Innovation and startups help drive a nation economy forward as a key engine of economic growth. The cycle of innovation is speeding up, and talented entrepreneurs are ready to take over and invent the next disruptive technologies.
Raising the Capital
Raising capital is typically one of the first issues a startup company will need to address, and your ability to attract investors will likely play an important role in the ultimate success of your company and its exit strategy.
Equity is the most common approach to early-stage investment, since most startups will not have enough revenue or history to attract debt financing.
1. Bootstrapping: The first round, often called bootstrapping, will typically come from founder’s savings and credit cards. In addition, many founders will reach out to their friends and family members to raise their initial seed capital.
2. Angel Investors: Angel investors are individuals or groups that specialize in making early-stage investments in startup ventures.
Angel Investors often learn about potential investments through referrals from other investors, a startup’s advisors or through trade groups or networks.
3. Strategic Investors: Strategic or corporate backed investment funds are a growing force in venture capital community, with most FORTUNE 500 companies having an internal venture investment unit.
Strategic investors partner with startups to get a front-row seat to cutting edge tehnology in their market segment or complementary industries.
4. Government Investment funds or grants: Startups with a strong scientific or technical focus may qualify for federal, state and local grants designed to foster the development of new technologies and tech-related employment.
5. Bank Financing: For some startups, taking on debt may be a more attractive option than diluting the ownership stake of the founders or other investors through equity offerings. While traditional banks may not be a viable option for most early-stage companies, there are several players in the venture lending space who are willing to take more risk and lend to startups.
Choosing a Legal Structure
Choosing the most appropriate legal structure is an important decision that establishes a foundation to support the company’s growth and operational effectiveness as it matures.
There are different types of legal structures, each offering distinct advantages and potential drawbacks.
Decide whether to form a Limited liability Partnership (LLP) or a Company, Angel Investors and VCs generally prefer to invest in corporations.
An enterprise shall be considered as a startup only till 10 years from the date of its registration.
Turnover of the entity since incorporation shall be less than 100 crore rupees for any of the previous financial years.
Build A Brand
Your brand is one of your company’s most valuable asset. Branding is much broader than logos and tactical activities. Your logo, tagline and website are all expressions of your brand. Building a brand is all about shaping public perceptions. To do this effectively requires careful planning and execution. Here are a few steps to help you get started.
1. Define a higher purpose or brand statement– At the core of every strong brand is a higher purpose that explains that why the company exists beyond profits. A purpose is a motivating, timeless statement that outlives your tagline and growth cycles.
2. Differentiate your brand– As you define your purpose and mission statement consider how your startup is unique in solving a problem for your target market.
3. Pick a brand name– Good products, great customer experience and strong brand messaging will be most impactful to your startup’s success, but a brand name should not be overlooked. Consider choosing a short name that is memorable and invokes positive thoughts.
4. Build a visual identity– Your visual brand identity is built through the consistent use of visual expressions
Here is a list of common visual expressions that you can expect to use to develop your brand identity:
- Logos
- Stationery/Letterheads
- Advertisements
- Brochure and Sales Materials
- Presentation Templates
- Taglines
- Product Packaging
- Websites and Digital/Mobile Pages
- Business Cards
As you build your visual identity, ensure the overall look and feel and design attributes fit your brand personality.
5. Brand is experiential– Branding is more than logos and taglines. Every interaction, both passive(i.e. customer reading a website) and active (i.e. customer interacts with a sales person), shapes the overall brand perception. It is crucial that all points of interaction with the customer represents your brand.
6. Always be consistent– The most damaging thing you can do to your brand is to be unpredictable. Consumers build a brand perception based on what they’ve come to expect from your company. Be genuine and consistent in everything your company does.
A good product coupled with a well-executed brand will position your company for long-term success securing a special place in the minds of your consumers.
Leveraging the Ecosystem
Tapping into a strong ecosystem that includes venture capitalists, experienced entrepreneurs, talent and business advisors is key for startup success.
As you develop your company’s support network, keep the following in mind:
- Incubators and accelerators– At the early startup stage, incubators and accelerators can provide short term access to facilities and resources where company founders can network with other startup teams, share ideas and learn from each other experiences.
- Mentors: Experienced entrepreneurs or people with critical technical or industry experience, can provide informal guidance about your company, technology, market or other important success factors.
- Advisors: Startups maximize their chances of success when they concentrate on what they do best and refrain from trying to solve business challenges they do not have the skill-set to manage. Advisors can also introduce company founders to their own ecosystem of mentors, investors, talent and other advisors.
- Talent: While engineering talent will likely be critical, startups often need to supplement their founder’s skills in financial, legal, marketing or other specialized functions.
- Enterprises: A number of large companies and industry groups have developed initiatives to promote industry innovation and identify promising technologies. Many companies have programs to help founders with a number of resources including technology, mentors and capital
Tax Matters
Tax compliance is a necessity. An effective tax planning strategy can add considerable value to your business.
Taxation is a critical factor in the success and financial health of your business and obtaining tax advice at the earliest stages of your startup’s development is advisable to prevent early mistakes that can have a lingering detrimental impact.
Startups can apply for tax exemption under section 80 IAC after being registered by DPIIT. DPIIT registration certificate and sanction of the inter-ministerial board allow the startup to avail tax sightseeing for 3 consecutive financial years out of its first 10 years since incorporation.
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