Lack of funding is definitely not the major reason why
startups failed but turn to be one of the common reasons. Money is the
bloodline of any business. That’s why, at almost every stage of the business,
entrepreneurs find themselves asking – How do I finance my startup?
Every
business has its own financing needs; startups have a lot of funding options
besides bank loans. There are even options outside of business credit cards and
borrowing from friends and family, and beyond the traditional bank loans, some
options are:
Venture capitalists
Venture capital (VC) in
India was known since the nineties which now have successfully emerged. Venture
Capital Financing is where an outside group takes part ownership of the company
in exchange for capital. The percentages of ownership to capital can be
negotiated, and are usually based on a company's valuation.
"Best fit
when anticipated for demonstrated high growth potentials, and a competitive
edge of some kind, like a patent or captive customer."
The other benefit is
if you go with a VC firm, you will usually receive more than just capital,
as some firms provide entrepreneurs with additional resources like hands-on
assistance from the firm's network of advisors and accelerators.
List
of Most Attractive Venture Capital firms://inc42.com/wp-content/uploads/2018/09/eBook_Top-58-Venture_Capital_Firms_India.pdf
Partner financing
A strategic
partnership (also see strategic alliance) is a relationship between two
commercial enterprises, usually formalized by one or more business contracts. In
which one firm is helping the other firm to expand its market to other marketplaces,
by helping with some expertise.
With strategic partner
financing, another player in your industry funds the growth in exchange for
special access to your product, staff, distribution rights, ultimate
sale or some combination of those items, sometimes strategic funding can
be royalty-based.
For example IBM offers
Strategic Partnership Finance to relevant IT clients, such financing is
typically offered to customers, salespeople, and marketing programming that you
can tap right into, assuming your product or service is a compatible fit with
what they already offer, which would surely be the case or there would be no
incentive for them to invest in you.
Angel investors
An angel investor is an affluent individual
who provides capital for a business start-up, usually in exchange for
convertible debt or ownership equity. Angel investors usually give support to
start-ups at the initial moments and when most investors are not prepared to
back them.
This loan is more about the personal interest
of the investor in your business model and you leverage your idea on their
capital."
Finding an angel investor can also be good in
a similar way that gaining funding from a venture capitalist can be good,
albeit on a more personal level.
Most Active Angel Investors in India: https://www.mensxp.com/work-life/entrepreneurship/43622-a-list-of-40-plus-most-active-angel-investors-in-india.html
Factoring/invoice advances
If you are a small business looking for working
capital, factoring, a service provider will front you the money on invoices
that have been billed out, factoring company can afford to wait 45 to 75 days
to get paid, which you then pay back once the customer has settled the bill.
This way, the business can keep going while waiting for customers to pay their
outstanding invoices.
These advances allow companies to close the
pay gap between billed work and payments to suppliers and contractors. In 2009,
SIDBI, in collaboration with NSE set up the first e-discounting platform for
MSME receivables.
Crowdfunding
Crowdfunding on sites such as Ketto, Kickstarter
and Indiegogo can give a boost to finance a business. These sites allow to pool
small investments from several investors instead of seeking out a single
investment source.
Grants
Businesses focused on science or research may
receive grants from the government.
Now
determine your need and make a plan.
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