Startups are young companies founded to develop a novel product or service, bring it to promotion and make it irresistible and irreplaceable for patrons.
Rooted in innovation, a startup aims to remedy deficiencies of existing products or create entirely new categories of products and services, disrupting entrenched ways of thinking and doing business for entire industries. This is why many startups are known as “disruptors” in the industry.
Startups are businesses that want to disrupt industries and alter the planet and bang all at scale. Startup founders dream of giving society something it needs but hasn’t created yet generating eye-popping valuations that result in an initial public offering (IPO) and an astronomical return on investment.
How Does A Startup Work
On a high level, a startup works like several other companies. a gaggle of employees works together to form a product that customers will buy. What distinguishes a startup from other businesses, though, is the way a startup goes about doing that.
Regular companies duplicate what’s been done before. Potential restaurant owners can franchise existing restaurants. In other words, it works according to existing patterns of how businesses work
A startup aims to form a wholly new template. within the food industry, that will mean offering meal kits, like Blue Apron or Dinnerly, to produce the identical thing as restaurants a meal prepared by a chef but with convenience and selection that sit-down places can’t match. In turn, this delivers a scale individual restaurants can’t touch: tens of variant potential customers, rather than thousands.
Raising Funds For A Startup In India
According to a recent study, over 94% of recent businesses fail during the primary year of operation. Lack of funding seems to be one of the common reasons. Money is the bloodline of any business. The long painstaking yet exciting journey from the thought to revenue-generating business needs a fuel named capital.
Now, once you would require funding depends largely on the character and kind of the business. But once you have got realized the requirement for fundraising, below are a number of the various sources of finance available.
1) Bootstrapping Your Startup Business:
Self-funding, also called bootstrapping, is an efficient way of startup financing, especially after you are just starting your business. First-time entrepreneurs often have trouble getting funding without first showing some traction and an idea for potential success. you’ll invest from your savings or can get your family and friends to contribute. this can be easy to boost because of fewer formalities/compliances, plus fewer costs of raising. In most situations, family and friends are flexible with the rate of interest.
2) Crowdfunding As A Funding Option:
Crowdfunding is one of the newer ways of funding a startup that has been gaining plenty of recognition lately. It’s like taking a loan, pre-order, contribution, or investment from over one person at an identical time.
In crowdfunding, an entrepreneur will put up a close description of his business on a crowdfunding platform. He will mention the goals of his business, plans for creating a profit, what quantity of funding he needs and for what reasons, etc. and so consumers can examine the business and provides money if they just like the idea. People who donate money make an online appointment and pre-purchase items or promise to donate. Anyone can donate money to help a business they truly believe in.
3) Get Angel Investment In Your Startup:
Angel investors are individuals with surplus cash and a keen interest to take a position in upcoming startups. They also add network groups to collectively test proposals before investing. they’ll also offer mentoring or advice alongside capital.
4) Get Risk Capital For Your Business:
Venture capital funds are professionally managed funds that invest in companies with great potential. they sometimes invest in a very business against equity and exit when there’s an IPO or a sale. VCs provide expertise, and mentorship and acts as a litmus test of where the organization goes, evaluating the business from the sustainability and scalability point of view.
5) Get Funding From Business Incubators & Accelerators:
Early-stage companies may consider incubator and accelerator programs as funding options. Found in almost every major city, these programs assist many startup businesses each year. It is used interchangeably, but there are some basic differences between the 2nd term. Incubators are sort of a parent to a baby, who nurture the business by providing shelter tools and training, and network to a business. Accelerators are more or less the identical thing, but an incubator helps/assists/nurtures a business to run, while an accelerator helps to run/take an enormous leap.
6) Raise Money Through Bank Loans:
Normally, banks are the primary place that entrepreneurs go when wondering funding.
The bank provides two styles of financing for businesses. One may be a capital loan, and therefore the other is funding. assets loan is the loan required to run one complete cycle of revenue-generating operations, and therefore the limit is typically decided by hypothecating stocks and debtors. Funding from the bank would involve the standard process of sharing the business plan and also the valuation details, together with the project report, supported by which the loan is sanctioned.
Almost all banks in India offer small business finance through various programs. as an example, leading Indian banks – Bank of Baroda, HDFC, ICICI, and Axis banks have quite 7-8 different options to supply collateral-free business loans.
7) Govt Programs That Provide Startup Capital:
The Government of India has launched a ten,000 Crore startup fund within the Union budget 2014-15 to boost the startup ecosystem in India. to spice up innovative product companies, the govt. has launched the Bank Of Ideas and Innovations program.
Government-backed “MUDRA (Pradhan Mantri Micro Units Development and Refinance Agency Limited)” starts with an initial capital of Rs. 20,000 crores increase the benefit for about 10 lakh SMEs. you’re purported to submit your business plan and once approved, the loan gets sanctioned. You get a MUDRA Card, which is sort of a MasterCard, which you’ll be able to use to buy raw materials, other expenses, etc. Shishu, Kishore, and Tarun are three categories of loans available in the promising scheme.
Also, different states have come up with different programs like Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Center for Entrepreneurship Development, Rajasthan Startup Fest, etc to encourage small businesses.
SIDBI – Small Industries Development Bank Of India also provides business loans to the MSME sector.