How to Raise Startup Funds : Key Tips for Indian Entrepreneurs

January 16, 2025

8 min read

All startup businesses begin with exciting new ideas and high hopes. It’s very important to find investors for startup who share your vision and can provide the financial backing and expertise needed for success. However, it is also an unfortunate fact that most startups run into unforeseen financial and operational difficulties within the first year of their operations.

Business researchers often point to a number of reasons that are responsible for the failure of a promising new venture. Yet, the fact also remains that most of these difficulties arise due to inadequate capital. The right seed funding opportunities is pivotal for startups, as they can provide the essential initial capital and resources required to propel their innovative concepts and entrepreneurial ventures forward.

Capital is the basic requirement for running any venture and no business can be expected to thrive if it does not have proper financing. Selecting the right capital raising strategies for a startup can be the key to turning vision into reality. That is the reason why the concept of investor funding is so strongly embedded in the startup scene. But, raising funds is not only a tedious exercise, it also determines the future of a startup venture. For instance, you may lose control of your business by giving up a large stake in return for capital funding.

There are a number of ways you can raise funds for a startup business, such as bootstrapping or self-funding, crowdfunding, Angel investment, venture capital, working capital loans, and government programs that help MSMEs. Below are the ways to get funding for start-up with its own pros and cons. Let’s have a look.

Top 6 Sources for your Business Funding:

1. Self-funding:

Using funds from personal savings or borrowings from family and friends or both.

Pros:	Cons:
Easily accessible funds	Not feasible for large scale business operations or expansions
No bureaucratic hassles
Flexible interest rates

2. Crowdfunding:

Getting funds from crowdfunding platforms by making a pitch and getting capital from interested crowd funders.

Pros:	Cons:
Helps in marketing as well as financing by creating a public interest	Competition is heavy due to the public nature of the platform
Allows you to retain control of your business
May help attract future investment from venture capitalists	So, is the probability of your idea of getting rejected due to too many homogeneous ideas
Crowdfunding startup can be the path to financial support and community engagement.

3. Angel Investment:

Basically, getting funds from individuals with huge capital worth, willing to invest in new business ideas.

Pros:	Cons:
An Angel investor can also provide valuable business mentorship along with the capital investment	The capital provided by Angel investors is often less in comparison to venture capitalists or other business funding methods
Angel investors are less risk averse

4. Venture Capital:

Venture capitalists are professionals who tend to invest in solid business ideas. However, they rarely seek equity and pull out when a business is acquired or upon IPO.

Pros:	Cons:
Venture capitalists bring a huge amount of mentorship and business acumen to the table	Venture capitalists tend to take away the control of your business in order to recover their investment quickly
They help you design exit-strategies that allow huge profit margins	Venture capitalists are mostly interested in large companies which have a proven business model

5. Working Capital Loan:

A loan from a microfinance company or NBFC that especially caters to the needs of small business owners.

Pros:	Cons:
Loans are unsecured so there is no risk of collateral loss as is with a bank loan	None that we can think of
A quick business loan can fast track your income generation
Helps small businesses gather their bearings before seeking higher investments
No legalities and technicalities in comparison to traditional bank loans

6. Government Programs:

Getting funds from the government subject to institutional scrutiny and meeting the policy parameters.

Pros:	Cons:
Great way to source funds at low-interest rates along with subsidies and other incentives	Very slow, long, and often tedious process that may take months or even years to get an approval

So, now that you know about the various ways of raising capital for your startup business, the obvious question that needs asking is – which one is the best?

Well, if you are looking for a quick and hassle-free funding, it means you have already tapped in bootstrapping sources. So, the next best thing here will be getting a working capital loan from an NBFC. Discovering how to raise startup capital for small business necessitates exploring diverse methods, such as crowdfunding, strategic partnerships, or leveraging social impact initiatives. These are the creative ways to raise funding for your startup business.

Faster Business Loans without Security

Non-Banking Financial Companies offer loans for business without requiring a collateral. NBFCs are also business sensitive and hence provide quick business loan approvals and disbursements in comparison to traditional banks. For example, a bank may take up to 15 days to process your business loan application whereas you can get a business loan approval within 72 hours by applying with an NBFC like Lendingkart Finance.

Flexible EMIs, Interest Rates and Prepayment Options

Working capital loans for businesses offer a range of advantages, including a flexible EMI schedule, lower interest rates, and adherence to prepayment charges as per the lender’s policy. If you are a budding entrepreneur, these benefits can be a godsend for your business. For instance, the ability to customize your EMIs allows you to plan your repayment in tandem with your invoicing cycle. Lower interest rates mean you are not losing precious capital in interest payments. If your business generates profits and you want to repay the loan early, note that prepayment charges may apply according to the lender’s policy, without any additional fees or penalties from us.

Conclusion

Raising funds for business establishment and growth is always tricky. There are a lot of checkboxes that you need to tick before getting the capital you need. Furthermore, some of the most popular startup funding measures are also the most crowded ones as other entrepreneurs are also having the same funding ideas. Whereas getting funds by giving away equity has its own pitfalls in the long-run and can leave you without any control whatsoever over your business. Alternatively, you can get a bank loan for funding your business but that process is also marred by slow processing, bureaucratic red-tape and the huge risk of collateral loss.

So, amidst such tedious and discouraging scenarios, getting a working capital loan or a business loan from an NBFC like Lendingkart is the most plausible alternative for funding your startup. Add to that the many benefits of NBFC business loans, and the fact that you do not have to give away control over your business for getting working capital funds, and you have a winner on your hands.

Frequently Asked Question:

1. What are the different ways to raise funds for a startup?

There are many ways to raise funds for startup, such as bootstrapping, seeking venture capital, crowdfunding, loans, grants, or angel investors, each with its pros and cons. The choice depends on the business’s needs, stage, and industry.

2. How can a startup attract angel investors and make a compelling pitch to them?

Angel investors for startups can be attracted by crafting a compelling pitch that outlines a clear value proposition, market opportunity, and a strong, capable team. Highlighting potential returns and risk mitigation strategies is key to gaining investor interest.

3. What types of small business loans are available for startups?

Startups have access to various small business loans, including SBA loans, microloans, equipment loans, and lines of credit. These loans cater to different financial needs, credit profiles, and business purposes, helping startups secure essential funding.

4. What should startups consider when deciding on the right funding method for their Business?

Startups should consider their funding needs, growth stage, industry, and long-term goals. Factors like equity ownership, repayment terms, interest rates, and the impact on decision-making should guide their choice of the most suitable funding methods to raise money for a startup.

5. How important is a strong pitch and presentation when seeking funding for a startup?

A well-crafted pitch demonstrates an entrepreneur’s ability to communicate their business concept and startup fundraising strategies effectively. It not only captures investors’ attention but also instils confidence in the startup’s prospects, making it a critical element in securing the necessary funds for growth.