Different sources of raising Funds
Venture Intelligence is a leading research company focused on raising venture capital and private funding deals. In its latest report VI publicly announced that there are 43 angel investor networks, 111 venture capitalist networks and 37 incubators in India.
Obviously, traditional forms of funding like breaking the bank for your life savings, liquidating fixed assets and borrowing money from friends and relatives are not the only means of business funding anymore.
However, relying on the traditional funding methods means scrimping on the capital and lack of proper documentation. There is no organized inflow of money and so growth patterns of your business face restrictions.
A more efficient way of raising capital for your venture is to get resource shares from people who are interested in your business idea. There are typically 3 initial stages of a start up venture – the seed stage, early growth stage and active growth stage.
You can work on the business idea to generate a prototype (seed stage) with pooled resources. However, if you have scalability issues and are finicky about maintaining absolute control, you have to look for private funding.
Friends and Family
After using your own funds i.e. savings, the next place most people go to, is their friends and family to seek out investment for their new business. This type of investment, if possible, will have the most flexibility, lowest or no interest rates and is the easiest to arrange.
However, be warned that you need to make sure they know the risks and only do this arrangement with friends or family members that you have strong relationships with as if things don’t work out it can seriously hurt relationships. Make sure you put it all in writing and have a signed agreement between you.
Individuals with HNV (high net worth) invest in potentially profitable start ups in exchange for a minimal share of the business. These kinds of investors are called Angel investors. The major networks in India are Indians Angel Network, Mumbai Angels, Pune Tech Angels and Business Angels Network.
Angels in India are interested in Education, Mobile technology services, healthcare innovations and rural development. The main advantage of getting help from angels is that they are very patient and have altruistic intentions.
Yourstory.in have a great article about the most prolific angels. Click here to read it.
Indian Investment Network (IIN) is a good forum for entrepreneurs to meet investors. The IIN is a part of the international network which focuses on investing in startup ventures.
Venture Capital Firms
Venture Capitalists are firms that invest the money of their shareholders to fund start ups. Though unlike angels, they don’t enter the business at the seed stage they can arrange for steadier and fatter inflows of money (10- 40 crores).
Well established venture capital firms in India are Sequoia Capital, Ncubate capital, Nexus Capitals and DFJ (Draper Fisher Jurveston). Be prepared to face incisive enquiries about your business plan viability and profit forecasts from these firms. The most favored sectors are Green technology, healthcare and e-commerce.
Venture Debts are medium tenure loans provided with special benefits to start-ups funded by prominent venture capitalist firms.
Small Industries Development Bank
Small Industries Development Bank of India (SIDBI) is an independent financial institution aimed to aid the growth and development of micro, small and medium-scale enterprises (MSME) in India.
SIDBI can help in a number of ways including financing but also promotional / marketing. They run a great number of schemes and can help you set up a new project, expand or diversify and existing business, modernize your business, upgrade your technology, improve quality and in general help to make you more competitive. Find out more at: http://www.sidbi.com/
There are a number of events that you can go to where you may meet investors and definitely meet other Entrepreneurs. Yourstory.in runs a great series of events called TechSparks which run across a lot of the main cities in India.