7 Practical Startup Funding Options in India

You must be planning to launch a startup if you’re here looking for startup funding options in India. You’ve come to the right place!

To guarantee that your startup does not end up closing down like the other 94% of startups, meticulous planning, and a futuristic strategy with appropriate funding is an essential aspect.

Funding and fundraising are extremely significant to meet the vision and to support the growth of your startup.

Now, you might already know what funding is. It’s the money required to start and run a business. The financial investment in a company for:

• Product development
• Manufacturing
• Expansion
• Sales and Marketing
• Office spaces and inventory
• Prototype creation
• Team hiring
• Working capital
• Legal and consulting services
• Raw materials and equipments
• Licenses and certifications

Are you sure you’re ready for funding? Do you have a detailed financial and business plan? Have you registered your startup business?

Before you approach investors, a detailed financial and business plan is necessary. It comes in handy when seeking investments from venture capitalists, angel investors, financial banks, ledgers, etc.

You must also ensure that the funding you’re looking for is in line with the short-term and long-term of your business, which depends on the nature and type of your business.

When looking for funding, don’t just look for cash. Look for the right people.

Jodie Fox, Entrepreneur

You’re not just getting access to more money but it provides you with talent, investors, mentors, PR, and much more.

Let’s look at some of the startup funding options in India.

Startup Funding options in India:

Try Crowdfunding

Crowdfunding isn’t about collecting money. It’s about making something happen with a crowd of people who believe in something.

Normal people, not rich people with a lot of money, just people like you and me.

Jozefien Daelemans, Charlie Magazine-Founder

Crowdfunding or crowdsourcing is similar to mutual funds on a primary level. It is when more than one investor is involved and they offer a fixed amount of money. The money they offer is based on your startup’s business idea, goal, and plan of action.

This is ideal only when there are people who believe in your business idea. It also helps in gaining popularity. When experienced players in the market believe in your idea, you gain crucial funds in the initial stage.

Try Self-funding a.k.a Bootstrapping

If opportunity doesn’t knock, build a door.

Milton Berle

Self-funding, also known as bootstrapping is an ideal startup funding option in India when it’s difficult to persuade others of your business idea and concept. It’s the best choice for entrepreneurs who have merely started their businesses.

Since it is difficult for first-time startup founders to get cash unless you show some traction and a business plan that has enough potential to sway the investors.

It is also a great idea if your initial business requirement is small. You will have the freedom to become your boss, where you’re not answerable to anyone, and can also keep an eye on the revenue earnings.

Try Angel Investors

Other startup funding options in India include Angel investors. Angel investors are individuals with abundant cash who are always looking for startups with enough capability, to invest in and get their share once the startup reaches its potential. They either work independently or collectively in a network.

Remember, these investors are experienced entrepreneurs, and since they have gone through this phase before, they have enough knowledge and experience to create a billion-dollar startup right out of scratch.

The only drawback is that you get a limited amount of money with elevated interest expectations of 30% equity or higher.

Also, don’t forget that Google, Yahoo, and Uber are all results of angel investing.

Try Venture Capitalists (VC)

Let’s look at other startup funding options in India. You might have heard of venture capitalists. Venture Capitalists offer professionally managed funds to startups with huge potential for success.

And the best part is, they bring along the best expertise and monitoring. They need a startup with adequate traction and a promising team. You also have to be adaptable enough to take their inputs and accept their close monitoring.

Uber, Airbnb, Flipkart, Xiaomi raised funds through venture capitalists.

Try raising funds through business incubators and accelerators

You can raise funds through business incubators and accelerators by joining their startup programs which typically run for 4-8 months, wherein you’re introduced to various mentors, investors, and other budding entrepreneurs like you.

It’s useful for early-stage startups and they are also readily available in almost every major city.

Business accelerator, as the name suggests, “accelerates” the growth of your business by focusing on scaling the business.

Similarly incubators “incubate” disruptive concepts with the confidence of building out a business prototype and company by focusing on innovation.

Try fundraising through bank loans

Other startup funding options in India include raising funds via bank loans.

Banks consider aspects associated with your startup business prototype, expected returns, your capacity to give back the loan, management experience, and aptitude, and last but not least, collateral insurance.

These are some of the types of bank loans available in this startup funding options in India:

• Term Loans – This type of loan is lent out for buying and constructing capital assets for your business.
• Working Capital Loans – This type of loan is for accumulating inventory and providing credit to clients. They assess the working capital requirement for the startup business prototype before lending out this type of loan.
• Asset-backed loans – This type of loan is for the R&D or marketing or expanding the startup. This is lent out depending on the market value of the property that is pledged as collateral security.

Startup India Project

Startup India Project is an initiative by the Narendra Modi-led government of India. It is an ideal startup funding options in India.

As part of the initiative, the Government of India has set up a Fund of Funds to empower startups with potential.

Click here, to apply for Startup India Seed Fund Scheme.

These are some of the startup funding options in India. Hope this article helped you. Good luck with your startup!

FAQ

How much funding does startup India give?

Startup India provides seed grants of up to INR 3 Lakhs per startup provided that the validation of your business idea, prototype, development, assistance towards traveling costs, and carrying out field or market research and initial activities to set up a startup.

Who is eligible for Startup India?

The criteria to be desirable for Startup India:-

• Your startup business should be integrated as a private limited company or registered as a partnership firm or a limited liability partnership.
• The turnover of your company should be less than INR 100 Crores during any of the previous financial years.

Is it easy to get funding for startups?

If you are unable to fund your business yourself, you could try obtaining a bank loan or a flexible loan from your local bank. Also, you could utilize the startup funding options in India mentioned in this article.

How hard is it to get funding for startup?

It is a tough job to get funding for a startup — even the ones with great potential. Launching a startup means you need all the help you can get in the form of mentors, professionals, directors, etc.

How can I get funding from the Government?

If you want to get Government funding for your startups, apply for Government grants or funding by logging in at NGODarpan.gov.in and proceed by clicking on available sites of various ministries.

Why startups need funding?

If you want to captivate the interest of the market and future investors in your startup business, funding is essential for your startup. When your startup is funded by venture capitalists or any other startup funding options in India, it indicates that your business has the potential.

Also read: 9 Essential Legal Documents for Startups