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Tag: Seed Fund

  • How to Get Pre-seed Funding for your Startup in India?

    The era of startups and business has dramatically changed in the past decade and especially after the Covid-19 pandemic. Hence, it is very important for all of us to know and understand what the funding landscape looks like today and in the future. Earlier, the only goal for businesses and entrepreneurs was to get Series-A funding. If one did not have enough traction, the only way forward was bootstrapping.

    Fortunately today, startup investing has become more competitive and new level funding categories have made their way to the market. One of the increasingly popular funding ways for emerging companies and businesses is Pre-seed funding. This funding requires you specific preparation so as to set yourself and your business up for growth and success.

    The Pre-seed investors have been a boon to the startups as they allow them to raise the funds which they require and bring minimal viable products (MVPs) to life. This article is a guide for you to know what Pre-seed funding is and how to get pre-seed funding for your business or startup in India.

    What is Pre-seed funding?
    How to Get Pre-seed Funding in India?
    Where to find Pre-Seed Investors in India?

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    A step-by-step process of fundraising

    What is Pre-seed funding?

    In order to help a startup to start with its primary and base operations, an investor makes a small investment into the business. These investors or individuals invest in the business when they know the founder personally or hold strong faith in the business idea. This activity of investing is known as pre-seed funding.

    There are many platforms that provide pre-seed funding in return for a stake in the startup or the business idea. Pre-seed funding can also be obtained through crowdfunding.

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    How to Get Pre-seed Funding in India?

    It might sometimes seem nerve-racking for you to meet the pre-seed investors as in the initial stage one might not see the vision you carry. Like any other funding round, your key is to have your finances organized and have a clear business plan that will be used by you. Here are the tips through which you can acquire Pre-seed funding.

    Have Financial and Profitable Clarity

    At this stage, it is very important that you set an easy and clear outline of your business’s path to profitability. If you have a clear and thoughtful business plan that serves as a long-run road map for your startup then there are chances of you grabbing the investment.

    If you keep your financial estimates attainable and concise; put emphasis on the business strategy and transparency; prove your credibility, you can win the investor’s trust and funding.

    Keep your Business Proofs Ready

    When you pitch in front of investors, the key to winning the investment is that you show proof of success for your business idea. Test your business idea in the market, communicate your assumptions clearly, and transparently share your business plan with the investors will help you to get the pre-seed funding for your startup.

    Vouch for your Intellectual Property

    Even when you do not have any cash in hand and hard assets for your business, you can show your credibility to the investors. One of the best ways to do this is to make them believe in your intellectual property.

    If you are able to demonstrate your business idea effectively and ensure the investors that you will work towards your brand and will protect them from infringement by other business entities, you show your company’s credibility to them and make your pitch more investable.

    Show your credibility

    One of the most effective ways to show your worthiness is to be clear and confident about your past records and professional accomplishments. It is important that you present all the sources of funding that you would have acquired in the past (if any), and present all the successes that you have had in the past. Become very sure to explain to the investors how you were successful and support it with tangible and quantifiable evidence.

    Where to find Pre-Seed Investors in India?

    After you have got to know about the steps to acquire Pre-seed funding, you need to now find the investors. This is one of the most challenging parts for many entrepreneurs.

    Today’s investors do not accept unsolicited pitches and usually, they let them pitch you after an introduction from someone within their network. Here you will find a few ways to get your business to those who will invest in it and can fund it.

    Family & Friends

    Using your personal connections and network to invest in your business in the initial stage is a very flexible and safe option for pre-seed funding. People who have seen your journey, dedication, and passion will be willing to put funds into your ideas. If your friends and family see potential in you and your startup idea, then they would be definitely investing their money in your business.

    Pre-seed Funding Platforms

    Number of early-stage venture capital deals worldwide
    Number of early-stage venture capital deals worldwide

    In the industry, there are many pre-seed funding platforms that encourage businesses and startups at their base-development stage by providing them with small amounts of funds to initiate their business activities. Through Pre-seed funding platforms, your business will get an opportunity to start your operations and get access to the market.

