Funding Options Available for Startups in India
The startup ecosystem has been riding the crest of an incredible bull market, defined by successful IPOs and unicorn valuations. The investor community anticipates the ecosystem and bourses to undergo some rationalisation and correction in the next months, as India's startup growth story has just begun. However, investors are generally positive about the ecosystem's expansion, with the SaaS (software-as-a-service) industry emerging as a new star. In 2021, Indian businesses raised $42 billion in investment over 1,583 deals, with 2,487 different investors participating. Software-as-a-service (SaaS), ecommerce, financial, and consumer services all received significant funding. Between 2014 and the end of January 2022, Indian startups raised about $116 billion in funding.
Equity, debt, and government subsidies are the three sources of startup funding available. Each funding type has advantages and disadvantages. Equity finance, for example, has no payback requirements but requires you to give up a stake in your company, making it the most expensive type of financing. Beyond angel investors and venture capitalists, the startup funding ecosystem has evolved. Depending on their demands and stage, startups can raise capital from a variety of investors and venues. Peek through the list of funding options for the startups including the government grants and funds.
Angel Investors
Individual investors or a group of individuals with family ties or extensive experience are known as angel investors. The majority of them are seasoned business owners who have gone through the process of beginning a company. They are aware of both the problems and the potential.
Angel investors serve as mentors to aspiring entrepreneurs. They do, however, invest less than venture capitalists and anticipate larger returns. Kunal Shah, Rajan Anandan, and Ritesh Malik are among well-known individual investors.
Angel Networks & Platforms
Angel investors pool their capital to invest in businesses through angel networks and platforms. These investors can give larger sums and manage risks because they work as a group. The platform receives equity ownership in the firm and benefits if it succeeds.
AngelList, Venture Catalysts, and LetsVenture are some of the most prominent sites.
Venture Capital Funds
A venture capital fund is a financial institution that invests in promising startups. This is the stage at which startup funding progresses to the next level. As an institution, venture capital funds contribute huge sums of funding to a firm for growth and expansion while also monitoring its progress to ensure that their investment produces long-term growth.
Micro VCs
Micro VCs are a type of venture capital with a fund size of $60 million to $70 million dollars. Micro VCs invest in early-stage firms in exchange for a share of the company's equity.
Corporate Venture Capital
Corporate Venture Capital is another type of VC (CVC). CVCs provide resources such as marketing skills, strategic guidance, or a line of credit to businesses. CVC provides capital in exchange for a share of the company's equity. Mahindra Partners, Reliance Ventures, and Times Group's Brand Capital are among the Indian CVCs.
Venture Debt Funds
In exchange for non-convertible debentures (NCDs) and equity warrants, venture debt funds lend you money. Some companies that provide venture debt financing to Indian businesses are Alteria Capital and Trifecta Capital.
Government Grants & Funds-Startup India Seed Fund Scheme
Grants and Funds from the Government of India-Startup India Seed Fund Scheme
The Government of India's Startup India initiative aims to create a strong startup ecosystem in the country in order to foster innovation and provide chances for aspiring entrepreneurs.
On January 16, 2016, the Hon'ble Prime Minister launched a Startup India Action Plan that included 19 action points.
This Action Plan outlined a strategy for creating a favourable startup environment in India. As a result, a slew of initiatives have been launched to support startups. One such plan, the Startup India Seed Fund Scheme (SISFS), gives financial help to early stage enterprises.
Startups can only get funding from angel investors and venture capital firms when they have demonstrated their concept. Similarly, banks only lend to applicants who have assets to back up their claims. Seed capital is critical for firms with new ideas to undergo proof of concept trials.
The Government of India's Startup India initiative aims to create a strong startup ecosystem in the country in order to foster innovation and provide chances for aspiring entrepreneurs.
The Startup India Seed Fund Scheme (SISFS) intends to help entrepreneurs with proof of concept, prototype development, product trials, market entry, and commercialization.
This would allow these firms to progress to the point where they might seek funding from angel investors or venture capitalists, as well as obtain loans from commercial banks or financial institutions.
Incubators and Accelerators
While all of the above funding alternatives are for already-existing businesses, incubators and accelerators are similar to startup prep schools. These programmes last four to eight months and provide cash as well as a venue for entrepreneurs to engage with investors, mentors, and other startups.
Y Combinator, GSF Accelerator, Microsoft Accelerator, Google Launchpad Accelerator, and JioGenNext are just a few of the popular accelerator programmes for Indian entrepreneurs.
