Starting your own business signals a lot of work. The biggest challenge that young entrepreneurs and startups in India face is the lack of adequate capital to make millions out of their brilliant ideas. According to a recent survey, nearly 94% of startups crash in their very first year. The primary reason for the cause is a shortfall of sufficient funds to get the business rolling. So the biggest dilemma that entrepreneurs face is – How to find investors for their business?
Businesses at all stages of operation need capital. The amount of funding, however, depends on the type and nature of your business. Remember that investors are only keen to invest their capital in ventures that have the potential to multiply their investment in a given period of time. Therefore your startup plan should be brilliant enough to turn the idea into a revenue-generating business. If you are looking for funding options, we have compiled a comprehensive guide to the various funding options in India and the ways to get your big fundraiser.
Angel Investments for Startups
Angel investors are individuals willing to invest their money in small-scale startups and businesses. Such individuals are professionals from various walks of life, who have presently cashed out and help young entrepreneurs to live their dream.
Angel investors primarily invest in startups in their early stages and seek minimal stakes in the shares of the company. While a good return on investment is the key concern, angel investors are also motivated by the proposal. It is therefore important to ensure that your idea is thoroughly researched and validated.
As per the views of some of the leading angel investors in India, startups should only approach them when their MVP (Minimum Viable Product) and unit economics is ready. In order to pitch angel investors for your big fundraising, it is important that your products and services are unique, best and one-of-its-kind in the industry.
The probability of attracting investors is very high if your business is already functioning and you have to pay customers. Traction is very important. Angel investors are keener on making investments where their money is used for business expansion rather than fulfilling day-to-day operations. They will only invest in your startups if their money is used for customer acquisition and not just experimentation. Besides this, if your product is appealing to the masses, the target market size is big; angel investors will be more interested in investing.
Now you might ask, how to find investors who’ll invest in your idea at a very early stage? Start by looking in your own network! Friends and family should be your first target as it’s much easier to gain their trust given your long-term relationship with them. You can also reach out to other angel investors on social media platforms like LinkedIn. Start attending live startup pitches, BPlan competitions where you’ll find a panel of investors looking for the next big idea.
Venture Capital Investments for your startup
VCs are funds that are professionally managed by financial wizards and ex-entrepreneurs who are recognized as General Partners (GPs). They generally invest their funds in small, emerging startups that exhibit high potential, thereby, guaranteeing a high amount of return in their investment. The investment is done in exchange for the equity and is a long-term investment, unlike angel investors.
Venture Capital firms never invest in businesses in their early stages or the later stages, when the competition gets high. Get a VC investment for your startup if your business is running and generating revenue.
VCs provide mentorship, expertise and in turn demand some control over managing business affairs. With a multitude of startups snapping for venture capital funding, you can only make them turn towards you if business showcases a strong team, good traction, and scalability in future.
Every VC fund will have a website with contact details clearly mentioned. But before you get excited, it’s important for you to do your homework. Most of the VCs have a sector inclination i.e. some invest in technology startups, some prefer consumer internet businesses while some invest only in specific domains. It is important to find a VC firm that invests in your line of business.
Bootstrapping your business
While angel investors and VCs are looked upon as the major source of investment for new startups, bootstrapping is another option you can consider. Bootstrapping is a form of self-funding your startup. Pitching up investors for their startup is a daunting task for first-time entrepreneurs.
Raising funds from your personal saving and asking contributions from family & friends can also generate investments to get your business kick-started. However, bootstrapping is a feasible option only if the initial capital requirement for your startup is small.
Crowdfunding, the latest model of funding, is a much sought after option by young entrepreneurs and startups. It involves taking up funds from a number of people who show interest in your product or services. In crowdfunding, the investors are not professional investors but common people willing to invest their surplus capital in startups.
In order to get crowdfunding, upload a detailed description of your business. Mention the investment amount required, goals and business plans for the future, on a crowdfunding platform. If the investors find your idea expedient enough, they will be more than willing to make the investment. Another advantage of crowdfunding is that it also helps to market your product, besides just generating funds.
There are a lot of crowdfunding websites like Kickstarter, Ketto, Indiegogo that you can always refer to if you are exploring crowdfunding as a medium to raise funds.
Offline Community & Meetups
Big investors often invest in businesses that have already started making profits. If you strongly feel your business is lagging in terms of reaching out to the right people, look out for communities to network better.
Lately, coworking has become a common term, especially in the startup ecosystem. Startups have started shifting to such workspaces not only because they are economical (and convenient) but also because they give them the opportunity to network with like-minded individuals. You also get to attend mentorship sessions and investor meetups organised by these coworking spaces.
Coworking communities like myHQ serve as platforms for entrepreneurs and startup founders to connect with professionals and investors in their field. Attending such meetups also give you a chance to reach and expand your market reach better.
Getting funding for your startup is not easy. Hopefully, this post gave you the right approach and help you find the right investors for your new business enterprise. Good luck!
Brush up your knowledge with more of these:
10 Most Active Angel Investors In India For Startups
Family Offices: The Emerging Gangsters In Indian Startup Ecosystem
As someone deeply entrenched in the world of entrepreneurship and startup funding, I understand the challenges young entrepreneurs face, particularly in regions like India where the startup ecosystem is vibrant yet challenging. The article you provided touches on several key concepts and strategies crucial for budding entrepreneurs seeking capital to fuel their ventures. Let's delve into each of them:
Startup Funding Challenges: The article highlights the daunting task of securing adequate capital for startups, emphasizing the staggering statistic that nearly 94% of startups in India fail within their first year due to insufficient funds.
Angel Investments: Angel investors play a pivotal role in supporting early-stage startups. They are typically successful individuals with a penchant for investing in promising ventures. The article emphasizes the importance of having a solid Minimum Viable Product (MVP) and validated business model before approaching angel investors. It also underscores the significance of traction and customer acquisition in attracting angel investment.
Venture Capital Investments: Venture capital (VC) firms cater to startups in later stages of development, providing substantial funding in exchange for equity. Unlike angel investors, VCs require startups to demonstrate revenue generation and scalability. The article advises entrepreneurs to research VC firms aligned with their business domain before reaching out.
Bootstrapping: Bootstrapping entails self-funding a startup using personal savings or contributions from family and friends. It's a viable option for startups with modest capital requirements, as highlighted in the article.
Crowdfunding: Crowdfunding platforms offer an alternative means of raising capital by soliciting funds from a large pool of individuals interested in the product or service. The article suggests providing a detailed business description and investment goals to attract potential investors.
Offline Community & Meetups: Networking within offline communities and coworking spaces can facilitate connections with potential investors and mentors. These environments offer valuable opportunities for startups to expand their network and gain insights from experienced professionals, as mentioned in the article.
Each of these funding avenues has its nuances and prerequisites, and navigating them requires a thorough understanding of the startup landscape and investor expectations. By leveraging these strategies effectively, entrepreneurs can increase their chances of securing the necessary capital to turn their ideas into successful businesses.