Today the discussion around the table is going to be on startups. Before getting into the corporate meaning of startup lets break what exactly it is. Startup = Start + up, just think of the alluring word, the word itself has it’s “up”. Up simply oughts to put you to the higher level that is a start that will put you up is “the startup”. Startups are the newly established companies. A startup is an infant company that is beginning to develop. It mainly refers to companies offering a product or service which has not been currently offered anywhere else in the market or offers something having an inferior existing market.
In recent times, India has become a breeding ground for startups. Some of the seedlings are flourishing while some fail to germinate. Basically, if an investor invests in a startup and it flourishes then ultimately the investor reaps out the profit from it. Similarly, if it fails to prosper it gives a setback to the investors. The major challenges that startups face are of funding. Let’s talk about the types of startups we generally come across-
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Types of Startups
Startups can be classified into two groups-
Capital Intensive Startup
Capital intensive businesses are those which requires ample capital. For example, a manufacturing company requires plant, machinery, labour and thus they need a huge capital.
Non-Capital Intensive Startup
On the other hand, these are the business which is not capital intensive. For example, service-providing businesses which require very minimal capital.
Thus, we can conclude that whether it is a capital intensive or a non-capital intensive startup, it requires funding to expand and achieve their prospectives and goals.
Ways to Raise Funding for a Startup
It is important to acquire funds to sustain the startup business even if it a non-capital intensive startup. The payment to personnel, advertisement, marketing, etc, all require funds. But the question arises, “How to raise funds for startups?” and that’s exactly what we are going to talk about.
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Raising Funds from Savings, Family, and Friends
Raising funds at an early stage is difficult for the startups as they are surrounded with uncertainties and so some investors might hesitate to invest in it. The first and the most reliable funding for a startup is the savings of the individual. Family and friends can be the second option to step on. 90% of the startups are contingent on this yardstick of funding.
Angel investors are becoming the backbone for upcoming startups. They generally boost up to the early-stage startups. They invest up to one million dollars that provide funding of 7 to 8 crores rupees in early blooming startups. And in return take an equity stake from the startup. Angel investor are individuals who, as per their capacity, directly invest their money in startups. They form groups and collectively invest in startups. Mumbai Angels, Bengaluru Angels, Indian Angels, Chennai Angels, etc are some of the angel networks.
One can apply to the angel group through the website of each angel group. One can check out the criterion their startup falls in and apply there too.
If one wants to raise funding from a particular angel investor then one needs to contact the particular investor. The best medium that builds a bridge between the angel investor and upcoming startups is LinkedIn. Most of the angel investors are very active on LinkedIn, one can approach them through the platform.
If you are thinking of business loans from the bank then they will require collaterals. And also banks don’t entertain early-stage startups. There is government loan such as Mudra loan which provides loans to the startups. The best part about the Mudra loan is that you don’t have to keep collaterals nor you require any processing fee for it. Mudra loans have three categories :
Sishu loans are basically for those who are going to give a start to their business. Shishu provides loan up to rupees 50,000.
It provides the loan to the businesses which are already in existence and reaping revenues. Kishor provides a loan of rupees 50,000 to 5 lakh.
It provides the loan to the businesses which have executed their business effectively and are going to expand it. Tarun loan provides a loan of rupees 5 to 10 lakh.
VC that is venture capital usually provides funding exceeding 1 million dollars. But generally, they do not provide funding to early-stage startups. One can only apply for VCs if the startups seem to be on track and start reaping the profits.
Some specialized banks and venture debt funds provide venture debts to startups which have already raised fundings from venture capital. Here the money that they raise from the venture is to be returned along with interest. Venture debts too provide with the plus point of non-collateral regime.
Competitions and Fellowships
You all might have heard of units where startup founders preach in front of some investors and if the investors like the ideas then they invest in it. Such units also run in India, one only needs to be updated about such units. One such event is organized by IIT Bombay’s e-cell. The TTMM aka The Ten-Minute Millionaire by e-cell where you have to pin your ideas in front of investors. This event may reap your startup with funding of 16 lakh or more.
There are many fellowships which provide financial aids to the startups. Thiel fellowship is one of them. Thiel fellowship is the fellowship of Peter Theil, the billionaire entrepreneur and founder of PayPal. It is a two-year program that provides you with the guidance and $100000 i.e, 70 lakh rupees. If you fall in the age group of below 23 then you can apply to the fellowship and if you are selected in the fellowship you have to drop your college for 2 years. Ritesh Agarwal founder of OYO Rooms was selected for Thiel fellowship, and OYO rooms stand as a great example of it. Only 1% of the mob that approaches Thiel fellowship finds the position to fit in it.
Take risks. Don’t waste time avoiding failure. Startups are really a long term game with thrill and adventures at each point. Startups can definitely put you up to that “UP”. But before that, you need to be an executor who dares to execute the idea. Let the spark in you ignite into a fire and light the future walls inscribing your bold name. Wish the plot helps you build a base for your startup. Comment if you want to know more about startups sphere.