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Tag: government funding for startups

  • How Can You Raise Seed Funds For Your Startups?

    India has witnessed a significant increase in the emergence of startups in the last few years. India is now the world’s second-largest startup hub, with over 94 unicorns in total. Indian entrepreneurs have evolved into powerful drivers of the country’s economic progress. This is undoubtedly the best time to start a successful company in India.

    With the Government encouraging people to form their startups, more and more people are indulging themselves in this journey. Currently, we have over 65000 startups in the country. The best part is every sector be it fintech, digital marketing or any other, is flourishing in the country.

    Graph showing the Top 5 most valued Indian Startups as of the end of 2021

    You got a Startup idea to build a product that could change lives. You have the Business Model and Product Development roadmap laid out. You might even have a small team to get started in your startup. And then comes the real problem that every Entrepreneur faces – funds to hatch the plan.

    We all know that timing plays a major role in the success of any startup. It’s not a simple task to transform the ideas into a profitable business. Founders might not always have the funds to launch the product at the right time in the market at the beginning. Since growth is the main goal in the initial stages, startup owners must understand how to raise the “seed” capital.

    What are Seed Funds?

    Startups raise seed funds essentially for operational costs like hiring the right people, purchasing tools, leasing offices and more. This crucial step forms the solid basis for launching a thriving business at the right time. When you start a business, the most important thing that is needed is funding. Seed funding means the funds by investors provided to your business in the initial stage. The investors pour their funds in return for an equity stake at the initial stage of business. It is at the early stage that the investment by the investors is done, which helps the business to grow and make its capital. Seed funding should not be confused with a loan. Investors get equity in the company for their investment.
    Now that we know what seed funds are and why they are crucial, let’s dive deeper into the different ways to raise seed capital for your startup.

    Proven Ways to Raise Seed Funds for Startups

    Crowdfunding
    Friends and Family
    Accelerators
    Incubators
    Corporate Seed Funds
    Bootstrapping
    Venture Capital Funds
    Angel Investments
    Debt Funding
    Government Grants and Schemes

    Crowdfunding

    Crowdfunding is becoming increasingly popular in recent years. Many startups have successfully raised seed money through crowdfunding platforms like Kickstarter, Indiegogo and Wefunder. The process involves creating a campaign to convince and persuade thousands of people to invest and buy your product before its developed. This method is a great strategy for founders who do not want to give up equity and dilute the company at the seed rounds. The idea is to build the product from the money made from pre-sales and ship it when ready. Startup founders also utilize crowdfunding websites to understand the market and assess the demand for their products. The idea is to build the product from the money made from pre-sales and ship it when ready.

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    Friends and Family

    Friends and Family are mostly the first places every entrepreneur reaches out to for investment when getting started. Some founders offer equity in the company but many consider this investment as a loan. This method provides a little breathing room in terms of loan repayment.

    Accelerators

    Accelerators typically exist for startups that need assistance with launching and growing the company. Accelerators like Y Combinator runs programs to choose startups for investing. The selected startups get a pre-decided amount in return for a specific percentage of equity. They also support startups with Mentorship and Networking events where the founder gets exposure.

    Incubators

    Incubators are specifically created for startups that are at an early stage. They facilitate the development of ideas and the validation of market fit. The investments are usually small as most founders get this funding to nurture the idea and introduce innovations. Incubators also offer Workspace and Mentorship Support and Networking Opportunities for founders.

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    Corporate Seed Funds

    Many established corporations consider startups as a major source of fresh talents and innovative ideas. Megacorporations are always on the lookout for new ways to invest in emerging technological innovations. Again, this type of financial help gives the startup much-needed exposure and is frequently a precursor to a potential acquisition.

    Bootstrapping

    Let’s not forget that not every startup needs to raise money at the seed stage. Bootstrapping is the process of funding the startup with your savings and reinvesting the profits from the business. Many startup founders use their own money to get their businesses off the ground to eliminate giving away equity at the initial stages. Bootstrapping, on the other hand, might put entrepreneurs under further financial strain.

