HOW TO FUND YOUR STARTUP
Find out the best ways in which you can source money for your venture according to its growth stage and needs
It has been raining startups in India for past 3-4 years .we list six options that you can tap to get money , explaining what these are, how you can explore these depending on your start up’s growth stage.
INCUBATORS & ACCELERATORS
These set-ups precede the seed funding stage and help the entrepreneur develop a business idea or make a prototype by providing resources and services in exchange for an equity stake , which ranges from 2-10%. Incubators offer office space , administrative support , legal compliances ,management training ,mentoring and access to industry experts as well as to funding through angel investors or VCs. The incubation period can be 2-3 years and admission is rigorous .The accelerators differ in that they help speed up and hone the business ideas in short spans of 2-3 months .The focus is on intense mentoring ,networking and building contacts ,getting more investors and helping with product development and marketing .
The funds of this stage are usually secured by entrepreneurs from their own savings or loans from family and friends. However, if you don’t have enough money you can get it from Other sources like angel investors or crowd funding .Once it gains a semi balance of market or customer base , you can approach VCs or bank for scaling up and expansion . Angel investors are usually individuals or group of industry professionals who are willing to fund your venture in return of any equity stake .The amounts can range from Rs 5 lakhs to Rs 3 crore and are not as high as those provided by venture capitalists .
This is the practice of raising capital through small amounts from a large number of people, usually through the Internet. The entrepreneur get money from his venture by showcasing his idea before the entire world and convincing people of its utility and success. The bottom line is that it should be convincing enough to draw investors
After the initial seed –funding stage comes expansion and growth of the venture ,which requires big money .This is where venture capitalist come in, offering anywhere of Rs 1-300 Crore in exchange for high equity stake .A type of private equity ,it is one of the most high profile and popular sources of funding for mid- to- late- stage startups and has been in the news after big ticket deals for Flip kart , Snap deal and Ola .Given the sale of funds ,it is not easy to secure and these entrepreneurs need to elaborate preparations before approaching the VCs.
6 START -UP MISTAKES TO AVOID
Here are the common mistakes made in first year of the business.
NOT DOING ADEQUATE RESEARCH
There is no dearth of ideas; the tough part is converting it in to a viable business model though market research .It not only reveals the potential, but also the limitation of the idea.
GOING BY FLAWED ASSUMPTIONS
There could be a few bugs in your business in the initial financial projections. A simple solution is to a beta test your prototype to fix the faults before the product is launched .
SCALING UP TOO Early
Experts advise to nail it first and then scale it up – start small, have short term goals, perfect the product and revenue model ,then scale up .
NOT KEEPING TABS ON COSTS
Keeping the over head cost low is essential .A small venture is starved of money and if expenses are not controlled , it will soon run out of working capital .Another area where you can cut cost is while building your website .
UNDER ESTIMATING MANPOWER NEEDS
If you think you can manage all by yourself you are mistaken .You need a team that can take care of various peripheral aspects and leave you with the core functions.
NOT MAINTAINING A FINANCIAL BUFFER
Make sure you have your finances in place before taking the plunge. Have contingency fund to take care of 6-8 months of expenses.