India has seen a tremendous growth towards the emergence of a fascinating 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.
Astudy says that 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%).
Any new business has to face entry barriers like government policies, competition, and economies of scale to control fixed costs, product differential to withhold market, etc.
There are a few obstacles that startup entrepreneurs face in the initial stage. Most of the startups are owned by young entrepreneurs, freshly graduated from college. Their brilliant minds are filled with fresh & witty ideas, but it’s not necessary that these people have great business sense or expertise.
They often wonder when and where to raise money from?
1. When to raise money?
Avery big question for startups is 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 thingsis crucial for startups especially for the first time entrepreneurs.
A short answer to the question would be – “How much money can you raise”… but it isn’t necessarily better in most cases. With more money, come several potential problems, noted below:
a. 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.
b. When you have money on hand, you are open to theriskof overspending.
When the right time for funding the business comes, search for – “How to raise money for your startup?”
2. How to raise money?
Entrepreneurs can raise money in two ways:
a. 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.
b. 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 cleared about when and from where to raise money, let’s have a look at the stages you would be dealing with while your business grows step by step. Click Here(link to Stages for Startup funding)