    A few common Pre-seed funding platforms include:

    • Unitus Seed Fund
    • Infuse ventures
    • Kae Capital
    • Blume Ventures

    Crowdfunding Platforms

    Crowdfunding is an excellent way to generate pre-seed funds for your business or startup. Though equity-based crowdfunding is illegal in India, donor-based and reward-based crowdfunding options are entirely legal. Raising a small amount of money from large masses through crowdfunding platforms can be a good way of acquiring pre-seed funds for your venture.

    Business Incubators

    There are various incubators in the industry who are willing to make small-scale investments into startups and businesses in the form of pre-seed investments. Their aim and motive are to support and assist early-age entrepreneurs in pursuing substantial market opportunities. In India, a few great incubators are:

    • Advantage
    • Seedfund
    • StartupXseed
    • Incubate Fund India
    • Better Capital Labs

    Pitch Competitions

    One of the best ways to get in front of investors is to participate in pitch competitions. All you need to do is practice your pitch, mark a good impression, prove yourself and strike a pre-seed funding deal. Such startup pitch competitions have become very common today and it is a very good way of winning funds for your business idea.

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    Conclusion

    Although anyone can bootstrap, some unique and revolutionary ideas need Pre-funding to be invested in the idea. Some people give up on their dream because they think getting pre-seed funding is near impossible and in fact, magical. But not the real entrepreneurs. They hustle, plan and reach the best person who believes in their ideas and invests in them. They find such people by strategizing and expanding their network, at the same time.

    Remember, you can reach anyone. There is a difference of only 6 people between you and that person. And if you keep expanding your network, you will reach that perfect investor who actually believes in your idea and invest in it.

    FAQs

    What is Pre-seed funding?

    In simple words, Pre-seed funding is the capital needed to start any business. It is acquired by investors to develop the business in return for equity in the company.

    What is the average amount of pre-seed funding in India?

    Most startups expect $500,000 or less pre-seed funding from investors.

    How much equity is given in the seed rounds?

    Most founders usually sell 10% to 20% equity in seed rounds.

    Where can entrepreneurs find Pre-seed funding?

    Entrepreneurs can find Pre-seed funding from several sources:

    • Family & Friends
    • Pre-seed Funding Platforms
    • Crowdfunding Platforms
    • Business Incubators
    • Pitch Competitions

    How to get pre-seed funding in India?

    Some tips to get pre-seed funding in India:

    • Have Financial and Profitable Clarity
    • Keep your Business Proofs Ready
    • Vouch for your Intellectual Property
    • Show your credibility

  • How to Calculate Valuation of Your Startup?

    In the competitive entrepreneurship world today, entrepreneurs are quite excited about adding value to their startups. It is one of the most essential things to do for founders as it helps in further equity and funding decisions. Quantifying the worth of a startup is the most complex task to do. There are several methodologies and approaches to determine the valuation of your startup. The worth of a startup depends on several factors:

    • The business idea of the Startup
    • Stage of the startup
    • Product Prototype
    • Market risks and competition
    • Technical Adaptability
    • Customer traction
    • Investors

    Let’s know about the approaches used by startup founders and entrepreneurs on how to calculate the valuation of your startup.

    Mehul Sharma – Founder & CEO, Signum Hotels & Resorts

    Mehul Sharma - Founder & CEO, Signum Hotels & Resorts
    Mehul Sharma – Founder & CEO, Signum Hotels & Resorts

    Pre-revenue start-up valuation may be a complicated endeavour. There are many factors to take into consideration, from the control group and marketplace traits to the call for the product and the advertising dangers involved. And a hard truth associated is that even after comparing everything, despite the only pre-revenue valuation formula, the first level you may get continues to be simply an ESTIMATE!

    The world of the start-up is a place full of enthusiasts. A start-up is initiated every 3 seconds around the world! Every big company you can think of started from a garage with a computer bought with savings money or some sort of gift. But not all start-ups share the same start.

