Startups Investment Options in India

Read about investment options for start-ups in India and their pros and cons. Angel Investment, Series Funding, Self Funding, Crowd Fund and more

Investments for start-ups: When you have a great idea or concept that can work and can potentially be of value in the market, you need some capital backing to get it running. Raising money may not be easy if you cannot convey your idea and process with well-researched facts and figures to the investor. This is the reason that many of the start-ups aren’t able to get funding and fail to stay afloat. Money is the lifeline for any business to function and flourish. It is a painstaking task to convince investors and getting your proposals right and seek capital.

Over the years, there are several means to generate capital. Still, it has been challenging to get people interested in your idea, and if they do, there is the question of whether the business will sustain the long run. Will there be a necessity to pump in funds each time with very little or no returns. The new entrepreneurs will always have to be on their toes to generate funds more than focus on working on their ideas.

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The funding of any business will depend on nature and type for which you will have to hunt for the right kind of available financial resources.

Self Funding 

There is an option of self-funding, which could be from your own savings or borrowings from friends and family. The investment can be traction for your initial funding in the business that you want to set up. Getting this money won’t be as much trouble due to a list of benefits that it offers. But there are also a few demerits that you should consider. 

Pros of Self Funding:

  • Lesser formalities
  • Having control over your business as it is your own money
  • Having a satisfaction of using your own money

Cons of Self Funding:

  • Your hard-earned savings get wasted if the business fails
  • You have no learning that you can gain while working with angel investors and others. 

Series Funding

Series Funding is mainly the very first venture capital funding that is gained by any startup business. 

Pros of Series Funding:

  • No-debt financing
  • Connections with the investors to learn new things

Cons of Series Funding:

  • You will lose control over your business
  • Have to invest a lot of time

Family and Friends

You can always seek help from your family and friends for investment in your business. But make sure to check out the bright sides as well as the dark sides of the idea. 

Pros of funding from family and friends:

  • Easy and faster funding

Cons of funding from family and friends:

  • No mentorship or learning is gained
  • You will have a pressure of returning the money in some of the instances, even if your business fails

Crowd Funding

When seeking crowdfunding, you will have to convince a whole lot of people to believe in your idea and explain how much funds you would require along with how you plan to make a profit. Some of the people who get interested in the product may want to pre-buy the product or donate for the venture. Well, it has got its own merits and demerits. 

Pros of Crowdfunding:

  • You will also be marketing the idea
  • You will understand the demand for the product as well
  • Common people will be part of making your company
  • Help  generate venture-capital investment as well, sometime later

Cons of Crowdfunding:

  • You need to invest a lot of time and dedication and have to be patient to see the result rolling in. 

Angel Investment

Angel investment is a boon for most start-ups; these investments have surplus cash and are in a lookout for great ideas and concepts to invest their money in. 

Pros of Angel Investment:

  • You can gain great suggestions and advice due to their experience in the market.
  • You can enjoy business terms that are highly flexible in nature. 

Cons of Angel Investment:

  • You may have to share some business control with the investors
  • Such investors deal in high-value equities that can be a bit risky at times

Venture Capital

Seeking venture capital is one of the better options that a start-up would want as venture capitalists would invest more compared to the other kind of investments mentioned above. 

Pros of Venture Capital:

  • Works well with smaller businesses
  • Provide guidance and mentorship such as angel investors
  • Offers immediate credibility to the business

Cons of Venture Capital:

  • You may have to lose control over your business in a huge way due to the funding

Bank Loans

Bank Loans are quite popular that many of the business owners prefer to go for. 

Pros of Bank Loans:

  • Variety of funding options available
  • It is quicker than other options
  • No need to lose control over the business

Cons of Bank Loans:

  • Loads of documentation to be done
  • Not applicable for everyone
  • Money has to be returned with interest even if the business does succeed

Small Business Administration Loans

If you are starting a small business, you can try out this option in comparison to the others. 

Pros of small business administration loan:

  • Improved relationship between borrowers and lenders
  • Higher chances of getting bank loans too if this loan is managed in a proper way

Cons of small business administration loan:

  • Maintains strict qualifications

Other Options

There are also a number of other options to gain funding for your startup company. 

  • Incubators and accelerators:

Funding from business incubators and accelerators are programs that help your business to get on its feet. These programs work on tools, training, and networking. 

  • Organizing Contests:

The start-up could get funds through the contest, perhaps if your idea gets selected as one of the brightest and most ingenious of the ones presented, the sponsor or the team of judges who are investors may come forward to fund the start-up with the most promising idea. There are shows wherein you can pitch in your start-up idea and win investment or cash prize to add to the capital of your business.

  • Microfinance Providers:

Getting a loan from microfinance providers for your start-up is a great idea too. 

  • Rebates from Government:

Government start-up programs for funding are a great option as you will get so many concessions in the form of rebates in tax, lower interest rate if your plan is for has excellent viability.

  • Selling Assets:

The other options will be presale of the products and raise finance. There is also the option of selling assets if you own any to generate capital.

  • Credit Cards:

Credit cards also allow you to get instant money for your project.

The need to get the initial funds may be difficult, but once you get them, you will have to work on getting external funding on a long term basis till you can take advantage of market opportunities and grow on your own and be able to attract investors to buy a stake of your company.

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