When we start a new business it is called a startup. An entity will be considered a startup up to 10 years from the date of its incorporation. To run the business we need financing for the survival of the business. There are some ways to get finance to run the business smoothly.
Let’s understand some of the ways of Startup Financing;
1. Bootstrapping: This is nothing but a self-finance when anyone starts his or her business without getting funds and investing his or her fund in his or her business and reinvesting the revenue generated from the business.
Zerodha is a perfect example of bootstrapping.
2. Angel Investors: They are wealthy private investors focused on financing small business ventures in exchange for equity. They invest in small startups or entrepreneurs. The capital angel investors provide may be a one-time investment to help the business propel or an ongoing injection of money to support and carry the company through its difficult early stages. Angel investors are also called informal investors, angel funders, private investors, seed investors, or business angels. Angel investors typically use their own money.
Some Well-known Names of Angel Investors in India; Ranjan Aandan (MD of Sequoia Capital), Anupam Mittal (Founder and CEO of the People Group)
3. Venture Capital Fund: They are a type of investment fund which invest in early-stage startups and small businesses with exceptional growth potential.
Stages of Venture Capital:
Seed Money: In this stage, the founder of the startup just proves the idea. It is the Early-stage firms that need funding for expenses associated with marketing and product development. After this founder of the startup goes for the First round for Early sales and manufacturing funds then goes for the Second Round for Working capital for early-stage companies that are selling products, but not yet turning in a profit. After this, they go for the Third Round for expansion money for a newly profitable company. In the last stage, they intended to finance the "Going Public" process.
Some Venture Capitalists in India: Helion Venture Partners, Accel Partners, Blume Ventures, Sequoia Capital India, Nexus Venture Partners, Inventus Capital Partners, IDG Ventures, Fidelity Growth Partners, Naspers, Steadview Capital