Top 7 ways to Finance your Tech Startup
When you want to start a new business, you must have some idea about the funding as well as the business or startup should have a plan which should execute to make the business work in the following year. Most startups don’t work well because of a lack of a good plan and fund. Over 90% of businesses fail in the early stages, for instance, in the first few months and the first year, because of a lack of knowledge and research.
This type of startup needs a great idea to make it work. For this, you have to raise money from different sources. Some of them are as follows, which will help in funding your startup—
The best way to start a new business is to have some amount of your own money. The money that you have saved for years. Self-funding should be considered a first funding option since this money will always help you build your business. It also depends on the type of your startup.
Investment from Friends and Family
One of the best ways is to make money from your spouse, friends and family. Borrowing money from them is much more beneficial than other options like bank loans because they will believe in you and your startup’s future.
The investment should also be by your side as it will positively impact the other investors that you have a vision for your startup and a long way to go with that. You can always repay the money to investors as your profit increases. For this, the investors should have faith in you, depending upon your plan and execution. Also, this should not be taken lightly as this much investment doesn’t need to be enough as family and friends do not have much capital, so there are some other ways in which you can get funding.
Banks loans are primarily used as funding options for startups and new businesses, be it small or medium. There are several ways and schemes under which banks proceed with loans to small businesses. There are some criteria for the approval of your loan. Not only a good idea would work, but there also has to be a good business plan as well if you wish to list your business longer and be profitable.
Government schemes and grants
The government provides so many schemes and grants to support small businesses. In every field, there exists competition. You have to be better than others, so getting grants is not easy. It totally depends on the type of your business, your overall plan, benefits of your startup, will it perform well in the market or not, good knowledge of the market.
Your startup should be innovative and attractive so that the investors can see a benefit, why you want the grants, is your idea well researched or not, whether it is focused or not, So these are some criteria that need to be thought about.
The Government of India has launched a 10000 crores of startup fund for the entrepreneurs and to improve the overall economy of our country.
Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA) was launched by the Honourable Prime Minister of our country to provide loans to small/ micro-enterprises. These types of loans are categorized as MUDRA under Pradhan Mantri Mudra Yojana. Such loans are provided by NBFCs, commercial banks, RRBs etc. In this, there are three stages called Shishu, Kishore and Tarun depending upon the needs of the fund for the development and growth.
Get Angel Investment
You can get angels for your funding, so what are angels? Let me explain it to you. Angels are basically people with surplus money who want to invest and get the profit they usually invest in the new startups.
Angel investors help in building up the startup in its early stages. It has helped so many huge companies and organizations, and after that, they expect some amount of equity in return. Equity is the amount of money that needs to return after all the assets are liquidated.
It comes with some advantages and disadvantages as well as any other options. It does not provide a considerable amount of funding.
Venture Capital For Business
Venture capitalists invest in sectors like technology, communication, and business with high growth potential. These are managed by professionals who have good knowledge about funding, so they only go for such type of startup in which they see the potential. It can be beneficial for the companies that are already earning.
Venture capitalists will act as owners of the equity and be a part of the profit, and they will expect a good return on their investment.
Venture capital is not for everyone or every entrepreneur; it is beneficial for only those willing to take a risk and those ready for risky projects with high potential. They definitely provide support to startups and help them grow.
Crowdfunding is a new way of funding that is so popular. In this, you can get funding from different investors simultaneously. Crowdfunding works as the entrepreneurs describe which kind of startup they are planning and trying to execute; then, the investors take a look. The investors will see the plan for the profit, what is the future of the startup and also what amount of investment is needed in that particular startup. Crowdfunding is such an excellent idea for your startup as it will not only help in finance, but the investors will help in marketing the products as well. There are so many investors involved, so the marketing strategy would be good enough.
These are the ways you can get the capital from the investors if you want to start a new business and get profit. With the help of outsourcing investment, you can grow much faster because it is not easy to get into the market and make a profit without any external source of funding or investment.
Edited by Prakriti Arora