2017 July


India has seen a tremendous growth towards the emergence of a very exciting and never-seen-before startup ecosystem. The growing number of players, increased focus on the sector and the heavy funding has increased the challenges for the startup world even further.

The study says India is the third biggest home to tech startups after US and UK. Bengaluru (26%) is host to the largest share of technology startups in the country, followed by Delhi-NCR (23%) and Mumbai (17%).

All new business are supposed to face entry barriers such as government policies, competition, and product differential to withhold market, economies of scale to control fixed costs, etc.

There are few obstacles that startup entrepreneurs face in the initial stage. Most of the startups are owned by young entrepreneurs who are newly college graduates – brilliant minds with fresh & brilliant ideas, but not necessarily people with great business sense or expertise.

They wonder when to raise money and from where to raise it?


  • When to raise money?


The very big question for startups would be from where to get funded. But before that, they should know when to raise money for their business. Using money at the right time for right things is crucial for startups especially for the first time entrepreneurs.

The short answer to this question would be – “How much you can”… but it isn’t necessarily better in most cases. With more money, comes several potential problems, noted below:


  • With more money into business comes more investment terms, more due diligence to make sure that the investor’s money isn’t going to be misused.
  • When you have money on hand, you are open to the risk of overspending by the management.


Once you have come up a time when you need funding for your business, search for – “How can you raise money?”


  • Whom to raise money from?


Entrepreneurs can raise money in two ways:



  • Debt: Debt is loan taken for business with a principal amount, interest rate and a maturity date at which principal and interest have to be paid.




  • Equity: Equity Financing is the process of raising capital through the sale of shares in an enterprise. It essentially refers to the sale of an ownership interest to raise funds for business purposes. This process of raising fund involves bringing in investors or partners who provide capital in exchange for a share of ownership of business.


Once you have your doubts solved about when and from where to raise money, let’s see the stages you would be dealing while your business grows step by step. Click Here 


Getting funding is a pre-requisite for kick off a start-up venture. Regardless of the stage of start-up life, you will always need funds to run the business smoothly.

It is very important to understand different needs of your business at each stage so that you can engage confidence in investors with a clear pathway of what they are into investing in your firm.

There are five major stages involved in funding a startup, which is explained below:


  • Seed Capital:


Seed Capital is the very first investment in business. Usually, it comes from founder’s personal savings, his friends & family, or closed ones. This round is sourced from professional or semi-professional investors either individually or in a group.



  • Angel Investor Funding:


Usually, Seed Capital is limited for start-up. More often than not entrepreneur tries to tap wealthy individuals excluding their family & friends are termed as an “Angel investors”.

Money received from an angel investor is a loan that is convertible to preferred stock. It often converts to the Series A round of funding (below)

Angel investors are different from other alternate investment options such as Venture Capital (as they use their own money). They may invest individually or also pool their money in a group.


  • Venture Capital Financing (VC):


Venture Capital (VC) firm is a group of investors who take investment from wealthy people who want to grow their wealth. They take this money and invest in risky business deemed to have high growth potential.

Venture Capital funding is made when the business grows beyond the startup phase when they have already started distributing/ selling their product or service, even though they may not be profitable yet.

In the case of negative profit, Venture Capital financing is often used to offset the negative cash flow. There are multiple rounds of VC funding – Series A, Series B, Series C and so on

Series A: The primary function of Series A investment is usually to take a startup to the next level. At this stage, startups have a strongly defined goal for the product or service. Capital used at this stage is often used to meet targets and defined business goals.


Series B: By the time a startup is heading for Series B investment, it is well on its way to establishing its business. The product/ service is managed well, the advertising is going strong and customers or users are actively purchasing an associated product or service as planned

Series C and beyond: A Venture capital firm goes for this round of funding when the company has proved its mettle and is a success in the market. Series C round of funding is made when the company looks for greater market share, acquisitions to develop and expand their product and services share. It is the last stage in company’s growth cycle before an IPO



  • Mezzanine Financing & Bridge Loans:


Mezzanine financing is a mix of debt and equity financing. This financing option gives the financier the rights to convert to an ownership or equity interest in the company in case of default, after venture capital companies and other senior lenders are paid


At this point, the company has several hundred employees and is operating in more than one country. The company is starting to speak with investment banks and the leadership team.

Mezzanine financing is often used 6 to 12 months before an IPO and when IPO’s proceeds are used by the company to pay back the mezzanine financing investor.


  • IPO (Initial Public Offering):


IPO is the very first sale of stock issued by a company to the public. Finally, companies can raise money through selling stock to the public. The IPO’s opening stock price is typically set with the help of investment bankers who commit to selling ‘X’ number of company’s shares at ‘Y’ price, raising money for the company. Once the stock is out, it is traded on a stock exchange.





The Indian Government has declared ‘Startup India’ initiative for creating a great platform for startups in India. The various Ministries of the Government of India have initiated a number of activities for the purpose.

To bring uniformity in the identified enterprises, the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India has come out with a definition for an entity to be considered as a Startup.

(Definition is limited only for the purpose of Government schemes)

The Ministry of Commerce and Industry released a notification on April 1, 2015, to define a startup. According to this notification – an entity will be identified as a startup.

  1. Till up to  5 years from the incorporation date
  2. If its turnover does not exceed 25 crores in the last five financial years
  3. Its working is driven by technology or intellectual property towards innovation, deployment, and commercialization of new products, processes or services


  • Provided that such entity is not formed by splitting up or reconstruction of a business already in existence.
  • Moreover, a startup needs to obtain certification from Inter-Ministerial Board for getting tax benefits.  

