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Vipashvi Agnihotri

“ When looking for funding, don’t just look for cash. Look for the right people”
-Jodie Fox (Founder of Shoes of Prey)


The biggest question that comes to the mind of an entrepreneur (be it a professional or an amature one) is : “How do I get funding for my idea?”. Before we answer that,let’s understand the meaning of “funding”.Funding refers to the money required to start and run a business. It is a financial investment in a company which is used for almost every aspect of the working of an idea, beginning with product development to the sales and marketing upto the recovery of profit.
So, coming back to the question, how to get funding? Here are some steps you should follow to get the best out of your search for funding

FORMULATE THE NEED FOR FUNDS

For this, have a detailed financial and business plan ready before approaching the investors.The major areas that require funding include:
  • Product development or website/app development
  • Human resource
  • Raw materials
  • Working capital
  • Raw materials
  • Licenses and certification
  • Marketing and sales
  • Admin and office development
This way you would have precise numbers with you.

UNDERSTAND THE DIFFERENT MODES OF FUNDING
There are three modes of funding: Equity funding, Debt funding and Grants.
1.Equity funding: This is the type of funding where the investor is more involved in the business model and has a goal greater than just earning some profit. Such investors may prefer to involve themselves in the decision making process and there is no concept of repayment of the invested money though the investor has a share in the profit. Examples of equity fund investors are: Self financing (bootstrapping),Family and friends,Venture Capitalists,Angel Investors,Incubators and Accelerators,Crowdfunding.
2.Debt Funding: Requires the invested funds to be repaid with interest within a stipulated time period. They have very little or no involvement in the decision making of the startups. Sources include:
i. Banks and Non-Banking Financial institutions - they provide pre designed loan programs to startups based on various categories.
ii. Government loan schemes; These are less sought after ones but can actually prove to be beneficial as the govt. Provides a number of perks to young and budding startups. Ex. CGTMSE, Mudra Loan and StartUp India.
3.Grants: If you are planning on running a startup related to Charity and Social Work, then grants are the best way to raise funding as they dont seek any repayment or share in profit or rights in decision making.

GET GOING ! HERE’S A LIST OF STAGEWISE FUNDING SOURCES FOR YOUR IDEA

IDEATION
Also known as the Pre-Seed stage, this is that point when all you have is an idea that you wish to bring into action. The amounts of funds that you require at this stage is usually small.Following funding sources are preferred at this stage:
1. BOOTSTRAPPING: Simply put, self-funding. You may use your bank savings to give a push to your plan if you have enough resources.The risk factor is high but if you are confident enough,it can prove to be a good idea.
2. FRIENDS AND FAMILY: Seeking help from family proves to be quite helpful as they don’t demand a huge equity(profit sharing) and also don’t pressurise you for an early repayment.Also, a good load of well wishes comes complimentary :)
3. PITCHING EVENTS : Just like our very own Startup Conclave, a number of events , completely dedicated to funding and supporting budding startups are organised at times and if you are worthy enough these events can prove to be of great help !

VALIDATION
This is the point where you have tested your idea on smaller, basic grounds and wish to enter the ‘Market’.The funding sources utilized at this stage are:
1. Angel Investors: They invest their money into high potential startups in return for equity. India Angel Network is a good example of this type.
2. Crowdfunding:This can prove to be highly effective if your idea is strong enough to gain attention from a larger crowd. Online platforms like KICKSTARTER and INDIEGOGO have made it butter-smooth to raise a truckload of funds for your startups.
3. Govt. Loan Schemes: Here comes a very safe and secure funding source for your startup.The Govt. provides collateral-free loan schemes to young entrepreneurs which include projects like Startup India and Mudra Loan.

EARLY TRACTION AND SCALING
That stage where your idea is no more just an idea, it is a fully functioning startup that’s also generating some revenue! This is when you need to take a bigger step and scale up your funds so that you can make appreciable amounts of profits.
1. Venture Capital and Debt Funds: VC’s usually have a set of rules and criteria that they use for investment. They demand equity in return and also actively participate in mentorship and (sometimes) decision making of your company.
2. Banks/NBFCs : Provide formal loans with higher rates of interest. Many entrepreneurs prefer loans over equity as the startup has already started generating traction and revenues. So, profit sharing doesn’t seem like a good idea at this stage.
3. Partnership: A very witty move, if you can find just the right business partner for scaling up your business.But be careful, the risk involved here is very high.

CONCLUSION
The answer to our question is; To get your startup funded you should inspect it at each and every step and make a detailed plan of where and how you are going to use these funds. Be ready with a detailed business plan, and simply follow the steps we have listed for you !!


Edited By:

Rishabh Runwal


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