💡Innovative Funding💰 Sources for Startups🚀: Think Outside the Box | 03 Startup 360 by Sivesh |
Beyond VCs and Angels: Discover Alternative Funding for Your Startup
If you can't explain it to a six-year-old, then you don't understand it yourself.
Albert Einstein
Hello Entrepreneurs,
I am back, and this week I will be talking about something which excites every one in Startup Ecosystem.
Funding / Fundraising / Investment / Investor / VC
We will be looking beyond Angels and VCs money.
And will try to explain the way Sir Albert suggested.
Trust me when I say it, I ran it through a 6 year old ( my niece ), I guess she was able to understand around 75% - 80% of it.
So I am confident you guys will get 95% of it. ( If case something confuses you, write to me with your query, together we will find the answer of it ).
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After talking to like 1000s of Founder over a period of 10 years, I realized that they are living with the wrong definition of Fundraising all along. Until and Unless you have your basics clear, it will be impossible to build anything over it.
So,
What is Fundraising?
Fundraising is largely generating funds for your venture either by selling your product / services / process to customer OR by selling your companies equity to the investors.
In brief it is bringing in money in your venture to for operation and growth.
Now Ask this to yourself,
Is Angel and VC only way to securing funds❓
Give it a day, and share with me all possible ways that you have found to generate funds ( ⏳waiting for your mail over it ).
But you are not here to get assignments from Prof Sivesh, so let me share some ways in which it is done ( Or I have done in / My mentees have done it ).
Bootstrapping:
Bootstrapping is building a company from the ground up with nothing but personal savings. Extremely limited resources can inhibit growth, prevent promotion, and even undermine the quality of the bootstrapped product. The bootstrap entrepreneur retains total control of the business and makes all of the decisions. Though founders are a bit skeptic about it, everybody wants name, fame and money which comes with raising money through Investors. Two of the biggest profit making Startups of India are Bootstrapped ( Zerodha & Zoho ). Let that sink
3Fs ( Family, Friends and Fools)
Friends: Because they believe in you, not the venture.
Family: Because they believe in you, not the venture.
Fools: Because they don't recognize the risk in the venture. ( Relatives, Ex-Boss, Colleauges, Friend’s Friend etc.)
It sound unreal for a lot of founders, why will anyone give you their money. Let me tell you a story on how I raise almosed INR 1.5 Million in 2013 for my venture in 3 days time. When I started, I knew that I am not going to get money from my Family and was not in contact with a lot of Fools. My parents advice of having good friends turned out to be a blessing for me. A lot of my friends went ahead and got placed at very competative salary packages ( they were from IITs and IIMs ), some even went to Silicon Valley. I created a list and started calling them, started asking samll amounts like anything between 20k - 100k. Within 3 days I had 1.5 Million in my account. Later I returned then with an interest ( which they never asked but I did gave them interest ).
As a founder it is your job to find a way.
Angel Investors
An angel investor (also known as a private investor, seed investor or angel funder) is a high-net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company. Often, angel investors are found among an entrepreneur's family and friends. Best Angels : Entrepreneurs who just made some money, CXOs.
At times it is hard to raise complete capital requirement from a single Angel, so it is always a good idea for founders to work it Angel Networks. Just google, you will find a list of networks there. Angel Investors are the people who invests in teams and founders.
Venture Capitalists
VCs are the big brother of the Investment Ecosystem.They are in the business of making money by investing money. Yes for them their commodity is money. Similar to Startups, they raise huge amount of money from LPs ( Limited Partners ) with a promise of returning the money at a ceratin X amount over a period of time. And futher they invest and make money out of it. As they invest someone else’s money and data says that even 9/10 VC backed startup fails, they take their good sweet time to review the entire business. They invest more on numbers which are present in your financial models. One can say that they are more professinal when it comes to funding startups.
Acceleratos / Incubators
Early stage Startup founders that are looking to start off on the right foot can raise funds through a startup accelerator or startup incubator by joining their startup programs. Often assumed to represent the same concept, startup incubators and accelerators have a few key distinctions between them.
A startup incubator is like a big house where new companies can live and get help from grown-ups called mentors. They give the new companies a place to work, resources to use and advice to help them grow big and strong.
A startup accelerator is like a big playground where new companies can play and learn new things quickly. They also have grown-ups called mentors who help them and give them money to make their ideas happen. But in exchange, the new companies have to give a small part of their idea to the grown-ups. The goal of the accelerator is to make the new companies become successful quickly, like getting to the top of the slide first.
On that note, I am really happy to announce that we have launched our Accelerator yesterday : O2 VC Fund. 03 Months Cohort with, validation funding starting from INR 25 Lac on succesful selection in the Deeptech space. For details and application process you can reach out to us at : sivesh@o2vc.fundBank Loans
I am not sure why founders are so much against it. I believe it have to do a lot with our mindset, which is quite prevelant in India that all Banks are theives. If you have a well written plan for your business, you can do wonders with bank loans. The conventional means of taking a bank loan can also be one of the viable funding options for startups. However there are certain factors that the bank considers before offering you a loan. These are related to your startup business model, expected returns, your ability to pay back the loan, management experience and expertise and last but not the least – the collateral security that will be provided by you.
TERM LOANS - PreSeed or Seed
WORKING CAPITAL LOANS - Series A
ASSET BACKED LOANS - Series B
Startup India Schemes
Startup India Seed Fund Scheme (SISFS) provides financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization. Eligible startups can apply for the scheme on the Startup India portal. The Seed Fund will be disbursed to selected startups through eligible incubators across India. Considering I am not an expert when it comes to Govt. schemes ( sincire appooies for it ), I will encourage you to please check their website.
Apart from SISFS there are a lot of competitions, challanges and events are organized by the Govt., and the prize amount at times are equal to Pre-Seed or Seed rounds. So why to miss them, keep on checking the Startup India Website for it.Investment Platforms
It is the new bread of Investment options and a good one if you are looking to raise a small ticket. Though in India crowd funding is not legal, but these investment platforms came up with some new instruments like CSOPs ( Customer/Client/Community stock option plans ) which is completely legal. The best part is, you are not diluting any equity in it. The process is quite simple. Every platform have their own thesis of investment, to take an example, some will invest only in D2C, some invest only in recuring revenue business models. Some known platforms are : TykeInvest, POD, Sateeq, Recur Club, Velocity etc. in India. Republic is the global platform.
Signing off
Sivesh
A Startup Student