April 14, 2020

A guideline for budding entrepreneurs to understand startup funding ecosystem in India

According to Investopedia, a startup is defined as a budding company that is just developing. The company is started with an idea to provide a unique solution, be it a product, service or software to mitigate the complicated problem or to more efficiently serve something that has already been there.

Reports state that almost 10 million jobs are needed in a year in India and not large organisations but these startups contribute to these openings. Approximately 3000 startups spurred in the Indian startup ecosystem in 2018 and it is evolving every day.

With approval from the Union Cabinet in June 2016, the Government created a Fund of Funds for Startups (FFS) with a sum of INR 10,000 crore to support the fundings of startups, over a period of XIV and XV Finance commission cycles. As of 2019, INR 2200 crore has been issued to the Small Industries Bank of India (SIDBI). Moreover, SIDBI further committed INR 2265 crore to 40 Alternate Investment funds (AIFs). 193 startups received funding of around INR 1150 Crore from AIFs till 2019. Furthermore, the Government has started the Bank of Ideas and Innovations program to boost innovative ideas of companies. The government’s Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA) is also there that has started with an initial amount of INR 20,000 crore to extend benefits to around 10 lakhs SMEs. Other state government programs include Maharashtra Centre for Entrepreneurship Development, Rajasthan Startup Fest, Kerala State Self Entrepreneur Development Mission (KSSEDM), Karnataka Venture Capital Fund, etc.

Apart from the Government and State Government, there are various funding associations and angel networks that support the startups in India. From providing funding to mentoring the entrepreneurs, they are constantly supporting the startup funding ecosystem of India.

Getting a startup funding in India is not an easy cakewalk, although with time it has got less time-consuming. Here are few tips for budding entrepreneurs to help in raising adequate funds from the right investors –

Start with creating a profile on AngelListEverything is being digitalized and its high time you start sharing your ideas online. If you don’t do it, how will investors know? AngelList is an effective platform that intimates potential investors about your ideas, companies, services, products. With an impressive profile, you can share it across informal and formal groups to render references. This method will increase your possibility of bagging investors and at least one big investment.
Develop a list of investors
It is always better to do some research and prepare a list of big names and pen it down. Approach some of the experienced entrepreneurs with this list and further shortlist the names who will be appropriate to reach out to. Suggestions from experienced entrepreneurs will create a win-win situation as they will mentor you to learn the art of investor selection and also save your time.
Work on networking skills
Getting an acquaintance in common with the investor will always give an edge. The chances of attracting funds brighten up if a known person of the investor is sharing the idea. So, after penning down the list, research the investors individually, and find common connections. If there’s someone then meet them individually and propose your idea highlighting how it stands striking amidst a crowd. If your connection feels confident then chances of enticing the investor heightens.
Make a well-versed classy introduction
Remember that first impression can make you or break you. So, when you are introducing your company to the investors then be cautious about giving a hard-hitting, crisp, alluring introduction. Don’t forget to draft emails with different styles as every investor is different. So, create uniquely and carefully.
Highlight why they should invest
Everyone says they are unique but what makes the difference is highlighting why they are unique. Sharing long-term objectives, unique benefits will show your passion and dedication and will much likely attract the investor. The business cycle keeps going when a founder finds the best investor and vice-versa.

There are also some options for getting funding for startups in India –

Self-funding – needed at the initial stage as first-time entrepreneurs find trouble in getting funding before showing some traction and potential success.
Crowdfunding – bagging investments, funding, contribution or loan from crowdfunding platforms like Indiegogo, Wishberry, Ketto, Fundlined, Catapooolt and others involving more than one person at the same time.
Angel investment – Indian Angel Network, Mumbai Angels, Hyderabad Angels, and others are some of the active angel investors who generally invest in the company’s early stages expecting up to 30% equity.
Win contests – NASSCOM’s 10000 startups, Microsoft BizSparks, Conquest, NextBigIdea Contest, Lets Ignite, and others are some of the Indian contests maximizing the fundraising opportunities.
Bank loans – Bank Of Baroda, HDFC, ICICI, Axis banks and others are some of the prominent Indian banks to get working capital loans for the initial funding stage.

There’s no bang-on method to get a fund from investors but perseverance is needed. Nos will be common but the key is to not give up and stick to a positive approach and keep trying.

Amidst the many, Hyderabad Angels is one of the most active investors in India who supports budding entrepreneurs to create a sustainable new-age startup ecosystem and value for mankind.