Do you have an idea that you think can improve people’s lives? Planning to launch your startup? Are you inquiring about funding for a startup? A startup is a business model that drives innovation and economic growth in society. These business models introduce new types of products and services each year.
India has transformed into one of the leading startup capitals of the world, with a significant ratio of startups. According to the surveys, there were approximately 50000 startups in India in 2018. And the number grew by 8000 to 9000 in just a matter of a year. With a higher number of startup successes, India has been on the top of the list for many investors. In fact, according to statistics, India stands second with 8,301 startups in the world. However, just having an innovative idea for a startup is not enough. Careful planning and pioneering approach are important to make sure that your startup doesn’t end within the first year of operation.
Funding for a startup is an extremely significant aspect in line with meeting the vision of a business. Both fundraising and funding for a startup are fundamental for the growth of a startup. There are various stages of funding. The first step of funding is popularly known as seed funding. Most of you, who are planning to launch a startup might have heard about it. But do you know the various ways to get funding for startups? If you have been searching for the best way to get funding for a startup then you have come to the right place. In this article, we will walk you through various ways to get funding for startups.
Checklist For Raising Seed Funding
Before heading towards some of the best ways to get funding for startups, your idea must meet certain conditions or terms to raise seed funding for a startup. Below we have mentions those terms or conditions:
- Dynamic market opportunity
- Fill the market gap
- Team’s execution on coordination
- Traction of the firm
- Investor relevance
- The X-factor
The Best Way To Get Funding For A Startup
Below we have mentioned some of the best way to get funding for a startup:
1. Go for Crowdfunding
In simple words, crowdfunding is taking a load, pre-order, or investments from more than one person at the same time. It is one of the latest ways to get funding for startups and has gained a lot of popularity. However, crowdfunding is a competitive platform to earn funding for a startup. So unless your business is solid and can gain the attention of the average consumer just with description and images, you may not find crowdfunding useful to you.
In crowdfunding, an entrepreneur will put up a detailed description of their startup on a crowdfunding platform. They will have to mention the goals, profits, how much funding will be required, etc. after this, the consumers can read about their startup and give money if they like their plans and ideas. Anyone can contribute money towards helping a startup that they believe in.
One of the best things about crowdfunding is that it can also generate interest among consumers. Hence it helps in marketing your product along with financing. Moreover, it cuts out the professional investors and brokers by putting funding in the hands of consumers. Some of the popular sites available in India for crowdfunding are CatapoooLt, Ketto, Indiegog, Wishberry, Fundlined, etc. In the United States Kickstarter, RocketHub, Onevest, and GoFundMe are some of the popular sites for Crowdfunding.
2. Bootstrap
Bootstrap is also known as self-funding. This method is a great way of funding for a startup if the initial business requirement is small and when it is hard to convince others of your startup ideas and visions. Further, the bootstrap method will allow you to keep a record of your revenue as well.
In bootstrap often investors will ask for traction before investing. The initial round of self-funding allows you to prove the feasibility of your idea and build confidence in the investors for further funding.
3. Venture Capitalists
Venture Capitalists or VC offers you professionally managed funds who are looking for startups that have success potential. One of the best parts of Venture Capital investments is the expertise and monitoring that they bring along. Normally, Venture Capitalists invest in equity till the startup releases its IPO or is acquired. Venture Capitalists usually look for startups with good enough traction and a pretty strong team. If you plan on opting for Venture Capital funding, you might have to be flexible enough to take their inputs and accept the close monitoring.
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4. Angel Investment
In Angel Investment individuals with surplus cash look for investing in promising startups. Once the startup grows into its potential they earn its share, sometimes they expect as high as 30% equity as well. They can either work alone or together in a network to screen startups with high potential. Although angel investment comes with an issue of high-interest expectations and lesser investments when compared to Venture capitalists. But it is important to note that, few famous organizations like Google, Yahoo, and Alibaba started their startups with Angel investment.
5. Incubators
This method of funding generally provides small seed investments to your startup. Incubators offer services such as office space or management training for startups that are at a very early stage or the idea stage. Most of the incubation programs do not take equity from the startup and offer support beyond just funding. It helps in shaping the idea of a startup and helps in solidifying the startup products and services to be a market fit.
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6. International Philanthropic Impact Investors
If you are planning to set up a business that addresses a social issue, then you are alone if you wonder how to get seed funding for a startup like this. This is where such startups could approach Philanthropic Impact Investors. These investors act as seed investors for businesses with social impact. One major advantage of this method of funding for a startup is that the expectations are lesser than VCs as this is a source of philanthropy for the investor and a business deal.
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