Don’t you wish to have a business created from your own innovative mind?
Well, that’s what a startup is. Pitching your creative ideas and turn it into something meaningful.
Along with this, a startup is highly considered due to its flexibility, ability to get most out of
limited resources, having control and many more. In fact, according to startup india.gov.in,
“India has the 3rd largest startup ecosystem in the world; expected to witness YoY growth of a
consistent annual growth of 12-15%
India had about 50,000 startups in 2018; around 8,900 – 9,300 of these are technology led
startups 1300 new tech startups were born in 2019 alone implying there are 2-3 tech startups
born every day.”
Now that you know how notable a startup can be, you need to have a powerful strategy.Starting from initial capital to manual labour to allocation of resources,you need to make wise decisions.
One out of these crucial elements is “Funding’.It is the capital required to start your business.
The term of investment being secondary, a “good” financing strategy acts a rock-solid foundation for your career.So what makes the strategy “good”, you might ask?
This plan of action involves you outweighing all the pros and cons of different investment options and choosing the one that suits your needs.Below are a few funding options which can be considered:
It is quite hard for new business enterprises to assemble capital for their initial working.Every investor demands assurity from indebtedness or any other factor considered.So, one of the best ways to fulfil the earliest needs is funding on your own.There are a few positives and negatives enlisted below which might help you.
- Favourable if you have a small-scale business
- You retain 100% control of the company.
- You can completely focus on other important aspects such as product/service designing and its marketing needs.
- It can be a huge burden on yourself as your entire team would look up to you to help them survive the fall, and not crash and burn.
- It can limit the size and scope of the business at start-up.
- Your lack of enough knowledge on the subject of investment can lead to an early shutdown of business.
VENTURE CAPITAL FUNDING
If you are someone with a strong plan,and an efficient team, then you can opt for “VENTURE CAPITAL FUNDING”
Venture Capital Financing can provide resources to scale the business channels, customer segments, or to increase marketing efforts for additional customer acquisition. At this stage, your startup is either profited or could benefit from offsetting the negative cash flow.In addition to that, this new way of investment will help the business to flourish.Want to know about the fors and against? Continue reading.
- Ability for company expansion that would not be possible through bank loans or other methods.
- Venture capitalists provide valuable expertise, advice and industry connections.
- Unlike a loan, you don’t have to repay the money. So if your startup fails, you’re not committed to repay the amount.
- When you bring on venture capitalists, you’re also giving them a say in how you run your startup.This indirectly takes the power of controlling from you.
- While some venture capital deals with providing funds at once,some others release it in instalments.This may get frustrating for you(if you are a founder) because even though the money is available, you are unable to access it.
An angel investor is usually a high net worth individual who funds startups at the early stages. Your business will be funded by their personal money in exchange for equity.Essentially these individuals both have the finances and desire to provide funding for your startups.The main aim of majority of angel investors is to help your startup take the first steps.
Some common forms of angel investors are-family and friends,wealthy individuals ,crowdfunding,etc.
But just like any other form of funding, it comes with its own conditions
- less risky than debt financing
- Contacts with investment bankers, accountants, lawyers and other professionals
- With angel investor comes business experience
- Loss of control
- Loss of equity(you may have to give up on a huge percent of your equity)
- Angel investors can replace you with a more experienced executive, if they possess a huge part in equity.This may lead to loss of ownership from the business you originally created.
If you are a business enthusiast and want to fund efficiently, then you could avail from some of the schemes the Indian government has introduced for the welfare of the former.
The Venture Capital Assistance Scheme:
Ministry of Agriculture and Farmers Welfare
Venture Capital Assistance is financial support in the form of an interest free loan provided by SFAC to qualifying projects to meet shortfall in the capital requirement for implementation of the project
Small Industries Development Bank of India (SIDBI)
SIDBI facilitates bank loans between 10 lakh and 1 crore to at least one scheduled caste (SC) or Scheduled Tribe, borrower and at least one woman per bank branch for setting up a greenfield enterprise. This enterprise may be in manufacturing, services or the trading sector.
Modified Special Incentive Package Scheme (M-SIPS)
This scheme is eligible for startups in electronic manufacturing.The scheme aims to support IPR awareness workshops/seminars for sensitising and disseminating awareness about Intellectual Property Rights among various stakeholders especially in the E&IT sector.
Software Technology Park (STP) Scheme
The STPI has been set up with the objective of encouraging, promoting, and boosting software exports from India.The scheme allows software companies to set up operations in convenient and inexpensive locations and plan their investment and growth, driven by business needs.
Apart from these, there are innumerable ways to fetch out benefits while financing.
Planning a startup is fulfilling and exhausting in one.It depends on how you manage and evaluate the factors.The form of funding which you go for may not be fruitful for others.So, it is solely your decision to consider the advantages and disadvantages, and choose the one which makes your journey easy.