As an entrepreneur, you must have experienced (or experiencing) the enormous need for capital. Raising capital is certainly one of the most challenging aspects of growing a business. Preparation and planning while maintaining your patience and energy level is imperative to success. A common question that we often come across is how to raise capital in India.
Well, we all know that India is a business-friendly nation with investors from around the world eying the Indian market. Now there are various ways you can pool money for your startup provided you have the right idea and execution plan. Here is a list of some of the most common funding sources in India that you can explore. Try them sequentially or you can even jump on to the one that you think is most suitable for your startup.
Common Business Funding Options In India
1. Friends And Family
This is the first door we usually knock to get some initial funding for our business. No doubt, the capital won’t be large enough. But if your close ones invest generously, you can definitely give a nice kick-start to your dream startup. Those who believe in you will definitely want to keep some faith in your idea as well, won’t they?
However, it is quite a delicate option and lack of transparency may create complications which might influence you personal relations too. So try to keep your business dealings as transparent as possible. Also make sure that you are not doing any injustice while repaying the loan or profit (whatever is the nature of the partnership).
This is a popular funding source that is increasingly becoming a preferred choice among entrepreneurs. In this age of internet, the concept of crowdfunding has emerged as a wise capital raising strategy. Instead of asking huge capital from people, you are reaching out a wide range of audience and asking for a small amount of money. Thereby no one is forced to spend huge but you are making a significant collection.
Business incubators are firms that take the initiative of promoting small, potential businesses with a selfless attitude. They fulfil the fundamental requirements of a startup such as office space, capital, networking, management trainings and other services. They primarily focus on startups and early stage businesses to ensure their growth and success. If you are planning to set your business off the ground, this is a great option to consider.
4. Angel Investors
Angels are wealthy individuals who work either individually or as a network. You must have gone through the success stories of WhatzApp, Facebook and others. The stories give a clear sign of the rising trend of angel investments. They usually invest between $ 25,000 to $ 100,000 but it may go beyond in certain investments. They invest in startups or early-stage companies in exchange of a percentage share in the equity. A unique idea, scalable model, smart team, great market traction, etc. are a must to convince an angel.
5. Venture Capital
Here comes the King – the most powerful of all funding options. Venture capitalists are professional investors willing to make high-risk investments in potential startups. The capital size they offer is the biggest of all though getting access to that is a challenge. They invest where they see profit. Once the investment tenure is over, they take their share of profit and exit the venture. If you can attract a VC, you don’t need any other investor.
These are some of the common funding options in India that you must look into. For more information regarding how to raise capital in India, feel free to visit Merger Alpha.