Guide to Startup Fund Raiser
Fund plays the most important role for any business and when it is a start-up it matters even more! In this article we are going to provide a guide for the Start-ups to raise their fund. Blog: https://financebuddha.com/blog/guide-startup-fund-raiser
Fund plays the most important role for any business and when it is a start-up it matters even more! In this article we are going to provide a guide for the Start-ups to raise their fund.
Blog: https://financebuddha.com/blog/guide-startup-fund-raiser
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<strong>Guide</strong> <strong>to</strong> <strong>Startup</strong> <strong>Fund</strong> <strong>Raiser</strong><br />
India is witnessing the emergence of start-up ecosystem from last few years. And it<br />
is a very good thing for the country’s economy. After studying the statistics it can<br />
be easily seen that most of the entrepreneurs in our country are the youth. It is<br />
pertinent for start-ups holders <strong>to</strong> be focussed and strategic in their approach.<br />
Whether it be equipped with a good understanding of market dynamics or it may<br />
be economics of competition and competi<strong>to</strong>rs. It is very normal that any new<br />
venture has <strong>to</strong> go through entry barriers like government policies, competition,<br />
and economies of scale, product differentiation <strong>to</strong> withhold market, different kind<br />
of taxes and many other things. Apart from all these fund plays the most<br />
important role for any business and when it is a start-up it matters even more! In<br />
this article we are going <strong>to</strong> provide a guide for the Start-ups <strong>to</strong> raise their fund.<br />
Ways <strong>to</strong> Raise Money for Your <strong>Startup</strong><br />
Crowdfunding<br />
Crowdfunding is considered as a major <strong>to</strong>ol <strong>to</strong> raise fund for start-ups. In<br />
Crowdfunding, entrepreneurs take small amount of money from a large number<br />
of individuals <strong>to</strong> finance their new business. Crowdfunding makes easy<br />
accessibility of vast networks/ large number of people through social media and<br />
other crowdfunding websites. This helps <strong>to</strong> bring inves<strong>to</strong>rs and entrepreneurs<br />
<strong>to</strong>gether. Crowdfunding has the potential <strong>to</strong> increase entrepreneurship by
expanding the pool of inves<strong>to</strong>rs from whom funds can be raised beyond the<br />
traditional circle of owners, venture capitalists, friends and relatives. Through the<br />
social media or Crowdfunding websites it makes easy for the entrepreneurs <strong>to</strong><br />
approach large no of people for funds. One of the best thing about crowdfunding<br />
is that it makes the marketing of the products even easier. But before starting it<br />
keep in mind that there will be <strong>to</strong>o much competition in this <strong>to</strong> get fund. Your<br />
business should have potential <strong>to</strong> attract people <strong>to</strong> invest in it.<br />
Get an Angel Inves<strong>to</strong>r<br />
Having an angel inves<strong>to</strong>r for your venture is also a good option <strong>to</strong> raise funds for<br />
your start-up venture. Angel inves<strong>to</strong>rs are generally people who have enough of<br />
fund and are ready <strong>to</strong> invest it in other’s venture against some share in form of<br />
equity. This is a best option <strong>to</strong> cover the capital shortage of your venture. But<br />
their investment decision depends on inves<strong>to</strong>rs, if your business plan is good and<br />
it has the potential <strong>to</strong> grow then the inves<strong>to</strong>rs will be ready <strong>to</strong> invest otherwise we<br />
you will have <strong>to</strong> look for other option. Angel inves<strong>to</strong>rs are the one who have<br />
helped many big companies such as Google and Yahoo. The funding is mostly<br />
required in the initial stage and this can seriously help you.<br />
Banking Finance<br />
One of the most common option which most of the people will use <strong>to</strong> raise<br />
capital for their new business is through a loan through the bank which is mostly a<br />
business loan. This is the most common option and easily available one. Your<br />
lender bank may request you <strong>to</strong> have a loan guaranteed or a collateral before<br />
approving the loan. The lender bank generally have some crater such as they will<br />
ask for the <strong>to</strong>tal last year turn over from your business, the applicant’s credit score<br />
and some other things <strong>to</strong>o.<br />
Business Line of Credit<br />
Line of Credit is the new financial <strong>to</strong>ol which can help a lot <strong>to</strong> the new ventures.<br />
It is somewhat same as that of using credit cards. You are provided an upper limit<br />
till which you can withdraw money when ever need. No need <strong>to</strong> go through the<br />
long process of bank, get a credit line account with a bank and you are eligible <strong>to</strong><br />
borrow money from it. The interest is charged only on the amount borrowed.<br />
One can even borrow frequently whenever needed until he/she reaches the<br />
maximum amount. The repayment can be done in the same way as in case of any<br />
loan, i.e. through EMIs. The money borrowed can be used for anything like<br />
purchasing inven<strong>to</strong>ry, paying staff, paying rent and many more but it should be<br />
related <strong>to</strong> the business.
Second Mortgage<br />
Second Mortgage is also known as the Home Equity Line of Credit (HELoC).<br />
These loans generally tap in<strong>to</strong> the locked up equity you may have in your home.<br />
To know that how much you can borrow from a second mortgage, take the value<br />
(price) of your home and deduct the value of any outstanding mortgage from it.<br />
You should be aware of the fact that some lenders may only lend only up <strong>to</strong> 70 –<br />
80% of the value of the home, only a few is ready <strong>to</strong> lend you the full value. One<br />
of the advantages of taking a second mortgage is that the interest rate tends <strong>to</strong> be<br />
lower than any others financing. This is due <strong>to</strong> the fact that -the bank knows they<br />
can easily recover the value of the loan by foreclosing on your property if you are<br />
not able <strong>to</strong> meet your interest payments.<br />
Venture Capital<br />
Venture Capital is basically financing that inves<strong>to</strong>rs provide <strong>to</strong> startup companies<br />
and small businesses who have strong potential and long term growth as well.<br />
Venture Capital generally comes more from the angel inves<strong>to</strong>rs, investment banks<br />
and other financial institutions who are ready <strong>to</strong> give money. However, it is not<br />
always done in form of monetary support, but apart from this it can be done in<br />
the form of technical or managerial expertise.<br />
However a risk fac<strong>to</strong>r is always involved in providing fund <strong>to</strong> the start-ups. But<br />
still there are many ways <strong>to</strong> reduce the risk fac<strong>to</strong>r, doing proper market analysis,<br />
understanding the cus<strong>to</strong>mers, having good staff can reduce all the risk<br />
fac<strong>to</strong>r. This works in favor of both the entrepreneur and the inves<strong>to</strong>r by reducing<br />
the risk fac<strong>to</strong>r and increasing the chances of business earning profits. There exists<br />
multiple ways for a startup <strong>to</strong> generate working capital and is very essential <strong>to</strong> take<br />
it forward and make it a full fledged entreprise.