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In the current time India have many startup companies or ventures are come up with their innovative ideas and it is most helpful in the growing economy of our country. We all know that the finance is the life blood oaf any business or ventures.

In case the ventures is self-funded there can be no better option than this. However, the startup is brainchild of its founders

In this article we discussing about most crucial part about the starting the startups which is INITIAL FUNDING to start the business. There are many sources for the startup to get funding out of which we are discussing some most important and helpful sources for funding to startups.

Now we are discussing the most important and helpful ways to get funding step by step for startups.

Initial Funding for the Startups in India

1. Seed Capital:

Technically seed capital is initial capital funded by the founder of the startups of family members or relatives or friends of the founder to start the business. It is help to start up for exploration the market and helpful to convert into the viable products or services and then further attracts venture capitalist. In this stage the founder must understand the value of this fund and utilize it in very better way which is helpful to the business. Sometimes the seed capital mays resulting into the dilution of the equity from where the founder gets the funding.

2. Unconventional modes of funding

1. Crowd Funding

Crowdfunding is practice where founder can get the fund is small amounts collected out of the large number of the people. As of now many companies are set up for the giving the services of crowd funding like 1. Kickstarter 2. Ketto 3. Fundable and etc.

In this system crowdfunding make one platform in which founder of the startup can present his idea and product on the platform, from this information any person who is willing to invest in the startup can contribute small amount and help to startup to get funding. Investor can get good return as per the decided terms and condition.

2. Incubators

Incubator is an organization help to startup companies to develop there business by providing resources, access to industry for the period of 2-3 years called incubation period, for this incubators can take 2-10% of the equity in the business. Incubators helps to startup by providing following services

> Establish the industry linkage

> Providing office space

> Management Training

> Mentorship

> Administrative Support

> Technical Support

> Arrange resources

> Assess the market conditions and entrepreneurs requirements and by many more services

There some top options are included in India are IIM-Bangalore, NSRCEL, Microsoft Accelerator and IIT- Kanpur, SIIC and the Sriram College of Commerce (SRCC).

3. Debt Financing

Debt Financing is a way from where founder can avail the finance without dilution the equity. In this point we are pointed out the area where the founder get the finance

1. Loan From Bank & Financial Institution

Loan from the bank and financial institution help to finance the purchase the inventory and equipment but for new business there is a disadvantage is high rate of interest but in the initial stage of the business there is rare chance to get finance without giving collateral of the founder family person.

2. CGTMS Loans

CGTMS refers Credit Guarantee Trust for Micro and Small Enterprises Scheme. CGTMS is blessing for the startup. This scheme is launched by the ministry of Micro and Small Enterprises for promoting the new startup which. In this scheme Micro and small enterprise in manufacturing and service sector can get funding upto Rs.2 Crore and retail sector can get upto Rs.1 Crore without giving any collateral. Government of India Set up the corpus for the CGTMS at initial level was Rs.2500 crore now it is enhanced to Rs.7500 crore. CGTMS includes lending partners form where startup can get the funding. As per the latest report of FY 2020-21 by CGTMS total 304 are lending members with it.

Total Number of MLIs

4. Equity Financing

Equity financing is stage where startup can get funding in exchange of the equity and the equity is the most important thing of the founder of the startup. Equity is the most precious thing ever for the founder. Founder at the time diluting its equity must required to think about all the aspects which are affecting his rights. Equity financing involve the four stage to get funding which are describing as below

1. Venture Capitalist

Venture capitalist is the first stage where startup can expect to receive large investment. Venture capitalist is a private or institutional investment made to startups. Here venture capitalist invest money in exchange of the convertible instruments. There are many venture capitalist firms are exists in India for example 1. Sequoia Capital 2. Accel 3. Matrix Partners and many more.

2. Angel Investors

Angel investors are usually individuals or group of industry professionals who are willing to fund the startups in exchange of the Equity of the company. In recent there is a reality Show named Shark Tank India having the Jury of Angel investors who are investing into the startups in exchange of the equity.

Initial Funding for the Startups in India

3. Bridge Financing

Bridge financing is interim financing option used by the topmost startups to satisfy the sort-term finance until a long-term finance option can arrange. Bridge financing normally comes from an investment bank or venture capital firm in the form of a loan or equity investment.

4. Series Funding

Once the business is well set up and have good track record than company can opt for the Series Funding. Concept of the series funding is more known in international market rather than Indian market. In India there are lessor number of Series investors instead of angel investors. Series refers to an investment in privately held startups after it has shown progress in to building the series funding company raise more than $2 million to $5 million against 15-25 % of the entity.

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April 2024