    Venture Capital Funds

    Venture capital firms offer seed funding for startups with high growth potential. Venture capitalists provide both professional experience and money to entrepreneurs. This type of investment calls for the exchange of a company’s equity for financial assistance. VCs review a lot of projects but only invest in a small percentage of them, so you’ll have to stick out from the pack.

    Angel Investments

    Angel investors are affluent people who invest their own money as seed capital in businesses in return for equity of the company’s ownership. This process is relatively quicker than a VC investment. Many angels are known to use convertible debt as it has the advantage of deferring the company’s value until the next funding round. Angel investors also get discounts for investing early in the startups.

    Debt Funding

    Debt funding is often provided by the bank, an investor or any financial institution to the startup founder. Here, the founder is borrowing the money for a fixed rate of interest instead of giving away any equity in the company. The capital must be repaid with the interest at the agreed timeline. It’s important to note that the only advantage for the investor here is the interest amount.

    Government Grants and Schemes

    The Indian government has stepped up to support young entrepreneurs who need help with growing their startups. The government has taken initiatives like The Startup India Seed Fund Scheme (SISFS) which intends to support startups with the conceptualizing of new ideas, developing prototypes, determining the demand in the market and monetization.

    Conclusion

    There is no doubt that raising the seed funding is difficult. Gaining the right understanding of the options available for you is the key and we hope that our information has helped you.
    You must also know and understand how the different kinds of investors operate, how they make financial decisions to help your startup and how their seed fund can help you grow.
    It’s also worth noting that seed financing isn’t just for the early stages but it’s also for the years ahead. Also, keep in mind that timely capital is critical for companies to stay up in a challenging market like India. A startup that sets growth initiatives should be able to use the seed capital to raise further investments.

    FAQs

    What is Seed Funding?

    Seed funding means the funds by investors provided to your business in the initial stage.

    What are some of the effective ways of raising seed funds?

    Some common and effective ways of raising seed funds are Crowdfunding, Friends and Families, Accelerators, Incubators, Bootstrapping, etc.

    How many Startups are there in our Country?

    There are currently over 65900 startups in the country. But the number is expected to rise shortly.

    What is The Startup India Seed Fund Scheme?

    The government has taken initiatives like The Startup India Seed Fund Scheme (SISFS) which intends to support startups with the conceptualizing of new ideas, developing prototypes, determining the demand in the market and monetization.

  • 7 Ways To Raise Funds For Your Startup or Business Idea

    A business startup comes with a lot of responsibilities. If you’ve got a business idea and you think it could make a change in the market, it’s up to you to make it a reality. Funding is an essential part of any business, as, without the seed money, you’ll be unable to fire the starting gun on your startup.

    Entrepreneurs are an incredibly clever and industrious bunch, but many are in the dark about how to fund their startup business idea, preferring instead to focus their energies on a core offering.

    Ways to Finance Your Business Idea
    1. Personal Money
    2. Seek for Angel Investors
    3. Crowdfunding
    4. Bank Loans
    5. Find a venture capitalist
    6. Pursue startup grants
    7. Family and Friends
    FAQ’s
    Conclusion

    Ways to Finance Your Business Idea

    Great ideas can only fulfill their potential if they are backed by a stable investment. These are some of the ways you can fund your startup:

    How Startup Funding Works.

    1. Personal Money

    For many people, the first inclination is to use personal money to make essential purchases. With a new startup creating so many different needs for money, it can be rather challenging to decide what needs to be funded first.

    Business costs start right from the time you decide on a business name. For instance, to retain that business name, you need to register a company name via a company formation. Registering a new entity costs money, but it is one of the first requirements to legitimizing your idea.

