One of the biggest challenges faced by growing startups is Monetising. It is never easy to collect funds and usually takes longer than anticipated. Even the savviest of the startups have difficulty developing product prototypes, testing market hypothesis, initiating investor interest for future backing, office space, marketing, without the proper capital required, which will in turn cause hindrance in the development of the startup, by obstructing the product manufacture, or any other expenses. Just as said by Entrepreneur David Roth,

“As leaders, it’s our job to manage the time and money needed to get to the next level without running out of either one.”

Importance of fundraising

1) Meeting the financial needs in a startup-

During the initial growth of a startup, funding is needed for developing, manufacturing and testing the product. Effective Marketing of the product is also required to attract the potential customers after it has been assayed, for a significant growth. To attain these goals, it is important to seek funding.

2) Risk Management-

Running a startup comes with a lot of risks. The behaviour of the market and unintentionally caused errors can result in significant losses in your business. One needs an exigency plan and funds to manage such inescapable risks.

3) Strengthening the level of competition-

The chase for newer and better products or technologies is striking. The level of competition in the market increases everyday. Fundraising and funding are thus necessary to enhance the growth of a startup. Without it, a startup might not be able to approach the market with newer products and thus, not be able to match the standards of the business world.

Finance is the grudge of a new startup due to shortage of funds. This has been the reason for the downfall of many startups. So we bring you various ways to raise funds and finance your startups.

1. Bootstrapping: Financing it yourself

Self-funding is also known as bootstrapping. You can loan money from family and friends or Maybe you already saved up a little bit of money or inherited some. Mostly friends and family are flexible with the rate of interest. But this is suitable only if the initial requirement is small.

2. A loan

Take up a loan at your local bank. It’s hard to convince banks to give you money, so you have to have a really good business plan in which you need to write in detail how you are going to finance your business and what your expected turnover looks like. Banks usually provide financing in two forms- working capital loan and funding.

3. Get financial aid from your state/country

Many countries/states want to support start ups and hand out financial aids to grow local business. The Government of India has launched 10,000 Crore Startup Fund, ‘Bank Of Ideas and Innovations’, ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)‘, Startup India Action Plan and more such schemes to improve startup ecosystem in India.

4. Start up championships

Many countries/states hold startup championships in which startups present their company. The winner often gets a huge amount of money! You can’t finance a whole company with that amount of money, but it’s a good resource for bridging finance. Also it can get you some media coverage. Some of the popular startups contests in India are NASSCOM’s 10000 startups, Microsoft BizSparks, Conquest, NextBigIdea Contest, and Lets Ignite. There are some contests that take place at college level as well.

5. Crowdfunding

There are many crowdfunding platforms, like Indiegogo, Wishberry, Ketto, Fundlined and Catapooolt, where you can present your business model. Hundreds or even thousands can invest a little amount of money in the given concept that is presented on start up networks.

6. Business Angels

Business angel investors are people with surplus money who are willing to invest their money in any upcoming business idea or startup. They also provide mentorship and guidance. Often former managers invest their own money in new, innovative companies. The business angels also help out startups with their networks and special knowledge. In return, business angels get a share of the startup company.

7. Venture capital

It’s the bigger form of business angels — companies invest their money in startups. They exit when there is an IPO or an acquisition. Venture capitalists can influence major decisions of the companies they are investing in. They invest a bigger amount of capital than business angels.

8. Pre orders

If you take up pre orders, you can already finance the product you want to bring out and sell to the customers. If you could not secure money through other means, this is an option for you. With this you will already have an idea about how many people are interested in your product, well ahead of the official launch . You would have seen how Apple and other companies take pre orders before they officially launch their product.