Funding for startups
Startup funding india
What is seed funding?
Seed funding or also called as seed financing. Seed funding is the first official equity funding of startups. This is basically the first funding coming to startup officially. Seed funding for startups helps a startup to validate the business idea and helps in building the minimum viable product (MVP). Larger startup equity is diluted on seed funding. The investors can be founders themselves, family, friends or angel investors. The primary sources for raising seed funding are from angel investors, banks, corporates and family/friends. It is called “bootstrapping“ when the promoters invest their own capital on startups.
The next stage of funding is raising funds from VC’s (venture capitalists)
How to raise seed funding for startups?
The seed funding for a startups round is a very critical funding round for a startup. Every startup needs to be prepared with the following documents before reaching out to any angel investors.
- Financial modelling
- Projected Valuation report
- Pitch deck / Investment deck
- Business Plan
Strong financial modelling helps a startup to analyze the market and growth. Every investor critically looks into the financial model / financial projections to understand the growth parameters. This helps and angel investor to understand the need, growth, ROI, valuation and potential of a startup. As an early-stage startup, it doesn’t have a valuation. The angel fundings are made on projected valuation.
The projected valuation are calculated using multiple valuation methods. “ Discounted Cash flow “ is one of the most commonly used technique to do a startup valuation.
Pitch deck is a tool used to explain the startup idea and business model. Pitch deck is also a most critical document for startup funding. An elaborate plan of action of a startup is a business plan also called a “detailed project report (DPR) ”.
How to get funding for startups
Every startup needs to understand and perform complete research to find the best angel investors for their seed funding capital. The major’s sources for seed round startup funding are:
- Angel investors
- Incubators and accelerators
- Startup programs
- Government grants
- Bank loans
- Debt funding
- Convertible securities
- Angel Investor networks
- Corporate seed funds
What is “Government schemes for startups”?
The Modi government has come up with various government schemes for young business startup in India. These schemes are focussed to increase and improve the startup community and entrepreneurship in India. These provide a wide range of financial and infrastructural support to the Indian startups. Every startup can use these schemes as an early funding for startups.
Following are the government – funding for startups in India:
1. MUDRA loan
3. Credit Guarantee Scheme
4. Stand Up India Scheme
7. Raw Material Assistance
8. PMEGP Scheme
9. Marketing Promotion Schemes
How to apply for Startup Business Loan
you are having a great idea and looking to start a startup or wish to upgrade your existing startup the biggest challenge you must be facing is the operating costs and cash flows. This limits your growth and expansion. As an early startup, most of the financial institutions hesitate to provide funding. Then the one option to get working capital for your startup is a bank loan. The Modi government has come up with a startups schemes to support early stage startups.
As a startup founder, proper financial modelling and solid documentation with a detailed business plan are the basic documents required to plan for funding. These documents should outline the goals and the objectives of the business including a strong financial model that will represent the growth of the startup along with the potential returns. Give a clear estimation of the funds and fund utilisation plans to specify the use of the startup loan in the business plan.
Learn more about startup business loan
Different funding stages of startups
There are multiple levels of a funding stages of startups. The startup funding journey and stages are described below.