How to raise funds for startup
For an entrepreneur, raising funds for a startup may seem very difficult because the competition for funds is gradually increasing each day, your chances of securing investors significantly slims. Following are the ways by which an entrepreneur can raise funds for his/her startup.
INITIAL STAGE :
- Bootstrapping: Bootstrap is a situation in which an entrepreneur starts a company with little capital. An individual is said to be boot strapping when he or she attempts to build a company from personal finances or from the operating revenues of the new company.
2. Friends & Family: If it is not possible for you to bootstrap, you can turn towards your friends and family to provide you initial funding for your startup.
3. Crowd-Funding: Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. Crowdfunding makes use of the easy accessibility of vast networks of people through social media and crowdfunding websites to bring investors and entrepreneurs together.
4. Accelerators – cohort- based programs, that include mentor-ship and educational components and culminate in a public pitch event.
5. Incubators — Incubators are typically institutes which provide space and other equipment to startup teams to go ahead and work on developing their product.
6. Angel Investors: They are affluent individual who provide capital for a business startup, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors invest online through equity crowdfunding or organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies.
GROWTH/SCALE STAGE :
7. Venture Capitalists: Once your startup is off the ground and starts growing, you will most likely seek venture capital. Approach only those VCs who fund startups in your sector.
8. Customer Advance — Once a company has a well-accepted product in the market, it can take advance payments from its customers for using the product or service. This advance works as an interest-free loan for the startup.
Try to create a product or service that is so compelling for the customers that they do not mind paying a month’s or even a year’s advance for using the same.
So, basically its the responsibility of an entrepreneur to seek guidance and then wisely make decisions on how and whom to approach for funding depending on which stage of the startup you are in. Its not very tough to raise funds it just requires patience, proper analysis and finally your ability to convince the investors to put in their money in your startup.
