Best fundraising ideas for a startup

23 Apr 2021 5 min read
Business Loan: Funding Options To Raise Startup Capital For Your Business

Dreaming of being an entrepreneur? But your financial condition doesn’t allow you to take risks and forces you to stick to your job. Well, this time can prove out to be a golden period for you. In the context of start-up funding, India is at its best-ever point. So instead of working diligently for someone else’s dreams, you can start building up your own dreams. We have shortlisted some efficient ways to generate funding so that you can actually bring life to your business ideas. 

Make a comprehensive business plan 

The first step in the path of generating finances is to have a clear picture of how much do you actually need. Well, a business idea only in your head will not help you achieve this. So pick up your laptop or simply pen and paper and make a detailed business plan. Pen down everything that comes to your mind regarding the business idea. It is rightly said that preparing a business plan can turn out to be the most difficult written task. Here are some key points one must keep in mind while preparing a business plan.  

Summary- It will throw light on your vision. Remember the first impression is the last impression. Similarly, your summary will help you introduce the basic idea. This will assist you in generating funds.

In a Bollywood movie, once Abhishek Bachhan (Playing the role of computer genius) missed a golden opportunity when he was unable to explain his brilliant idea to a business tycoon in 60 seconds. This is why you require a summary.   

Initial set-up cost- When your vision is clear, you will have a brief idea about the requirements for the commencement of the business. Starting from the basic infrastructure to the variable expenses that are required for the smooth running of the business. Always remember you can never expect profit from the initial months, sometimes it takes too long to finally achieve a profitable position. Most of the new business setups are winded up in the initial months due to a lack of funds. It is commonly seen that people spend all their funds in the commencement stage and tend to forget about the working capital. So you need to plan how much you want to spend on the initial stage and how much you will require as operational costs.

Organizational structure- In the starting stage try to list the utmost essential staff members you will need. Don’t try to hire a big team instead try getting efficient personnel for your firm. Prepare a list keeping the following vital points in mind:

  • No. of employees 
  • Working profiles(roles)
  • Pay scales

This will help you to forecast the funds that you will require for your staff members. 

Analysis of market- You have to be clear about your target market and as well as your competitors. Try to analyze how your rivals have made a strong foothold in the market. It will help you predict your marketing expenses. To be successful and to embark on a strong position in the market, you have to put some serious efforts into the marketing department. Whether you are aiming at selling a product or a service, there is a vital need to have exposure in the market. 

With such a comprehensive business plan you will have an overview of how much funds are actually needed. 

Self-Reliance or Bootstrapping

Bootstrapping refers to starting a business with very little or zero outside investment. It means relying on your own savings and the upcoming revenues. Bootstrapping or self-funding is a very popular means of generating finance, especially in small start-ups. One tends to use his personal savings for implementing the business ideas. Every coin has two sides, the same way bootstrapping has its own advantages and disadvantages. We have listed some of them for you:

Advantages

Disadvantages

Full control on business

Undertaking whole Financial risk on your own

Experiments can be done

Being unanswerable can lead to leniency which affects efficiency

No need to convince investors

Limited sources as personal saving and assets are involved 

Less mental pressure of repaying to outsiders

 

Lack of support of renowned investors affects credibility 

No profit sharing 

Difficulty of resources in long run

Bootstrapping can be the easiest method of generating finance for those who don’t have a very strong convincing power. Sometimes a very genius mind cannot express his idea effectively and is unable to make others believe in it. Such people can start with little personal investment, and if their idea works, then the outcome will help them to attract outside investors. At this point outside investment can be used for growing the scale of the business, getting exposure in the market (marketing), and for introducing some new concepts. Bootstrapping can also be beneficial for those who are haunted by the word ‘debt’ but still are wailing to give life to their business idea. It will not be right to say that it will not cause any mental pressure, because after all your assets or savings are getting involved, which you may have saved for yourself and your family for some uncertain times. But still, in self-funding you don’t have to worry continuously about repaying and your prime focus can be on generating profits. It allows you to be your own boss but also limits your resources and credibility in the market. As the entrepreneur is not answerable to anyone, sometimes he can be lenient in following the planned business strategy which in turn can affect the business productivity.

Crowdfunding

As the name suggests, crowdfunding means more than one person is involved in the funding process. In this, you have to persuade a few people to invest in your project. You need to give them details about your concept, potential target market, expected returns, current market analysis, competitors. A comprehensive business plan and a convincing approach will help you in attracting investors. You can start with your family, friends, colleagues. In case of your near and dear ones, be prepared in a very formal way but still carry an informal approach towards them. In this situation, your personal goodwill in the social circle will play a vital role. Moreover, be patient to dispel their doubts. Crowdfunding can be helpful in generating funds even in the pre-seed stage. You just need to make them believe in your concept. You can repay crowd funders in two ways whichever is decided at the investment stage. The first way is to repay the invested amount with interest and the other way is providing a share in the returns.  

Business loans

Already irritated by attending numerous numbers of calls every day saying do you need a loan, sir, apko loan chahiye? Well if you are not having savings or any near and dear ones who are ready to invest in your ideas but still really want to plant the business seed stuck in your mind then don’t get irritated with the word loan. It can be a boon to you. What you need to do is actually contact a bank. You can start with the same bank you are having an account with. The already established relationship with this bank will ease your path to attain a loan. You have to follow a very formal command this time. Following are some key points to keep in mind while approaching any bank for a Business loan:

  • Fix an appointment with the office of the concerned department
  • Be punctual and wear formals
  • Carry your comprehensive business plan
  • Interpret your basic idea and the requirements of funds for its implementation 

Don’t get disappointed if your first meeting doesn’t turn out to be fruitful, you can try again with the same or another bank, there are an endless number of banks providing loans, you just need to prove your credibility and efficiency

Venture Capitalists

If you want to convert your aspiring ideas into a fruitful business on a good scale, then you must try to contact a venture capitalist. Venture capitalists have ample funds, you just need to prove your potential to them. First, try to identify the right investors for your business. Try to make venture capitalists which have already invested in similar kinds of business. This will ease your path, as they must be familiar with your basic concept. If you have a promising idea, which forecasts an accelerating growth in terms of annual revenue, the number of personnel, the scale of business, then these venture capitalists can invest in your business. In return for their investment, they can demand equity or ownership stake. Moreover, they also provide their inputs and frequent monitoring. Their experience will help you achieve a good foothold in the market. 

Angel investors

Angel investors literally can act as angels for your business. These are people who have surplus cash and a will to invest in the emerging companies having promising potential. You have to show meticulous efforts to make these investors believe in your idea. Show them your vision, if convinced, they can take higher investment risk for supporting you. This is their USP. So plan your pitch accordingly. They can provide finances for the initial setup as well as operational expenses. For the high risk they undertake, angel investors usually demand 30-40% annual returns.   

Conclusion

So for any business concept, finance is the most vital attribute. Starting from the early commencement stage to embarking its name in the market, every business needs funds for numerous purposes. Choosing the right financial resource is also an important aspect of being a successful business. One should choose to keep in mind various key points like the nature of the business, the scale of business, location, target market, number of employees required, and predicted time period to achieve profits. One can also use more than one source to generate funds.

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