    Personal money can come from savings, and you can finance everything yourself, leaving you with total equity in the organization. One important factor to keep in mind is not only will you need cash for business purchases, but you will need working cash flow. You probably have other financial responsibilities. Therefore, you will need funds to deal with these. If you use up all your savings for your business startup idea, it could leave you in a precarious situation financially as you move forward.

    Money Management Tips

    2. Seek for Angel Investors

    There are some people out there whose sole job is investing in businesses that might help them make even more money going forward. These are known as angel investors and they have plenty of money to spare. These are the people you should be pitching to if you think your business idea is innovative and has the potential to make big money in the future. There are many online angel investment networks, as well as local investor groups you can pitch to in person, so do your research and start submitting your pitches.

    Find the right angel investor and not only will you benefit from their financial support but also their wisdom: oftentimes, they offer mentorship as a side dish alongside their capital. Although they generally offer less financial backing than banks and venture capital funds.

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    3. Crowdfunding

    Crowdfunding has taken off in a big way over the last few years. Crowdfunding is a favorite of the digital economy, and probably the quickest way of obtaining finance for a new business. All you need is a compelling pitch, one which strongly references your start-up’s potential for growth, as well as a knack for interacting with your cash-rich community. The sooner you get started and get creative with your crowdfunding campaign, the sooner you’ll start to draw more people in.

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    As a side benefit, crowdfunding is a nifty form of advertising, a way of stimulating public interest in your company before it’s even made its debut.

    4. Bank Loans

    In the modern age, it almost seems anachronistic to seek a bank loan. But if you have a solid credit history or existing assets that you’re happy to offer as collateral, as well as a workable business plan with clear profit forecasts, it’s still possible to launch your start-up with an infusion of bank cash. If you want to get money, it makes sense to head to a bank where they have lots of it. Their loans might come with harsh interest rates that could cause you plenty of problems further down the line though.

    5. Find a venture capitalist

    Finding a venture capitalist who shares your vision, or at the very least believes in your ability to turn your idea into a successful, profitable venture, is a good way of raising cash. The main con with this option is that venture capitalists are typically looking for the next big thing and so, many entrepreneurs struggle to convey the scale-ability of their enterprise.

    Venture capital funds, by their very nature, have a short shelf life as they generally seek to recover their investment, turn a profit then move on to the next fresh startup.

    6. Pursue startup grants

    Grants are great for people who don’t know where else to turn. If you have an unusual idea that investors and banks are scared of and crowdfunding doesn’t seem like a realistic option for you, it makes sense to apply for startup grants. While you shouldn’t expect to be cut a massive cheque, there are dozens of grants available, offered by national and state governments (as well as private enterprises) in the interests of stimulating the economy and growing the jobs market so it’s worth checking out your options for funding your startup.

    The main drawback is the fierce competitiveness of such grants, as well as the box-ticking involved, it can be a frustratingly drawn-out process, but that’s the tradeoff for retaining equity.

    7. Family and Friends

    Lastly, the idea of hitting friends and family for cash doesn’t sit well with some entrepreneurs, but many of the world’s top magnates readily admit to borrowing from their social network early in their careers. As such, you should have no compunction about doing the same.

    On the other hand, it’s not easy to put together a hefty bankroll relying solely on family and friends; and you have to ask yourself whether you want to risk straining meaningful relationships.

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    FAQ’s

    How difficult is it to get a business loan?

    It is difficult to qualify for a small business loan with a credit score lower than 700. Additionally, you should build a strong personal credit score and drive down any debt prior to applying for a business loan.

    What do startups use the funding for?

    Startups raise funds for various reasons but most often the main purpose is to grow their business. It can take a while for a company to reach profitability and until then, the business needs some cash to keep going.

    Who is eligible for startup India?

    Being incorporated or registered in India for less than seven years and for biotechnology startups up to 10 years from its date of incorporation. Annual turnover not exceeding INR 25 crores in any of the preceding financial years.

    How can I approach angel investors in India?

