10 Steps Sources Of Fund Raising For Startups

Business demands an equal balance of both idea and investment. Convincing the investor about the grit and tenacity of the business proposal is a tedious process.

It needs proper research, planning, and execution from the entrepreneur’s end to gain the confidence of the investors.

Moreover, a proper investment cycle can achieve the goal of developing product prototypes, check the market, generate investor’s interest, and also a source of future funding.

Entrepreneurs with the savviest of ideas also depend on the experienced investor to reach the goal within the desired frame of mind.

The funding goals, objectives, and utilization should be part of business documentation. Investors should be convinced regarding the scale and potential to reach new heights in the ever-growing global market setup.

There are various sources of fundraising, which the startup units can check before planning their business proposition. Some of the sources are Fund Raising:

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Customer is the Best Investor

Business is all about realizing the demand from the end of the customer. The business unit which can satisfy and gain the trust of the customer is bound to make recognition in the market.

Solve the burning problem of the customer and urging the same for advance payment to deliver the product or service can act as a fundraising stunt for the startups.

This advance payment will serve as an investment for the growing company, without the risk of giving shares or interest on the invested amount.

Moreover, satisfied customers can help in marketing by referring to the company’s name to their known circle. The company shares will be sole with the owner with no financial risks.

Self-Fund and Personal Savings

Investors generally check whether the owner has invested in their startup. This is the trust gaining act, this stunt can help you gain the trust of the investor and gain the investment.

Moreover, it delivers a positive message to the investor about the tenacity of the owners for this project and the entrepreneur also gets dedicated because of the involvement of the personal savings.

Negligence can cause huge losses, which they will never let happen because of the involvement of personal funds and savings.

Peer-to-Peer Lending

Friends and family can also invest in the startup idea if they desire to do so. Moreover, there is no need to give interest, or percentage of company shares to family and friends.

Lack of professional relations reduces the stress about returning the payments with the proper interest amount.

One can gather small amounts from a group of friends or family members and collect the total amount needed for the business setup.

There is no risk for documentation, and this way is an easy and also less time-consuming way to accumulate the required amount. 

Crowd Funding

This concept allows startups to collect the required finance in petty amounts from a major section of society.

Therefore, this doesn’t become a burden to both parties in the investment relation. The fund is easily raised and the business setup cycle starts within no time.

The advantage is free of cost marketing to a larger customer without the risk of heavy interests and payments.

Angel Investment

Startups can get the seed capital, that is if there is no revenue but a strong idea and belief in that idea, angel investment is a perfect choice.

One can get access to these angel investments in various events, online platforms, angel community, focus groups, and fields.

Moreover, friends and family, fundraising advisers, wealthy individuals, and such personalities can also be the Angel investor for the startup.

You only have to share-flow, that is give a small portion of the company’s share without a massive outflow of money.

There is no EMI as well as interest pressure on the business and the individuals involved.

Accelerator and Incubator

This concept offers overall guidance to start the business setup. They provide office space and resources which are the primary needs for any business.

Moreover, some mentors can advise and guide them to reach their desired goals. There are technical and marketing teams to handle the business operations smoothly in this digital market scenario.

Therefore, they become a part of you and your company by taking a certain percentage of share in return for all the investment and effort.

Accelerator and incubator thus help you witness your dream idea and turn it into a growing business project.

Vendor Finance

There are many instruments in this Vendor finance process like- debt instrument, equity, instrument, trade credit, customer enablement process.

These instruments help you to get investment without worrying about the interests and payment to the investor.

Debt and equity are common processes of using the company shares and raising the fund. In the credit and enablement process, various financial organizations come and assist you to gain the required amount for company setup with EMI payment options.

Therefore, vendor finance or purchase order finance ensures profit of all the levels starting from investor to the startup company.

Also Read: HOW TO START BUSINESS NO MONEY

Bill Discounting

The startup uses the bill that they issue for the customer as a means to gain loans from financial organizations like banks, credit houses, etc.

This technique ensures valid proof about the processing of the business idea. The financer, therefore, offers the amount to the startup without taking debt or selling equity.

The customer can opt for an easy payment option, the businessman can enhance the sales and gain more profit, and the financer can earn the interest on the investment.

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Venture Capital and Venture Debt

Angel investors assist startups that require investment within 50 lakhs, but they can’t invest in bigger projects. Venture capital is the solution to the business units which requires a massive investment to ensure growth.

Venture Capital takes a small percentage of your share in your company and helps the company to grow to earn more from the shares.

High net worth individuals, venture firms, and other such units invest in the established business models and accelerate the growth.

Therefore, no property guarantee or payment of interest is needed on the part of the businessman.

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Initial Public Offering

IPO or Initial Public Offering is a process where shares of a private corporation are offered to the public in new stock issuance. Therefore, the business can raise funds from public investors and gain maximum profit from it.

The startups obtain the required capital by offering shares through the base level market. This is an exit strategy for the founders and investors of the company.

The company shows its interest in this process after gaining a certain maturity or growth in the field. They should be aware of the benefits and responsibilities of public setup and then choose the path.

An increase in transparency and share listing credibility helps to obtain the best from the borrowed funds. 

Apart from all these funding sources, there are more ancillary methods like- Mudra Scheme, Micro Finance, Government Funding Initiatives, Credit Guarantee Fund Transfer For MSME, SIDBI Scheme, Sewa Sahakari Bank, etc.

Therefore, startups should be aware of the sources and work on their idea to achieve goals and success. Therefore, starting from small scale to large scale business, fundraising is an essential step to gain recognition in the global platform.

Also Read: 7 Strategies To Grow Your Business

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Ashutosh Chatterjee
I am Ashutosh Chatterjee. I am an Economics Hons student and a part-time content writer. I believe in enhancing my skills through hard work and consistency. My passion is reading books and taking some amazing photos.
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