How to raise funds for startup

Chase the vision, not the money; the money will end up following you. But the real question here is – how? For a startup to sustain, both ideation and capital go hand-in-hand. Most of the startups fail at an early stage because they are not able to generate the right amount of capital to fuel and sustain their idea. Timely availability of adequate funds can either make or break a business.
Here are some useful guidelines that might help you get your startup off the ground –

  1. Bootstrap your startup

Tap into personal savings to build your startup. It could be a small sum of investment that is enough to get you started. Or use credit cards to buy initial equipments and cover setup cost. Remember when you bootstrap you are actually “booting-up” your brand and it’s important to be careful of every single decision.

Warning – Don’t use it all. Keep emergency funds.

  1. Crowd Funding & Angel Funding  

There are basically two types of crowdfunding –

Investment Crowd funding is selling of equity in the company and Rewards Crowd funding involves the selling of product or goodwill. Some of the crowd funding platforms include kickstart, FunDable, Milaap and many more. Your choice of platform depends on the target audience.

Crowd funding even helps in increasing brand visibility and helps to attract additional investors for subsequent funding rounds.

Angel investors are the ones who invest in your business by providing seed money, banking on the company’s value over time. It’s like providing a loan but they don’t expect it to be repaid rather they rely on increasing the startup’s net worth over time.

Warning – When looking for funding don’t just look for the cash, look for the right people.

  1. NBFC Companies  

NBFCs are always good for the economy since it mobilizes the funds by transforming the savings into investments and utiliizing these funds to provide loans to the companies.

From attractive rates of interest to making the entire process very simple, P2P(peer to peer) platforms have quickly become very popular with small businesses, proving to be a better choice to raise funds. NBFC works on business related to loans and advances, acquisition of shares, stock, debentures, securities issued by government or local authority. Few reasons why NBFC’s are better at providing loan than banks – better interest, less stringent rules, quick processing.

Warning –  Make sure the NBFC holds a valid certificate of registration.

  1. Mudra Loan for Startups

The government of India stepped in with the scheme Pradhan Mantri Mudra Yojana in April 2015, which provides finance and loans to small businesses through NBFCs- Micro Units Development and Refinance Agency or MUDRA. The offerings of Mudra loan for startups is classified into three categories;

  • Shishu: This loan is provided to startups in their initial years and can be furnished up to an amount of INR 50K.
  • Kishore: This category of Mudra loans in the bracket of INR 50K to INR 5 Lakh.
  • Tarun: Fund requirements over INR 5 lakh, but under INR 10 lakh.

To encourage women entrepreneurs, the loan scheme has additional benefits and special interest rates.

  1. Incubators and Accelerators

Startup incubators are occasionally referred to as “business schools”. Leading incubators take entrepreneurs with promising ideas, and teach them how to run a successful startup. A primary function of accelerators is connecting startups with mentors, guidance, resources, and funding. These aren’t just space, or resources providers, they help you undertand the nitty gritties of a startup life!

Warning-  Be optimistic. It takes time for an idea to mature into reality.