Money talk: What’s the best way to generate funds?
The environment for startups today is especially challenging, as the pressure to raise funds to achieve success is humongous.
BENGALURU: The environment for startups today is especially challenging, as the pressure to raise funds to achieve success is humongous. This has also brought about the downfall of many promising startups in the country. Startups should assess whether the funds are being raised as risk capital in a completely new and unforeseen industry. If revenue can be generated from customers by providing an exceptional product and service, that is the most sound foundation that entrepreneurs can work with. It will not only ensure sustainable business operations in the long term but will also hold a startup in good stead if and when a funding round is needed for the growth of the startup.In the last few years, the startup ecosystem narrative in India has been driven by the buzzwords of valuation and funding. However, it is important to be self-aware and prudent about raising funds. We must start creating businesses that will stand tall and delight customers over decades of existence.
– Chaitanya Ramalingegowda, co-founder, Wakefit.co
The best way is by generating revenue from clients. This is especially true for B2B startups as businesses are typically willing to pay if you solve an important enough problem for them. Beyond revenues, there are several options for raising external capital as well. For idea-stage start-ups, angel investors are one of the best sources of external capital. They don’t just help with money but can also provide guidance and their connections. Having a well-known angel investor on board also helps in raising money in the future also. Look for angel investors that have been active in your industry with similar startups. Your college’s alumni network is also a good channel to explore for prospective angel investors. One can also try platforms like Let’s Venture which connects angel investors to startups. Finally, startups can raise money by taking loans from VCs, also known as venture debt. This is not a very popular way of raising money as of now but is getting more prominence as the Indian start-up ecosystem matures. There has been a marked increase in the number of venture debt deals in the last 12 months.
– Ankur Choudhary co-founder and CIO at Goalwise.com
There may be millions of ways around how you go about bringing in funds for your startup. But the best way is the way that suits you as an entrepreneur and exemplifies your personality and your business.
As per my own experience, it is necessary to look at things objectively and in a simplistic manner. Often times as an entrepreneur you’re unapologetically lost in the details and glory of your business and it is likely that you would look at the investor as someone who brings in money. You have to understand that an investor who brings the kind of money that he/she can; does so for a variety of reasons; and as an entrepreneur, are you aware of those? Is it the growth that your company can put up which brings in equity returns? Is there an interest of short term returns or long term value building? Is your investor looking for a quick bonanza or a long term gestation but a solid value build? It is important to have these conversations with as many investors you can proactively to really find the fit you want to be working with. End of the day the investor needs to be assured that they are money is better off being in your company than any other company/bank/institution etc. A starter’s course on finance may help if you do not have a backdrop of finance.
– AM Sameer, founder-CEO, Bonito Designs