15 Ways to Raise Funds for Startups in India

Thinking of starting your business but don’t know how to fund it? Well, starting a business is an exciting venture and a promising opportunity in India. We understand that raising funds for startups in India is equally challenging. You don’t need to worry anymore because we have got 15 ways to help you raise funds for your startup.

Why Do you Need Funding for Startups in India?

Funding is vital for Indian startups for several reasons. It serves as the driving force that moves them from an early concept to a successful enterprise. This is an in-depth breakdown of why funding is crucial.

Turning Ideas into Reality

The majority of startups start with an imaginative idea. However, a creative idea may not be enough to build a business. To spark your ideas, you will need detailed R&D. With funding, you can make investments in R&D, build early models, and improve your goods and services. For instance, a hardware firm needs capital to construct real devices and carry out testing.

Technology Development

Let us not forget that technology is typically at the heart of startups in the current digital era. Funding makes possible investments in software development, app creation, and the construction of the required tech infrastructure. It also helps understand the target market, consumer demands, and competitive environment.

Also Read: 30 Most Profitable Franchise Businesses in India

Talent Acquisition

Highly skilled employees expect competitive salaries, particularly in marketing and technology. Hiring important staff members, including developers, sales teams, and leadership, is facilitated by early-stage funding.

Promotion and Branding

The most important part of running a business is to market your brand. Funding is needed for PR efforts, influencer partnerships, and digital advertisements to raise brand awareness. For instance, to attract clients, startups like Zomato and Swiggy invested crores in marketing. They are well known for their outstanding marketing and branding.

Costs of Operations

Even though you have the money to support your startup, you might still require consistent funds for everyday business expenses, office space, utilities, and logistics. Bootstrapped startups may be burdened by just rent and internet fees.

Growth and Scaling

Significant expenditure is required when expanding internationally, entering new markets, or starting in several cities. For instance, after obtaining funds, Ola expanded to the UK and Australia. Funding might be used to expand the product line, support the creation of new features, or serve various customer groups.

Supply Chain & Inventory

Startups in D2C and e-commerce require solutions for logistics, warehousing, and inventory. For instance, Flipkart required capital to fortify its supply chain.

Also Read: 15 Unique Business Ideas in Villages

Handling Uncertainty and Risks

We all know that running a business is not an easy task. Uncertainties and unforeseen difficulties are common for startups, particularly in the initial stages. Funding gives them a safety net to handle these storms. It also enables them to change course or modify their plans as necessary. Rather than concentrating just on short-term survival because of cash flow limitations, funding enables entrepreneurs to make strategic decisions with an eye on long-term growth.

15 Ways to Raise Funds for Startups in India

It's thrilling to start a business, but securing funding can be difficult. The startup scene in India is flourishing, and entrepreneurs have access to a variety of funding sources. Let’s explore 15 ways to secure funding in India:

1. Bootstrapping

This is the most common way to fund any business. Many founders consider it one of the best because it allows them to have full control over their business. Bootstrapping is the process of starting a business with money from your resources, early sales proceeds, or rigorous cost control. Consider it the do-it-yourself method of financing. The common challenge that comes with this type of funding is that your finances may be at risk, and growth may be slower.

2. Family and Friends

The individuals closest to you are frequently the first to believe in your vision. Especially for very early-stage firms, asking friends and family for financial help can be a smart place to start. The terms may be more lenient than those of traditional investors. The best thing is that they know and trust you. It might be challenging to balance business and personal ties. To prevent future disputes, it is essential to manage expectations and have clear agreements.

3. Angel Investors

High-net-worth individuals known as angel investors contribute their own money to startup companies in return for stock. They frequently contribute not only money but also invaluable connections, mentorship, and expertise.
Angel investors have the power to create strategic alliances and future fundraising rounds. They bring in their expertise that can help a startup grow. Challenges of possible disparities in vision and dilution of equity can be faced.

