutions that pool investments. In India, venture capital funds are governed by SEBI (venture capital funds) regulation 1996.
MUST-READ: How to get funding from a Venture Capital?
3. Startup Business Loan
A startup business loan can be taken from Banks or other financial institutions for the purpose of expanding business operations. Applicants for such loans may not have a great credit history on their company due to a lack of business vintage.
Thus, to judge the business loan eligibility, the lender takes into account the business owner’s personal credit profile along with that of the company. Loan eligibility depends upon the type of business loans one is looking to apply for.
MUST-READ: How to Get a Startup Business Loan in India?
Crowdfunding is one of the newer ways of funding a startup which is becoming more and more popular nowadays.
To get crowdfunding for your startup the entrepreneur will have to submit a detailed description of his/her business on a crowdfunding platform. The description should clearly highlight the “why” factor for the crowd.
If you are able to convey to your investors that “why they should invest in your startup?” then you can get funded easily on a crowdfunding platform.
5. Get Angel Investment
Angel Investors are individuals with surplus cash and a keen interest to invest in startups in various sectors. Some Angel Investors invest in specific sectors while others may invest in any sector if they find the opportunity to be interesting.
Alongside capital angel investors also offer to mentor to startups. Compared to a VC, Angels Investors invest a lesser amount but they are willing to take more risks.
Startups Funding is a very complicated process and requires a lot of Business Valuation, Due-Diligence, and Market analysis. An Entrepreneur should always go for the best funding option according to his/her needs and business nature.
Note: DGM Capital is an Investment Banking and Wealth Management firm in India offering services like M&A Advisory, Business/Enterprise Valuation, Capital restructuring, Investment Advisory, and Financial Modeling.