    Here are a few tips to approach angel investors in India are:

    • Approach angel investors in your niche.
    • Show them how successful your past business ventures were.
    • You’ve got to know the numbers involved.
    • Make it a priority to do proper research.
    • Stay confident.

    How to Get Investors for a Startup in India?

    • Create a profile on AngelList.
    • Prepare a record of investors to share your ideas with.
    • Brush up your networking skills.
    • Have a classy intro.
    • Tell them why they should invest in your startup.

    How can I raise money to start a business in India?

    • Go for Crowdfunding.
    • Consider Self-funding.
    • Get in touch with the Venture Capitalists.
    • Try Angel Investment.
    • Try Angel Investment.
    • Focus on the close.
    • Terms of the deal.

    Conclusion

    Perhaps a combination of funding options is best, but only you will truly know. All these above options require a great deal of consideration and researching because each of the options that have been discussed here has its own benefits and drawbacks, don’t forget that when you’re making your decision.

  • The Startup India Seed Fund—How Will It Help Your Startup?

    Indian Prime Minister Mr. Narendra Modi has from the start of his tenure emphasized the growth of India with the “Made in India” plan. Under his leadership, the central and state governments have been actively incentives for Indian Businesses.

    He was addressing the Prarambh Startup India International summit and said in his address that the target for India’s startups over the next five years should be to become global giants in their respective service areas. And announced the launch of a new seed fund for startups for setting up and growing business subsequently.

    Read on to learn how it can impact your startup.

    When is a Business called a Startup?
    What is Startup India?
    What is Startup India Seed Fund?
    What will the Startup Seed India Fund do for Startups?
    What Advantages would Startups get with Startup Seed India Fund?
    FAQ’s
    Conclusion

    When is a Business called a Startup?

    A business would usually be called a startup when it has been set up, so a young company. It is a venture by the aspiring entrepreneur to create a unique product or provide a service. These usually operate on a tight budget and are funded either by the founder or with association with friends, family, or maybe personal borrowing.

    The very first challenge they face is validating their product or service. They have to convince the consumer that their product/service is worth believing and spending. And convince lenders and investors of the possibility of healthy returns.

    What is Startup India?

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    Startup India Benefits by Government

    Startup India was introduced in 2016 by the Central government with intention of creating a positive environment to encourage innovation and growth of new companies in the country. This would ensure the sustained growth of the nation and provide a continued source of employment.

    The government created the Startup India Action plan to:

    • Simplify establishing business and provide guidance
    • Provide funding schemes and other incentives
    • Be a common ground for industry and academia to work together

    Definition of a Startup under Startup India:

    • Establishment: The company’s date of incorporation should not exceed 10 years
    • Type of Company: The business should be registered as either Private Limited Company; a Registered or Limited Liability Partnership
    • Turnover: The annual turnover should not exceed 100 crores in any year since incorporation
    • Formation: The business should not have been formed by splitting the company
    • Potential: The should a potential to improve existing product or service and creation of wealth and employment in the process

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    What is Startup India Seed Fund?

    The Fund of Funds for Startups was set up in 2016 so that new companies could get assistance in raising equity capital through the Fourteenth and fifteenth Finance commission cycles. The size of this corpus was a huge 10,000 crores and it was mainly designed towards raising equity capital.

    With the announcement of the Startup India Seed Fund, the Government has taken its initiative a step further. Allocating 1,000 crores for gaining access to debt capital by providing the guarantee for these young companies.

    What will the Startup Seed India Fund do for Startups?

    Prime Minister Mr. Narendra Modi announced that the new Startup Seed India fund will assist companies source funds for their growth and operative costs. The main aim is to assist with gaining access to debt capital by providing a guarantee to potential investors and lenders.

    Your undertaking gets a solid back in form of a government guarantee and securing the needed funding. On the other hand, while lenders and investors have peace of mind having secured the return of their money.

