How to raise funds for Startup Business in India

Imagine sharing your revolutionary idea in a dark room crammed with uncertainty. This is what Indian entrepreneurs had to face before 2016. 

Funding was a tough journey through an uncharted jungle that was filled with problems for entrepreneurs and investors. The money, which is essential to any business, was slowed through the red tape, and lacking adequate assistance.

Investors, however, felt the risk appeared to be too high. Finding promising startups was like looking for diamonds in a mine. The absence of a robust system meant that checking the details was ambiguous and unreliable. 

Startups had a major hurdle to overcome with an outdated system that was not able to support their new goals. 

It wasn’t only about individual problems, it affected the entire Indian startup ecosystem. It was slow to grow and the new ideas struggled. 

Few pioneers were able to get some money, and many of the best ideas did not get the chance to be considered.

Then, in the year 2016, things began to change. In 2016, the Startup India initiative appeared, promising to change everything. 

It wasn’t merely about giving subsidies but a total shift, laying the foundation for a new era of funding.

Before we discuss the events that took place following Startup India, let’s look at the process that began by recognizing the need for changes. The period before Startup India, though tough prepared us for the massive changes to come. It taught us valuable lessons on risk, resilience, and the indomitable energy of Indian entrepreneurs. 

With this story with us, let’s get into the exciting scene that is Startup India – a place where money flows freely dreams fly and the Indian Startup world is on the way to success.

What are the different stages of starting a business? financing in India

The process of starting a business beginning with a small idea to a huge unicorn, is marked by important milestones known as rounds of funding. Each round provides the funds needed to get to the next level encouraging growth and advancing the company towards eventual success. 

In India, the startup financing environment caters to the different requirements of entrepreneurs at each stage of their journey. Let’s take a look at the essential steps of funding for startups in India and learn how each round helps fuel the spark of innovation:

1. Bootstrapped:

• Consider: A lone climber climbing the first few meters with determination and grit.
• the Stage It’s where the process begins, usually using the founder’s own savings, the sweat equity of co-founders, or donations from family members and friends. The goal is to make the best use of your limited resources, testing the concept and laying the foundation for future investment.

2. Pre-Seed:

• Consider: Reaching a precarious edge, and needing a hand to ensure the foothold you’re on.
• The stage: Angel investors step in typically wealthy people who believe in the vision of the founder and offer small sums of money (typically less than $250,000) to test the concept and create the Minimum Viable Product (MVP).

3. Seed Funding:

• Consider: Securing ropes and anchors, getting ready for a more difficult ascent.
• The stage: Funding rounds for seed bring in larger sums (up up to $2,000,000) through angel investors, or specially-designed seed funds. This is when the MVP is perfected, customer trust is achieved and the company’s model gets evaluated.

4. Series A:

• Think about: Conquering a major rock face, the top in sight.
• The stage: This series marks an important milestone that sees the venture capitalists (VCs) being the main focus. The rounds be anywhere from $2 million up to $10 million, and can be used to grow the business, grow teams, as well as meet important growth metrics.

5. Series B:

• Think about: Traversing a treacherous ridge that requires a skilled guide and assistance.
• The Stage Series B investment is a continuation of the momentum from Series A. VCs are investing more money (up of $50m) to accelerate growth, expand into new markets, and establish its position in the marketplace.

6. Series C and Beyond:

• Consider: Reaching the final top, the entire world spreads out in front of you.
• the stage: The subsequent rounds, like the Series C as well as the following ones, are designed for established startups looking to be the best in their field and acquire competitors as well as prepare an initial public offering (IPO). These rounds are accompanied by even greater investment from VCs as well as Private equity companies, as well as other institutional investors.

Bonus Stage: Bridge Round:

• Think about: Encountering an unexpected crevice that requires a bridge temporarily to carry on the climb.
• The stage: The bridge round can be described as a small infusion of funding between larger rounds. It is typically utilized to fill temporary cash gap or to make use of unexpected opportunities.

Explore the essential 13 ways on How to raise funds for Startup Business in India

Equity Funding:

1. Angel investors: Imagine them as mentors of experience with their hands in their pockets. These wealthy individuals offer early-stage capital (typically less than $200,000) to exchange strategic direction and equity. They are convinced of your idea and your vision, providing an unbeatable amount of support that goes beyond money.
2. Self-Financing or Bootstrapping It’s the DIY option that relies on your personal savings, the revenue from initial sales or pre-orders to finance the initial expansion. It requires a great deal of creativity and determination, yet it provides you with complete control of the direction you take and your vision.
3. Family and Friendships: While this can be a fantastic source of support in the beginning and an emotional investment, you must be conscious of your expectations and the potential dangers. Make agreements in writing to keep your relationships solid and prevent future problems.
4. Venture capitalists (VCs): These companies are the biggest that invest larger amounts (millions in dollars) in startups with high growth potential. They provide expertise connections, connections, and access to more markets, however, they also promise large control and fast returns.
5. Crowdfunding The idea is to make investing more democratic by allowing anyone to make tiny amounts to your cause. Platforms such as Kickstarter or Groww let you build communities, spread awareness, and verify your concept before seeking bigger funding.
6. Incubators: The nurturing environment offers entrepreneurs offices as well as mentorship and networking opportunities, and even seed money. They can help you refine your business plan as well as connect you to sources, and prepare you for the next round of fundraising.

