InvestorQ : As a start-up entrepreneur, what are the capital and fund raising options in front of me and how can I go about raising funds?
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As a start-up entrepreneur, what are the capital and fund raising options in front of me and how can I go about raising funds?

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vidhya Laxmi answered.
1 year ago
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Capital is one of the most crucial parts of any start-up and raising it is one of the hardest parts for any company. You can raise capital through equity or through debt depending on the eligibility and the attractiveness of your business plan for the potential investors in the VC / PE field. This is a delicate stage because capital investment is huge for any company it has a dark side as it is a huge financial risk for anyone. Founders must therefore look for angel investors or venture capital firms for their company and in return for their money have to show a lot of potentials and at times keep everything as collateral. Thus, you need to know exactly how much capital you need to raise for your business and how much of it should come from investors as a loan. Once you have that figured this out, you should decide how you’ll be raising it and how you plan to give it back in the future. This research should be extensive and not exhaustive as these are the people who will make it or break it for your company and also have a huge impact on your future performance and cash flows.

The choice between debt and equity must be made based on whether the cash flows of the business are predictable or not. Debt calls for servicing and hence you need predictable cash flows. On the other hand, equity does not need regular servicing but it normally results in dilution of control. Over a period of time, if the existing promoter is not able to bring in the necessary capital for the business, they may even have to sell and cede control to the VC / PE as we saw in the case of Flipkart in India.

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