To have more clarification for the definition of startup, you can visit http://startupindia.gov.in/

The companies or entrepreneurial ventures that are in their initial phase of development are termed as Start-up companies. They are most commonly associated with high-tech projects, development, and production, distribution of new products, processes or services.


Measures taken by the Startup India Action Plan are benefited only to those who are eligible. Let’s have a look at whether you are eligible for the benefits that were announced as a part of Startup India Action Plan.

(**specifically applicable for startups seeking tax exemptions**)

Hope you are clear about the eligibility for fitting in the definition for STARTUP. If you are a one, let’s have a look at fund related doubts for startup entrepreneurs. Click Here (redirected  to Fundraising for Startups Article)



Department of Industrial Policy & Promotion (DIPP) is responsible for formulation and implementation of promotional and developmental measures for growth of Industrial sector, keeping in view the national priorities and socio-economic objectives.

While individual Administrative Ministries look after the production, distribution, development and planning aspects of their specific industries, (DIPP) Department of Industrial Policy & Promotion will have sole responsibility of overall industrial policy.



Incubators are companies that provide services to new and startup companies such as management training or office spaces and help them to develop. These programmes are sponsored by private companies, municipal entities or public institutions such as colleges and universities.

Incubators benefit to startups in many ways – Office buildings and manufacturing space offered at discounted market rates, staff supplies advice and much-needed expertise in developing business to a higher level and marketing plans as well as helping to fund fledgling businesses

So if you have a specialized idea for your business and want to find an incubator in your state, visit National Business Incubation Association


Angel Network:

It is Network of Angel investors (affluent individuals – former entrepreneurs or professionals) that provide funding at initial stages of business. Provide the smaller amount of funding.



Buying a house is a dream of everyone, but not all are either capable enough to pay a big amount or are eligible for a home loan. During such times, a mortgage loan can become your savior. So let us know more about this savior in times of crisis:

What is a Mortgage Loan?

A mortgage loan is a loan in which a property (immovable or moveable) is used as collateral. It is a type of a secured loan under which an agreement is made with the lender (Bank or Financial Institution) in which the borrower receives upfront cash by giving his property as a security to the bank and makes payments in EMI to the lender. Until the full payment of loan (along with the interest) is paid, the property remains mortgaged with the bank.

Advantages and Disadvantages of a Mortgage Loan


  • Mortgage repayments are similar to rental payments on the same property.
  • With fixed rate mortgage, monthly payments become predictable.
  • Protection from any sudden large increase in rent as your mortgage repayment would be fixed.
  • Loan repayments are tax deductible.
  • Any rise in the value of the property will increase your capital.


  • Risk of losing the collateral if a default occurs.
  • Complex Procedure to avail the loan.
  • Variable mortgage rates depend on the market fluctuations.
  • Extra charges like processing fees, legal charges, insurance fees, etc are there.
  • Any loss in property value would negatively impact the capital.

Eligibility Criteria

1) For Salaried

  • Min. age should be 25 years at the time of applying for the loan.
  • The age of individual must be less than 60 years at the time of applying for the loan.
  • Min. Loan Amt. – Rs. 5 lakhs.
  • Working in a reputed company.

2) For Self-Employed

  • Income Tax Returns must be filed by an individual.
  • Min. age should be 24 years at the time of applying for the loan.
  • The age of an individual must be less than 65 years at the time of applying for the loan
  • Min. Loan Amt. – Rs. 5 lakhs.
  • Continued business should be existing for the past 3 years.

3) For Self-Employed Professionals

  • Individual must be a professional (i.e. doctor, engineer, dentist, architect, chartered accountant, cost
  • accountant, company secretary, and management consultants) only.
  • Min. age should be 24 years at the time of applying for the loan.
  • The age of individual must be less than 65 years at the time of applying for the loan
  • Min. Loan Amt. – Rs. 5 lakhs

Documentation Required

1) For Salaried

  • KYC Documents (PAN Card, Aadhaar Card, Voter ID card, Driving License, etc.)
  • Address Proof (Electricity Bill, Tax Bill, Telephone Bill, etc.)
  • Last 6 months’ bank statement/passbook of the account in which your salary is being credited.
  • Salary Slip of last 3 months showing all the deductions.
  • Form 16/ITR (Income Tax Returns) of last two years.
  • Existing Loan Details – Welcome Letter and Loan statement (if any).
  • Copies of all the property documents of the property that you wish to apply for the loan.
  • Application Form of the respective bank along with photographs.

2) For Self-Employed/Professionals

  • KYC Documents (PAN Card, Aadhaar Card, Voter ID card, Driving License, etc.)
  • Address Proof (Electricity Bill, Tax Bill, Telephone Bill, etc.)
  • Certified Financial Statements for the last 3 years. (ITR, P&L, Balance Sheet, etc. – if applicable.)
  • Last 6 – 12 months’ bank statement/passbook of the account(s) in which income is being credited.
  • Existing Loan Details – Welcome Letter and Loan statement (if any).
  • Copies of all the property documents of the property that you wish to pledge for the loan.
  • Office Proof (VAT Return, CST Return, Rent Agreement, Electricity Bill, etc.)
  • Business Continuity Proof (Registration Certificate, Old ITR, Old Bank statements, etc.)
  • Application Form of the respective bank along with photographs.

Fintech Companies – Next Frontier

With the introduction of Fintech companies (like CapitaWorld), the processing of such loans has become easier. The customers are beginning to have a good experience of Fintech companies as they have relieved the customer from the hassles of paperwork and their frequent visits to various banks. This frontier, as it develops, will further reduce the burden on the customers, become faster, easier, and more transparent.


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