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07th April 2017

Taj Palace, New Delhi

7 Ways Startups Raise Funds for Business

Posted on 03 Apr 2017 in Blog | Comments Off on 7 Ways Startups Raise Funds for Business

This post was contributed by Disha Dinesh, content strategist at DrumUp, a social media management and content marketing platform that simplified social marketing. 

Over 90% businesses fail in their very first year, on account of low funds. In India, educating customers, building infrastructure and capturing market share costs startups a substantial amount of money that has become hard to raise lately. Investors have become more conservative and limited funding is stunting the growth of many companies.

World over, there are about 7 popular ways to raise funds for business.

1.Bootstrapping

Amateur entrepreneurs without track records to speak for them, can struggle with finding funding opportunities. Bootstrapping in such a scenario is a viable option.

You could invest savings and invite friends/relatives to participate, reducing bureaucratic and compliance issues.

2. Angel investments

Angel investors can be people of any profession with surplus money and the intent to invest in ventures. Sometimes, they also offer mentoring and become fully vested in the businesses they invest in.

Some angel investors also work in networks to vet and qualify startups before they invest in them. Global giants like Google and Alibaba are products of angel investments.

3. VC funding

VCs represent professionally managed funding units that partake in investable businesses with the intent of growing their money. While VC funding is considered a herald of success, it also demands results and can affect the original vision and direction of the company.

4. Crowdfunding

You could use crowdfunding platforms to pitch your business and invite people to contribute. The more detailed your business plan/idea is, the more likely you are to elicit a wholehearted response.

Crowdfunding also impacts the PR and marketing functions, by creating interest among people and drawing the attention of journalists and publications.

5. Contests

Contests are a great way to raise funds, but they’re also usually very competitive. You need for your product/service to standout from the rest to win capital.

You can also apply to some contests without a prototype and only a business plan in hand, but your plan has got to be impressive to make the cut.

6. Incubators/accelerators

Several incubators/accelerators also offer funding and support (infrastructure and mentoring) to startups. They are great for building networks and connecting with potential mentors and investors.

These organizations are usually meant to serve early stage startups that haven’t grown to a sizable presence yet.

7. Government programs

The Government has a program for startups titled – ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA). With a fund of 20,000 crore rupees, the unit is authorized to support purchase expenses via the credit card model.

The program is basically a grant that is treated like a loan. There are three categories that classify loans under this program that you can read about in detail here.

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