Funding never happens!!!

Types of Funding

07 April 2019, Hyderabad:

An innovative brain is the ideal workshop for an emerging startup. Being intriguing about opportunities is the necessary trait of a successful founder. To succeed one need to be equipped with adequate knowledge, determination, hard work and willingness to move out of comfort zone.

Funding is an essential aspect of any startup from incorporation to scaling up every facet needs funds. Teams with good corporate governance and fiscal discipline along with interesting project analysis will come handy to lure investors. Though self-financing is required in the initial stages, however external financing plays a crucial role in fully utilizing the available market opportunities.

The startup limousine needs finance fuel to accelerate at great speeds to scale greater heights.’ Successive rounds of funding in startups are consecutively termed as Series A, Series B and Series C financing. The various types of funding for the startups are:

BOOTSTRAPPING is nurturing the startup growth through self-funding. This leaves a good impact on the investor when you go for further funding. Bootstrapping shows your confidence and shows startup traction and a plan for potential success.

CROWD FUNDING is a way to get funds from multiple sources of small remittances. A startup needs to give a detailed description of the USP, about the product and goals for business plans along with the total fund required on crowd funding platforms. The reader would either donate or pay for pre-buying the product. The advantages of this type of funding is, it acts as a litmus test for the scalability of the project and gives the much-needed initial buzz in the market. Maximum 5-10% of readers will take a call, the rest will know about the project even before actual launching. However, the process requires time and dedication before reaping optimum results. Some of the popular Crowd Funding sites in India are lndiegogo, Wishberry, Ketto, Fundlined and Catapooolt.

SEED FUNDING or seed capital or seed investment is the initial stage of funding done in a startup by individuals or a small entity in return for equity in the newly formed organization. The amount of money is usually relatively small because the business is still in the idea or conceptual stage. Seed funding is the earliest funding that you may be able to attract into your startup. At one point in the technology industry, entrepreneurs would routinely attract seed funding based on concepts. Seed investors expect to see a lot more validation and traction even at the seed stage.

ANGEL INVESTMENT is availing funds from individual investors who also mentor / advice the startups and handhold them till a certain point.  Normally these investors work in a network, screen proposals, and decide on funding. Many companies like Google, Alibaba and Yahoo are few examples of this modus operandi. However, the limitations of this type are, funding amounts are lesser and inreturn for an equity of almost 30% stake in the startup company.

VENTURE CAPITAL is availing funds by a professionally managed fund facilitation companies. They are choosy and try investing only in startups that are disruptive or with high return potentials. They look for stronger teams with good traction. They demand equity and remain as stakeholders until the company goes for IPO or acquisition by another corporate giant.

Normally the Venture Capital Company is interested in entities that have successfully completed the startup phase and are in revenue generating mode. They offer their expertise and mentorship that enhance the success rates of the enterprise. However, the disadvantage in this type of funding is VCs play a dominant role in the decision making of the company, which could be disturbing for the team at times.

FUNDING FROM BUSINESS INCUBATORS AND ACCELERATORS is available for early stage startups. Business Incubators nurture the startup with training, providing shelter, tools and mentorship. They also help in networking to businesses. On the other hand, Accelerators do the same things and the main difference is the speed. They provide good chances to network with peers and startups across the platform.

The other types of funding are through participation in competitions, government schemes, bank loans and from NBFCs.


  • Helps in scaling the infrastructures
  • Recruit the best brains
  • Promote the products / services
  • To achieve targets within stipulated schedules
  • Withstand competitions


  • At the idea stage
  • At the team erection stage
  • At the prototype stage
  • At the marketing stage
  • At the IPO stage

RETURN ON INVESTMENTS (ROI): ROI measures the amount of return on an investment, relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. In other words, it is the gains from Investment that is obtained from the sale of the investment earlier made.

EXIT POLICY: As the word suggests it is the exit point at which the investor would sell his stake and move out of the company. It is the contingency plan designed by the investors to liquidate the stake in the startup as per certain predetermined criteria that both the startup and investors decide at the time of investing.

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