Knowing more about Startups: How to fund them?

More than 90% of startups fail because of lack of funds. Any business runs on capital and that is what most entrepreneurs are found looking for. If you are someone who plans to start a new business or are looking for new options to fund your existing startup, these funding options can make your job easier:

Self-funding

Or bootstrapping is the most common and easiest way of setting up a new business. Many first time entrepreneurs have a hard time raising funds from outside sources and hence, have to rely on themselves, or family and friends for at least the initial funding of their startup. This method of funding also has many advantages- the pressure is less and the interest rates are usually less or zero.

Crowd-funding

Crowd-funding is when an entrepreneur puts forth his/her idea of business on a crowd-funding website (including all the details like the goals, expected profits, required funding etc) and then the consumers reading it could help the entrepreneur by pre-ordering the product or by giving a donation.
Crowd-funding has now become a very popular means of generating funds as it also markets the products and can be also used in cases where the entrepreneur is not sure about the market value of a product. It also eliminates the involvement of professional investors and brokers by putting investment in the hands of common people. At the same time, collecting funds through crowd-funding is not very easy as there is a lot of competition and it is difficult to convince people with just a few pictures and descriptions.

Angel Investors

As the name suggests, angel investors are the investors that have surplus cash and are interested in funding startups. They may also provide mentoring along with the capital. They invest in your company expecting a certain percentage of equity. If they believe that your idea of a startup can work, they take the risk of investing hoping to get greater returns.

Venture Capitals

Venture Capitals are for those companies who are past the startup phase and are generating revenue of some kind. VCs generally invest in companies that have high potential and hence, are willing to invest more. VCs, however, have a short leash when it comes to company loyalty and often look to recover their investment within three to five years of time frame. VCs demand bit more of flexibility from the company as they could demand a lot of control or compromise.

Business Incubators and Accelerators

Programs like these help hundreds of startups every year. They help, assist, mentor and guide startups from its very early stages and run for about four to eight months. Incubators help in running a startup while accelerators generally help them take a giant leap.

Winning contests

A lot of contests are being held these days that are hosted to help startups. Winning such contests helps in two ways- the winning title attracts investors and convinces them of your ideas, or, provides (the entire or a part of the required) capital.

Bank loans

The bank provides two kinds of financing for businesses. One is working capital loan, and other is funding. Working Capital loan is the loan required to run one complete cycle of revenue-generating operations, and the limit is usually decided by hypothecating stocks and debtors. Funding from a bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is sanctioned.

Govt programs for startups

The Government of India has started many programs like ‘Bank Of Ideas and Innovations’ program and Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA) to boost the startup environment in India. 

While there are a plethora of fundraising options to choose from, it is important to choose the right ones according to the nature of your business.

Similarly, it is equally important to choose the right investment options. Cedrus Wealth Partners is a company that thrives to provide you with the best financial and investment advices. Visit Cedrus Wealth Partners now and make your journey of entrepreneurship less risky.