    This follows a similar initiative by the Ministry of Electronics and Information Technology in 2020 to select up to 300 startups and provide them financial assistance. This would include funds up to rupees twenty-five lakhs and a host of other benefits.

    The Startup seed India Fund is expected to be designed along similar lines and more details are expected in the forthcoming weeks as the structure is set in place for encouraging new enterprises by the Indian Government.

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    Government Loans for Startups

    What Advantages would Startups get with Startup Seed India Fund?

    Startup India has a lot of in-store for the new enterprise. And as it sees a new dimension added to it, you can without doubt expect the advantages to be aligned with each other:

    • Simple Process: The government recognizes that setting up a new venture is exhausting; thus, the registration process is simple and straightforward. Most of it can be even completed online and the documentation required is easily accessible.
    • Inexpensive: The government can provide information about facilitators who help in completing expensive processes at lower costs. And the statutory and other fees may be borne by the government or kept very nominal.
    • Access to Funds: A 1000 crores corpus has been set aside by the government for the Startup Seed India Fund. This government will also provide a guarantee to lenders and other investors to help raise debt funding for the undertaking.
    • Simplified compliances: Many compliances and essential requirements have been simplified to save time and money. This makes the process more transparent, easily understandable, secure, and understood by the masses.
    • Tax Benefits: There are usually tax benefits offered to both new companies and investors. The new institution will get either be exempt from tax or reduced tax up to a certain turnover. The lender will have similar facilities for the money invested.

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    Raise Funds for Startups

    FAQ’s

    What is Startup India scheme?

    Startup India Scheme is an initiative by the Government of India for generation of employment and wealth creation. The goal of Startup India is the development and innovation of products and services and increasing the employment rate in India. Startup India was launched by Prime Minister Shri Narendra Modi.

    Who are eligible for Startup India?

    Being incorporated or registered in India for less than seven years and for biotechnology startups up to 10 years from its date of incorporation. Annual turnover not exceeding INR 25 crores in any of the preceding financial years.

    How do I get funding for my Startup?

    One of the most popular forms of startup funding is through venture capital. High-net-worth individuals, giant super funds, corporates and other groups invest in venture funds, which are managed by investors, who invest in startups on their behalf, taking equity stakes in the business.

    How much Fund has the Indian Govt. announced for Startups?

    The Indian Government has taken its initiative a step further by announcing the Startup India Seed Fund and allocated 1,000 crores for the startups.

    Conclusion

    Under the current Regime, India has seen a more robust environment conducive to the establishment and growth of startups. The Indian government has promoted new ventures not only to engage the youth. But also, to bring forth innovation, create employment, strengthen the economy and development of the nation. This new Startup India Seed Fund is another step to make the future brighter and make India self-sufficient.

  • How to Apply for Startup India and Seed Funding

    Prime Minister Narendra Modi announced a Rs. 1,000 Crore seed fund for India Startups, to allow initial funding for startups. “This is going to help to launch and develop new businesses,” Modi said at the International Summit of Prarambh Startup India. Modi said, “India is trying to create a startup ecosystem based on the key principles of youth, youth, and youth.” The Government will also enable new companies to develop debt capital by providing guarantees.

    PM Modi announced the Startup fund on 16th January, 2021
    PM Modi announced the Startup fund on 16th January, 2021

    The GeM platform offers local startups the chance to take part in government tenders with large corporations. Modi reported that approximately 8,000 startups had so far registered and had done almost Rs 2,300 crore. He praised the startups for creating innovative solutions during the pandemic and for supporting the efforts of the government to normalize economic activity. More than 10 startups across sectors ranging from beauty to payments turned unicorn in 2020 against nine in 2019.

    Startup Ecosystem facilitated through various Government Departments & Programs

    • 4000+ Startups have benefitted in the last year through various programs of the Central Govt.
    • 960 crore of funding has been enabled to Startups through various schemes.
    • 828 Cr sanctioned funds for infrastructure.

