Fund Raising for Startups

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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 


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