InvestorQ : Can I have your thoughts on the various ways that I can fund my start up? Should I bootstrap the start up or accept institutional money?
Lavanya Subramanian made post

Can I have your thoughts on the various ways that I can fund my start up? Should I bootstrap the start up or accept institutional money?

ishika Banerjee answered.
1 year ago

That largely depends on your personal choice and the needs of the business. In fact, most start-ups begin as bootstrapped (self-funded) entities. Of course, if the cash flows from the business are robust enough to take care of all your working capital needs then you are in a golden sweet spot but that rarely happens in practice. That is why a plan to raise funds becomes very critical. How to you go about fund raising?

Raising funds and having a source to rely on is an important part of your continuity plan. Once you are sure about the type of business you want to operate in the next big thing will be to raise the amount to run that business. There are various forms you can raise the funds to start a business in India. Here are a few options in front of you.

· Personal Savings can be invested in your business and that is what most people do to begin with. This method entails using your personal savings to start up a business. If you have saved some money, you can invest the same. Entrepreneurs generally go with bootstrapping (Personal Saving) method to begin with. However, personal resources can deplete quite fast if you commit the same to business and the business does not generate enough, as is most likely in the initial years.

· Another way to make life easier for you is to allow your business to get loans if you are in the initial stage of the business. All you need to do is start a business that is profitable from your own savings and show the same results to the bank. Most banks have this option to give loans for Business Start-ups. After personal savings, loans from banks are the next option people generally go for. Since personal resources are generally limited, start-ups often turn to banks with the hope to get the loan sanctioned by the bank. However, it can be quite tricky getting banks to fund a start-up idea.

· A third option, and quite popular nowadays, is funding From Venture Capitalists or VCs. Some businesses also get funds from Private Equity (PE) players or even from angel investors. Such investors are always on the lookout for young and dynamic start-ups to invest in. Of late, India has become a booming hub for start-ups from the past two years. Big global names like Blackstone, KKR, Tiger Global, Helion, Accel, Blume and Softbank are showing a lot of interest in India.

· A more improved and all-round funding experience is called as a Business Incubator. These business incubators are firms that definitely provide monetary investment but they also look forward to helping the booming businesses to come up with the ladder by providing them other amenities needed to operate. Such amenities include co-working space, Electricity, Internet, etc. They are also called accelerators for start-ups, and normally also enjoy government or state support.