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    Support Offered By Government

    What is GeM
    Conclusion
    Frequently Asked Questions

    Support Offered By Government

    With the objective to build a strong eco-system for nurturing innovation and startups in the country the Government launched a Startup India Action Plan that offers the following support to recognized supports through:

    Tax Exemption

    • IT exemptions for 3 years
    • Capital gains exemption to people investing such capital gains in the Government recognized Fund of Funds
    • Tax exemption on investments above the Fair Market Value

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    • Fast track of Startup Patent applications
    • A panel of facilitators to assist in filing applications, govt. bears facilitation costs: 423 facilitators for patent & design, 596 for trademark applications
    • 80% rebate in filing of patents: 377 startups benefitted

    Easy Compliance

    Self-certification and compliance of 9 environments and labor laws through Startup India web portal/mobile app. Online self-certification for Labour Laws enabled through ‘Shram Suvidha’ portal.

    Relaxed Norms for Public Procurement

    By easing the requirement of prior experience and prior turnover in tenders for application by startups.

    Fund of Funds

    • ₹ 10,000 Cr. Fund of Funds to be provided by Mar 2025: Avg. ₹ 1,100 Cr. Per year
    • Operating guidelines has changed to incorporate the following:

      – 2x of FFS to DIPP Startups Allow funding of the entity after ceasing to be the startup (under DIPP)

      – 600 Cr (+25Cr Interest) given by DIPP to SIDBI which further committed Rs 623 Cr to 17 VC. 56Cr has been disbursed to 72 startups catalyzing investments of Rs 245 Cr

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    Credit Guarantee Scheme for Startups

    • Corpus of ₹ 2,000 Cr across 3 years
    • Collateral Free, Fund & Non-Fund Based Credit Support
    • Loans of up to 5 Cr. per Startup to be covered
    • Status: EFC Memo circulated on 22 March 2017 to 6 Departments
    • Impact: Credit guarantee to benefit 7,500+ Startups in 3 years

    Industry/Academia Support

    Providing and building infrastructure across the country by setting/scaling up: 31 Innovation Centers, 15 Startup centers, 15 Technology Business Incubators, 7 Research Parks, 500 Atal Tinkering Labs.

    Startup Recognition

    6398 Applications received; 4127 startups recognized; 1900 startups eligible for tax exemption (900 processed, 1000 pending); 69 startups given tax exemption.

    What is GeM

    What is GeM?
    What is GeM?

    Government e Marketplace (GeM) is a government and agency online procurement platform and the most commonly used public procurement channel in India. MSMEs and DPIIT recognized startups can be used to register as sellers on GeM, and directly to government bodies to sell their goods and services. GeM Startup The runway is the latest initiative laid by GeM to empower businesses to enter the universe of government purchasers through the provision of creative, design, process, and operation-specific goods.

    To apply to Startup India Seed Fund, here are a few steps you are required to follow:

    1. Registration of the Company:

    The company needs to register itself through the GeM Portal. In the website, it has instructed on how to register the company in the portal and to check if the company is eligible.

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    How to register your MSME?

    2. Fill Up Application:

    Fill the Form Correctly and Upload the appropriate Document then Submit the Application.