Family Offices
Family offices are another source of funding for Indian entrepreneurs. In India, family enterprises have a long history of passing on their assets to the next generation. There are about 140 family offices in India that have made significant investments in the startup ecosystem. According to a research by Praxis Global Alliance and 256 Network, they have been actively participating in 50+ such deals every year since 2015.
Equity, debt, and government subsidies are the three sources of startup funding available. Each funding type has advantages and disadvantages. Equity finance, for example, has no payback requirements but requires you to give up a stake in your company, making it the most expensive type of financing. Beyond angel investors and venture capitalists, the startup funding ecosystem has evolved. Depending on their demands and stage, startups can raise capital from a variety of investors and venues. Peek through the list of funding options for the startups including the government grants and funds.
Family offices are another source of funding for Indian entrepreneurs. In India, family enterprises have a long history of passing on their assets to the next generation
Angel Investors
Individual investors or a group of individuals with family ties or extensive experience are known as angel investors. The majority of them are seasoned business owners who have gone through the process of beginning a company. They are aware of both the problems and the potential.
Angel investors serve as mentors to aspiring entrepreneurs. They do, however, invest less than venture capitalists and anticipate larger returns. Kunal Shah, Rajan Anandan, and Ritesh Malik are among well-known individual investors.
Angel Networks & Platforms
Angel investors pool their capital to invest in businesses through angel networks and platforms. These investors can give larger sums and manage risks because they work as a group. The platform receives equity ownership in the firm and benefits if it succeeds.
AngelList, Venture Catalysts, and LetsVenture are some of the most prominent sites.
Venture Capital Funds
A venture capital fund is a financial institution that invests in promising startups. This is the stage at which startup funding progresses to the next level. As an institution, venture capital funds contribute huge sums of funding to a firm for growth and expansion while also monitoring its progress to ensure that their investment produces long-term growth.
Micro VCs
Micro VCs are a type of venture capital with a fund size of $60 million to $70 million dollars. Micro VCs invest in early-stage firms in exchange for a share of the company's equity.
Corporate Venture Capital
Corporate Venture Capital is another type of VC (CVC). CVCs provide resources such as marketing skills, strategic guidance, or a line of credit to businesses. CVC provides capital in exchange for a share of the company's equity. Mahindra Partners, Reliance Ventures, and Times Group's Brand Capital are among the Indian CVCs.
Venture Debt Funds
In exchange for non-convertible debentures (NCDs) and equity warrants, venture debt funds lend you money. Some companies that provide venture debt financing to Indian businesses are Alteria Capital and Trifecta Capital.
Government Grants & Funds-Startup India Seed Fund Scheme
Grants and Funds from the Government of India-Startup India Seed Fund Scheme
The Government of India's Startup India initiative aims to create a strong startup ecosystem in the country in order to foster innovation and provide chances for aspiring entrepreneurs.
On January 16, 2016, the Hon'ble Prime Minister launched a Startup India Action Plan that included 19 action points.
This Action Plan outlined a strategy for creating a favourable startup environment in India. As a result, a slew of initiatives have been launched to support startups. One such plan, the Startup India Seed Fund Scheme (SISFS), gives financial help to early stage enterprises.
Startups can only get funding from angel investors and venture capital firms when they have demonstrated their concept. Similarly, banks only lend to applicants who have assets to back up their claims. Seed capital is critical for firms with new ideas to undergo proof of concept trials.
The Government of India's Startup India initiative aims to create a strong startup ecosystem in the country in order to foster innovation and provide chances for aspiring entrepreneurs.
The Startup India Seed Fund Scheme (SISFS) intends to help entrepreneurs with proof of concept, prototype development, product trials, market entry, and commercialization.
This would allow these firms to progress to the point where they might seek funding from angel investors or venture capitalists, as well as obtain loans from commercial banks or financial institutions.
Incubators and Accelerators
While all of the above funding alternatives are for already-existing businesses, incubators and accelerators are similar to startup prep schools. These programmes last four to eight months and provide cash as well as a venue for entrepreneurs to engage with investors, mentors, and other startups.
Y Combinator, GSF Accelerator, Microsoft Accelerator, Google Launchpad Accelerator, and JioGenNext are just a few of the popular accelerator programmes for Indian entrepreneurs.
Family Offices
Family offices are another source of funding for Indian entrepreneurs. In India, family enterprises have a long history of passing on their assets to the next generation. There are about 140 family offices in India that have made significant investments in the startup ecosystem. According to a research by Praxis Global Alliance and 256 Network, they have been actively participating in 50+ such deals every year since 2015.