Debt Funding:

1. Banks: Traditional lenders offer secured loans to established companies that have solid financials. Although rates of interest can be less than equity options but strict eligibility criteria and collateral requirements mean they are not available to startups.
2. Non-Banking Financial Institutions (NBFCs): They offer more flexible credit options in comparison to banks, and cater to the requirements of small-scale businesses. However, the interest rates could be higher and due diligence processes is often thorough.
3. Govt Loan Schemes Many government-sponsored initiatives such as MUDRA loans provide subsidised financing for startups in certain sectors. These programs come with appealing terms and conditions however making the process of applying for loans isn’t easy.

Grant Funding Startup India Seed Fund scheme:

1. Central Government Grant: Many ministries offer grants to startups in fields such as innovation or technology, as well as social impact. Find grants thoroughly and research pertinent to your industry since competition could be very high.

1. State Government Grant: Every state offers its own unique set of grant programs that are aimed at stimulating local business. Learn about the grant programs provided by your state government, and customize your application to demonstrate the ways your business aligns with their objectives.
2. Corporate Challenge Grants: Many corporations organize innovation challenge or competitions. They award grants to startups that have won in solutions that relate to their particular industry. Be active in these challenges for exposure and fund-raising opportunities.
3. Programs of private entities: Foundations, non-profit organisations, and even startups may offer grants or other funding programs that are geared towards particular causes or social impact initiatives. Keep yourself informed of such opportunities and use your connections with their objectives to secure funds.

• Atal Innovation Mission (AIM)
• Multiplier Grant Scheme (MGS)
• Dairy Entrepreneurship Development Scheme (DEDS)
• Startup India Initiative
• Aatmanirbhar Bharat App Innovation Challenge
• Software Technology Park (STP)
• MUDRA Banks

How Your Day Job Can Fuel Your Startup

Although securing funding from outside sources is vital for many start-ups launching your business on bootstrapping at the beginning of its development is incredibly beneficial. A method that is often ignored is using the resources that you already have including your time and experience. This is how working part-time, freelance, or even full-time could help your startup build an operational prototype with momentum:

Financial Resources:

• income replacement: Make use of your earnings from work to pay for your cost of living and expenses for starting up, thus reducing the dependence on funding from outside sources.
• Start-up Seed Capital: Allocate a portion of your earnings to invest into your venture, which will cover the development cost, prototyping as well as the tools you need to be successful, and even your initial marketing budgets.

Time Management:

• Timingboxing You should allocate specific time beyond your working hours, like weekends or evenings for your business. Create a regular schedule and adhere to it to make the most of your time.
• Prioritization You can delegate work within your job to allow you to have more mental space and energy to focus on your work as a startup.
• Multitasking As much as you are able, make use of your time off to brainstorm ideas, conduct research markets, or perform smaller projects for your start-up.

Skill Transfer:

• Cross-pollination Utilize the knowledge and skills gained through your work directly to your new venture. Do you have experience in marketing? Design your startup’s message. Do you have financial analysis expertise? How do you manage your startup’s budget?
• Building Expertise Make use of your job to build upon relevant abilities that you can incorporate into your startup. For example, programming on your job will help speed up the prototyping process.
• Networking Build your network professionally with your work and build connections that can help your business later on.

Validation and Traction:

• Customers’ Feedback Invite your friends or clients in your work to become early adopters of your product prototype. Receive valuable feedback and improve your service based on actual knowledge.
• Test Market: Leverage your existing contacts and knowledge from your work to test your startup’s concept and worth proposition in your targeted market.
• Prototype Making a functioning prototype using resources and the knowledge gained from your work can draw interested investors, or even collaborators while demonstrating your passion and dedication.

Keep in mind that balancing your job and your business requires a lot of discipline and a good understanding of time management. By strategically leveraging your resources and abilities to turn your work into a platform to begin your own entrepreneurial journey.

Conclusion

It is a fact that the Indian startup scene offers many funding options, ranging from angel investors and grants from the government to crowdfunding platforms and venture capitalists. Knowing your company’s level and goals is vital in choosing the appropriate funding.

Initial Phase: Bootstrap your idea and seek advice via angel investors as well as incubators or verify your idea with crowdfunding.

Growing Stage The venture capitalist can accelerate the growth of your business and help propel your company to the top of the pack.

Beyond funding: Explore debt options such as banks and NBFCs to ensure stability and leverage grants from the government to specific sectors or social projects.

It is important to remember that financing is a continual process. The ability to think strategically, resourcefulness, and professional advice is crucial to navigating the marketplace. In the end, your success depends on your determination, passion, and firm faith in your goals. Take advantage of the possibilities, adjust to the changing environment, and be a part of this Indian business scene!