Raising funds is one of the key factors that play a major role in any start-up. Deciding how to raise funds by analyzing various factors like the control over the fund, type of fund required, risk of raising any type of fund, etc. can be a deciding factor in the success of any start-up. So here we will talk about various ways in which start-ups can realistically raise funds.
This is the easiest and most convenient way to raise funds because here you retain 100% of the ownership, you don’t lose control in the decision-making process and there is no burden to repay interest or any particular amount that you have invested in your start-up. The only potential concern is you need to have the necessary sum of money which you might have accumulated through your job, business, or maybe parents and there is a risk to lose that money if that start-up doesn’t work out as planned.
Family and Friends
Convincing an investor or bank may require a lot of planning and trial & error but your family or friends are easier to deal with in this context. They know you to a great extent and they might believe in your dreams if they see certain qualities in you.
One important thing is to make the loan or whatever agreement it is legal and in a documented form. Even though it’s someone you know things can go south anytime and it might create a lot of financial as well as personal problems.
The government has launched many schemes for Small businesses as well as start-ups and start-ups should have a good look at the options they have in the government scheme. It can be lending money on no or low-interest rates, grants by the government for certain sectors, etc. Certain schemes are specially made for Startups and one takes advantage for benefit of the company. Loan schemes like the MUDRA loan scheme under Pradhan Mantri Mudra Yojana (PMMY), Start-up India, Stand-up India, Atal Innovation Mission, Make in India, etc. are available for Start-ups.
Angel investors are people who have excessive money and are willing to invest in start-ups that they think have great potential. Although the risk of putting money in startups is very high as compared to investing money in other ways but so is the return on investment. The investors often also act as a guide for the company helping the business with various tasks. But convincing Angel investors are not so easy to convince and you need to do proper research and have a great plan so that they can show faith in the start-up.
It is another way to raise funds where the employees of risk capital companies invest people’s money in companies. They generally look at the start-up in a much more detailed manner and are also generally involved in the working of the company as compared to angel investors who are individuals with excessive money and are willing to provide financial assistance generally.