Rakesh came up with the greatest idea for the business. He sat one day, wrote his idea down on paper. He imagined how he would look like as a big businessman. The growth, the big building, the big house, the car, and the team – all his dreams came in front of him and once. After waking up, he went ahead and called his friends.
They all loved the idea. But no one wanted to fund it.
He just sat there – sad and wishing for a miracle. Something that would help him get funds for his awesome idea. He wasn’t about to let it go and give up.
Not letting go and keeping persevering through obstacles is the key for any business to grow. It’s this perseverance that has given rise to many businesses. But, how did they all to it? How so many people did get funding for start-ups in India? All the answers boil to a simple guide.
How to get funding for a startup in India
Every start-up starts small. It does not matter how novel or great the idea is, every entrepreneur needs to generate funds. Funding is not just about merely money. It’s also about the trust of the investors. If you have a lot of funds, it means that you are already marketing yourself as firm that people can put their trust in.
So what’s the secret? The secret guide is made up of 5 options:
- Government funding
Bootstrapping means funding your company with your own money. It’s a way to start a business from scratch with your own money. And once you generate the first sales, using that money to fund your business. It’s an option of funding all the entrepreneurs have. However, it’s also the most difficult one to follow. There are three keys to successful bootstrapping:
- Focus on the cash inflow: Keeping a laser-like focus on money coming into your business. You should remember that this cash flow is not to be used for profits. Yes, you can use some of the money to pay the bills, but most of the money should be spent on leveling up the business.
- Starting with a small staff: Bootstrappers keep a small staff to make sure that the lack of cash inflow doesn’t burden the business development.
- Direct Approach: eCommerce is a way to directly approach the customers. There are no intermediaries involved so, you need to approach the customers directly.
Loans are, have always been, and probably always will be the biggest source of funding for business in India. You can take a reasonable amount of loan from the bank to finance your “growing” business and repay the money within a specific tenure.
The reason I quoted ‘growing’ is to tell you that debt work best when you have already bootstrapped your business. That is if you have put your money in your own business and are almost generating profits. That being said, it can be quite time-consuming to get bank loans. However, there is a solution for that: the Startup India Initiative. Register your startup under this initiative and the banks will be more willing to give you a loan.
Give part of an ownership
The best form of business organization in India is a Private Limited Company. It suits the need of every entrepreneur. However, there is one issue with it: you can’t directly get funds from the general public. This makes general funding a bit of an issue,
That being said, there is a solution. You can give equity. It means sharing part of the ownership of the company in return for money. It’s where Venture Capitalists or VCs come in. They are businessmen who are in the business of investing. They can own a part of your company and can give you funds. In return, they take the profits of their shares.
Finding VCs to invest isn’t the way. The key to getting venture capitalists to show interest in your business is to tantalize them through a well-formed pitch deck. It’s a presentation of sorts that you’ll need to find a way to build.
Remember when I said that the general public can’t directly give you funds? Well, through crowdfunding, you can cure this issue. Crowdfunding is a technique to fund any project or business venture by raising small amounts of money from a crowd. It’s a form of alternative finance. The basic idea is to take small loans from each member of the crowd.
P2P (peer to peer) Lending is something that has been gaining a lot of traction in India since 2016. It’s a form of crowdfunding done through P2P platforms. It has become a new way of getting funding for a startup for many entrepreneurs. You should too try it out. The risk is not much and the possibilities are endless.
Government funding is a reason that there are many entrepreneurs getting ready to conquer the startup world. Many start-up aspirants have now grown fearless because they know that the government will help them. Why is that? It’s because the government of India wants you to be a successful entrepreneur.
The government have created several schemes like Pradhanmantri MUDRA Yojana, Kerala Self Entrepreneur Development Mission, Maharashtra Centre for Entrepreneurship Development and much more.
The secret of getting funds for your startup boils down to three points: Equity, loans and government funding. Understand these secrets properly and see your entrepreneurial dreams soar higher and higher.