Also Read: How to Start a Small Business - Detailed Guide

4. VC (Venture Capital) Companies

Venture capital firms invest in businesses with strong development potential in exchange for a sizeable stock interest. They achieve this by pooling funds from a variety of investors, including endowments, pension funds, and rich people. The advantage is that it is a significant financial resource for quick scalability and growth. VCs also contribute a wide network and strategic advice. The challenge often arises with strict inspection, pressure to produce quick development, and a significant dilution of stock.

5. Startup Grants and Contests

Applying for government or private grants and entering startup competitions may result in non-dilutive capital. This eliminates the need to give up stock, allowing you to keep the stake. Benefits include networking opportunities, idea validation, and no dilution of equity. There is a strong rivalry and money may be scarce. Additionally, the application procedure can take a long time.

6. Incubators and Accelerators

In exchange for a tiny equity stake or program fee, incubators and accelerators offer entrepreneurs services such as networking opportunities, co-working space, coaching, and occasionally seed money. You get access to a network of advisors and investors, guidance from seasoned business owners, and a planned program to assist you in honing your business plan and reaching goals. The program's lifetime may be lengthy, and equity may be diluted.

7. Bank Credit Facilities and Loans

Examining traditional financial institution loans and credit facilities can be a choice, even if it's frequently difficult for extremely early-stage firms. This is after your company has some assets and operating experience. You can maintain complete control and ownership. It could be challenging because banks usually need robust financial records and collateral, which early-stage firms may not have.
Pro tip: Government programs like the Pradhan Mantri Mudra Yojana (PMMY) are designed to make it simpler for startups and small enterprises to obtain finance.

8. Crowdfunding

You may not have heard a lot about founders building businesses with crowdfunding, but it is quite popular. Through crowdfunding sites, you can raise modest sums of money from a large number of individuals, frequently in return for debt, equity, or awards. Benefits include marketing opportunities, validation of your product or service, and access to a sizable pool of possible investors or clients. To reach your target audience, a lot of marketing and promotion work is needed. Success rates can differ.

9. Strategic Partnerships

Working together with other startups or well-established businesses can occasionally result in finance through joint ventures, investments, or revenue-sharing arrangements. Benefits include market reach, resource accessibility, and perhaps investment from a strategic partner that recognizes the potential of your business or technology. Managing the partnership and coordinating interests might be challenging.

10. Demand-Driven Funding

One of the best ways to finance your business and show prospective investors that there is a market is to generate early money through pre-orders or initial sales. Strong product or service validation and non-dilutive funding. It usually requires efficient marketing and a product or service that is ready for early adopters.

11. Corporate Venture Capital (CVC)

Big businesses frequently have their venture capital divisions that make investments in new businesses that fit with their strategic goals. Obtaining substantial funds and possibly collaborating with the corporate investor on projects like technology integration or market access can be highly beneficial. There may be strategic restrictions on the investment, and the only way out could be to be acquired by the parent corporation.

12. Government Programs and Subsidies

To assist entrepreneurs in a variety of industries, the Indian government has introduced several programs and incentives. Advantages include tax reductions, non-dilutive cash, and further assistance. The application procedure might be lengthy and difficult.

13. Debt Financing from Non-Banking Financial Companies (NBFCs)

Compared to traditional banks, NBFCs frequently have more accommodating lending standards and can offer entrepreneurs financial capital. It allows you to maintain complete control and ownership. They still need a certain amount of financial stability and may have higher interest rates than bank loans.

14. Supply Chain Financing and Invoice Factoring

Supplier chain financing or invoice factoring can offer instant operating capital to firms that have begun to make money and have a supplier chain or invoices. Enhances cash flow and lets you expand and execute orders without having to wait for payments from clients. It might not be for startups that don't have a steady source of income.

Also Read: How do you set up and register an e-commerce company in India?

15. Token Sales and Initial Coin Offerings (ICOs)

Token sales, also known as initial coin offerings (ICOs), are a means for blockchain and cryptocurrency firms to raise money by selling digital tokens or coins. It gives community development and substantial financial potential. It may involve regulatory monitoring and high volatility.

India offers a wide range of startup funding choices depending on the needs and phases of growth of the company. Entrepreneurs may get the appropriate finance for their startups and make well-informed decisions by being aware of various funding sources. It’s time for you to give wings to your business idea without worrying about the funding.