    • Name of the firm: Provide name of the business firm which shall be used to sell products and services on GeM Portal. Please note you must carry registration proof in the name of business firm.
    • Address of the Business firm: Provide the registered address of the business firm.
    • Nature of the Business: Describe the business activity of the firm such as the manufacturer of goods, service provider, retailer, wholesaler, distributor, etc.
    • List of Products & Services to be sell in GeM: Enter all the goods and services needed for public procurement in the GeM Portal. By separating commas, a company may join many products and services.
    • Owners Name: Enter the company owner’s name. In the case of a company, LLP, or partnership firm, you may enter any one authorized partner/director details.
    • Owner’s Aadhar Or PAN Number: Provide the 12 digits Aadhar Number of the business firm owner. In the case of a company, LLP, or partnership firm, you may enter any one authorized partner/director details.
    • Type of Firm: Select the nature of your business entity.
    • E-mail ID: Enter the email id of the owner or authorized director/partner.
    • Mobile Number: Enter the mobile number of the owner or authorized director/partner.
    • Bank Account Details: Provide complete bank details of the business the firm under which payment shall be received after goods/services public procurement or on completion of tender.
    • Date of Business Incorporation: Enter the date of the company/firm incorporation which shall be available in partnership deed or certificate of incorporation or other business registration certificate (in case of the sole proprietor).
    • Income Tax Incorporation: Select yes if the income tax return of the firm or owner (in the case of the sole proprietor) has been filed for any previous year. Else select No.

    3. Online Payment: Make an online payment to process your application with our Secured Payment Gateway.

    4. Schedule Call-back: Schedule a call back for validation

    5. Validate and complete registration: To receive a call from the validation department and complete your registration.

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    Conclusion

    Startups are excluded from specific selection requirements such as Prior Experience, Preview and Earnest Money Deposits. The incentive to consult with the government on trial request, making it more likely to introduce a new product. On GeM, purchasers may rate their product or ServiceNow more restrictive definitions for GEM, meaning the publication on the website of new and creative products.

    Frequently Asked Questions

    Can a foreign company register under Startup India hub?

    Yes. Any company having at least on registered office in India can register on startup India hub as location preferences, for the time being are only created for Indian states. However, the government is working on international relations and will soon be able to enable registration for stakeholders from the global ecosystem.

    How can I register a profile on the hub?

    registering on the Startup India hub is very easy.

    • The “register” tab on the page will direct you towards “mygov” platform. On mygov you will be asked to fill details like name, email id etc. Then you will get an OTP for verification and a link to set a new password.
    • Sign in using the login credentials you created in step 1. This will direct you to the Hub where you can select and create the profile of a stakeholder which best defines your role.

    How do we connect to enablers after creating a profile?

    The system is build to connect you to your relevant stakeholders based on your industry and preferred stage. Under the profile of every enabler there will be an option to “connect/apply”. Upon clicking, a request will be sent to the respective profile for acceptance. Once accepted, you will able to see the enabler as a new connection.

    Please note that you can connect with upto 3 users per week.

  • How to Raise Fund for Startup in India?

    When it comes to a business the most significant thing is funding and if it’s a startup, funding becomes more important. The survival of a business hugely depends on it. In a startup, funding is important so that the business can meet its expenses, as the profit will be mediocre at first.

    Finance is the fuel needed to run any business. There are numerous stories of entrepreneurial ventures which could not survive despite having great potential tanking, due to a shortage of funding. Getting funds is especially challenging when a business is in the startup stage. Hence, it is important for emerging entrepreneurs to be aware of the various startup company funding options.

    According to a report, Indian startups raise a record $3.9 billion so far in 2019. So we have compiled a list of sources from where you can raise funds for startups, in India.

    Microlending
    Crowdfunding
    Line of Credit
    Equipment Financing
    Angel Investors
    Venture Capitalists
    Government Grants
    Peer to Peer Loans
    Business Credit Cards
    Bank and NBFC Loans

    Microlending

    When loans are given by individuals or a group of people instead of banks and other financial institutions, such loans are known as micro-loans and the technique is called microlending. Micro-loans can be a good source of startup funding for small businesses. Microloans are unsecured loans. The credit score of the borrower is a guiding factor for the lender; it helps in deciding the interest that the borrower would pay to the lender in addition to the original principal amount.

    Crowdfunding

    Crowdfunding
    Crowdfunding

    Using an online platform, individuals interested in raising funds for their initiative can make use of crowdfunding. The investor gets some form of equity or reward in exchange for the contribution. KickStarter, GoFundMe and Indiegogo are some of the most popular and top-ranked crowdfunding sites. Crowdfunding is a good startup funding process because it is easier to acquire than traditional bank loans.

