How to Amass Funds for Your Business

- BY Jaspreet Kaur
Feature Writer, BusinessEx
- |
- Jul 16,2019
- |
13 Mins Read
The process of building a company is much similar to constructing a house. The house’s foundation is created initially and likewise, the underpinnings of an organisation are decided early. Another thing which correlates in both cases is the monetary requirement. For establishing one’s business, as well as a house, one needs to have a large chunk of money.
Talking about a business enterprise, it becomes convenient to achieve goals and further, expand business plans by receiving monetary help. However, gathering money is a daunting job for startup owners. After all, building others’ interest and trust in one’s business is not an easy task, specifically for the early-stage business.
Is Venture Capital Helpful for All Types of Startups?
According to Venture Intelligence’s report, Series A investments by venture capital firms have surged by 23 per cent from $411 million to $505 million in the first six months of the current year (2019). The comparison was made reflecting on investments in the initial six months of 2018 and witnessing a similar period in 2019.
Seeing a rise in VC investments, it can be deduced that venture capital firms readily give monetary help to the companies. Before presuming it further, it is important to understand the nature of VC firms and how they function.
While scouting options for financial backing, venture capital firms seem to be a preferred option for early-stage companies. In essence, venture capital firms approach affluent people in society and amass money from them. This money later gets invested in startup companies, after ascertaining their potential and possibility of success. The invested sum is offered on an interest which startups have to pay in a decided time.
When startups pay back money to VC firms, the accrued interest rate is considered as income of VCs and the remaining portion is paid to wealthy individuals. Nonetheless, the interest rate is comparatively higher than banking institutions and in turn, puts more burden on the startups.
Considering different types of business, venture capital could not fit in all situations and thus, entrepreneurs should look for other available options.
Gather Funding from These 3 Sources
Apart from venture capital, there are some other proven ways to acquire funding for startup companies. The startups can use below-listed methods to gather a large sum of money to scale their business.
- Crowdfunding
According to Statista’s report, “Transaction value in the Crowdfunding segment amounts to US$1.7m in 2019. Transaction value is expected to show an annual growth rate (CAGR 2019-2023) of 0.6 per cent resulting in the total amount of US$1.8m by 2023.”
In crowdfunding platforms, a startup sells off its business idea and promises to turn it in reality if it gets funded adequately. Some of the prominent crowdfunding platforms are Ketto, Milaap, Wishberry, Faircent and so on.
- Equity Crowdfunding
Equity Crowdfunding is a part of crowdfunding only wherein people, who fund the company, acquire shares in return. Later, the earned profit of the company becomes distributed amongst all stakeholders. This form of crowdfunding can be also practised on above-cited crowdfunding platforms.
- Angel Investors
On the surface, angel investors work like venture capitalists. However, the only thing that distinguishes them from VCs is their independent nature. Unlike VC, angel investors entirely scrutinise a business and then make a bet. Thus, it can be said that angel investors are not driven by a motive to earn income.
After ascertaining a potential business, angel investors not only invest in the business but also mentors it from time to time. Some of the popular angel investment platforms are Seed Invest, Angel India, Lets Venture and Gust.
More from Jaspreet Kaur
5 C’s Entrepreneur must be aware...
Getting a Loan is a difficult task so one must be prepare...
July 11, 20173 Min Read
What incubator provides startup...
Startups need incubators for their overall development...
January 10, 20183 Min Read
When Is Debt Better Than Investment?
An entrepreneur must consider lending as an option...
January 17, 20183 Min Read
8 Food Business Ideas Pick Up Steam...
Seeking business opportunity in the food industry then...
January 18, 20183 Min Read
How to maintain a good business...
A good relation between mentor and entrepreneur builds...
January 20, 20183 Min Read
How online networking helps small...
A one stop solution for all business related problem...
January 22, 20183 Min Read
Why invest in the leisure and entertainment...
Investing in the leisure and entertainment industry...
January 23, 20183 Min Read
Why you should invest in a startup?
Investing in a startup is the fastest way to get a...
January 24, 20183 Min Read
When is the right time to exit...
Starting a business is not a child's play so it is...
January 29, 20183 Min Read
6 mistakes to avoid after raising...
Entrepreneur makes mistakes after raising funding which...
January 30, 20183 Min Read
What Startups and SMEs can expect...
Let's see what experts have to say on this year budget...
January 31, 20183 Min Read
Union Budget 2018: Highlights for...
Union Budget 2018 has revealed some policies that impact...
February 01, 20183 Min Read
Recommended for you
- September 30, 2021
- September 07, 2021
- August 11, 2021
Latest News & Articles
- July 11, 2017
- January 10, 2018
- January 17, 2018