    Line of Credit

    Once approved for a ‘line of credit’, the borrower gets access to a pool of money. But only when he actually takes out some amount i.e. borrows from the pool, he is subjected to the interest that would be charged. The benefit of this type of loan is the low-interest rate charged as compared to bank loans or NBFC loans.

    Equipment Financing

    As the name suggests, equipment financing involves machinery or some other item instead of monetary funds at disposal. The idea is to allow businesses to save money on purchasing equipment and use the same for other purposes. So equipment financing can be the funding option for startups that require equipment and machinery.

    Angel Investors

    Wealthy people who are interested in assisting the business owner through debt-free funding are known as angel investors. They ask for a stake in the ownership of the business and provide advises and suggestions from their own experiences. Such investors usually back early-stage startups that can generate a massive turnover in the future. So if you have a great business plan, then approaching angel investors can be one of the best ways to raise capital for the company.

    Venture Capitalists

    There are many venture capitalists that readily provides fund for a startup. People often use the terms venture capitalists and angel investors interchangeably without understanding that there are more than just subtle differences. Unlike angel investors, venture capitalists are proper firms aimed at helping businesses to develop. The venture capitalist plays an active role in running the business. Apart from purchasing stakes in the business, the firm has a say in the business’s decisions. There are two types of entities in such firms—‘limited’ partners who inject cash into the venture capitalists’ funds meant for assisting startups, and ‘general’ partners who work alongside the startup by engaging with the startup’s management in business-related decisions.

    Government Grants

    The central authority of the country also provides loans for startups in different sectors of the economy. In India, there are various schemes such as Credit Guarantee Scheme, MUDRA loan scheme, and Stand Up India scheme under which the Government provides funds to startups.

    Also, there are schemes introduced by the State Government of different states of India, like Rajasthan Startup Fest, Kerela State Self Entrepreneur Development Mission, Sarothi startup loan by the Govt of Assam.

    Peer to Peer Loans

    In P2P lending, people (excluding banks and financial institutions) lend to those in need of money. Now, this may seem like crowdfunding but there’s a significant distinction: In peer-to-peer lending, the borrower has to repay the original principal along with the interest accrued. This isn’t part of crowdfunding, where the investors may not necessarily pay money to the lenders in exchange for their contribution; it could be a reward exchange program as well.

    Business Credit Cards

    As the name suggests, business credit cards allow borrowers to access a pool of money with a credit limit for transactions. Credit cards are suitable for financing short-term needs and immediate requirements. Just like ordinary credit cards, the card owner is liable to be penalized if the borrowed amount is not repaid in full at the end of the billing period.

    Bank and NBFC Loans

    Lastly let’s talk about the traditional method of funding, the bank, and NBFC loans. Banks provide term loans, working capital loan,s and asset-backed loans. NBFCs provide business loans too. But the issue with most banks and NBFCs is that they offer unsecured loans to only such businesses that have been in business for at least 2 years and which are earning a specific amount of profit.

    While approaching someone for a loan for your startup, ensure that you have an excellent business plan. A business plan is the heart and soul of your initiative or project. It should cover the minute details, must be easy to comprehend, engaging, and enticing at the same time. Above all, it’s the attitude brimming with confidence and the ability to convince that would either make or break the deal!

    Conclusion

    If you are thinking about long-term sustainability then funding is highly recommended. Funding also helps you to explore the current market opportunities as well. Before going for funding, you need to understand what type of funding is actually needed for your business. The entrepreneur needs to be very careful while selecting the type of funding they are going to choose for their business.

    FAQs

    Can businesses use GoFundMe?

    To start funding for a business, people can use GoFundMe.

    What is Startup Funding?

    Startup funding means the amount of money required to start and build a new business.

    How many Startups are there in India?

    There are 61400 startups in India as of now.