    Business proprietors will wish for an excessive valuation, while pre-revenue investors might opt for a lower price that guarantees a larger go back on investment (ROI).

    So, how does pre-revenue start-up valuation evaluate with a mature commercial enterprise valuation?

    Unlike early-stage start-ups, a mature publicly-indexed commercial enterprise will have extra information and figures to head on. Regular circulation of sales and monetary statistics make it less difficult to calculate the price of the commercial enterprise. More often than not, early-stage startups are valued somewhere within the middle, which means founders don’t get quite the amount they anticipated, and investors pay higher than what they intended to invest.

    For most start-ups especially pre-revenue, Traction is one of the significant indicators for assessing the worth. The true story of a start-up can be brought into the daylight by taking a look at its effectiveness in the market, the number of users, and its growth rate.

    Estimating the actual worth of an unlisted startup before the seed funding is actually of equal importance to having a business idea while going in.

    There are various ways to estimate the current worth of a business, but only a few are used as a daily pill by entrepreneurs.

    The most basic method to assess the value is by analyzing the previous year’s Balance sheet. Under this method, the total debt and liabilities are subtracted from the aggregate value of assets owned by the business. This method is less complicated, easy to assess, and comes in handy.

    Although, the Balance sheet method does not provide the whole picture of the situation. The problem here is that this methodology considers the start-up in its current state and not how it’ll be in the future. Investors are inquisitive about the latter, and so, as an asset-based valuation doesn’t take that into account, this method has its drawbacks.

    Another method of assessing the valuation of a business is by calculating the EPS (Earnings Per Share). EPS is calculated by subtracting the Preferred dividends from the Net income and further dividing it by the average of outstanding common shares. For an individual investor, EPS shows the exact value of revenues and makes more sense.

    The valuation of a start-up is a complex task and there is no straight jacket solution or method to be put into use each time. Often, the valuation is calculated using a combination of ratios, and ordinal values.

    The angel capitalist Dave Berkus believes investors ought to be ready to envision the corporate breaking of $20M in 5 years. His technique assesses five important aspects of a start-up, namely, Concept, Prototype, Quality Management, Connections, and Launch plan. The Berkus technique is an easy estimation, typically used for IT start-ups. It is a good way to gauge value, however, because the market into account isn’t taken into account, it’s not going to provide the scope that some folks desire.

    Furthermore, a few more methods like EDITBA (Earnings before interest, taxes, depreciation, and amortization), top-line method, and GMV (Gross Merchandise Value) have been proven to provide significance for the estimations.

    EDITBA is another easy-to-use method that provides ordinal values by using the previous financial statements. Varied business segments face varied rates of tax payment based on the industry they fall into.  A business with a higher revenue may have an NPV (Net Present Value) lower than the one with lesser revenues due to the different industries they fall into.

    Another interesting method for assessing the value is the Top Line method, which is a reference to gross figures reported by a company, such as sales or revenue. This method gets the name because these are shown at the top of a company’s income statement and are kept aside for the reporting of revenue and or gross sales.

    GMV method ascertains the gross value of sales in the market. Under this, the gross value of the merchandise is calculated as the Sales price of goods with the number of goods sold. It shall be noticed that GMV is calculated in conjunction with net sales, which takes deductions into account.

    The first-time valuation of a start-up is bound to foresee at least a few mistakes. Hence, while evaluating the value of your start-up two big pitfalls one shall avoid are:

    1. Never assume a valuation is Permanent, i.e., after all, a startup is going to be valued at what investors are willing to speculate in it. Ultimately, it shall be kept in mind that the variables are at play, and perceive that no valuation, high or low, is ever permanent- or maybe even correct with certainty.

    2. A Valuation is never straightforward, i.e., even after getting a pre-revenue start-up valuation you’re happy with, it’s best to debate things in nice detail with potential investors simply to ascertain that everyone is on the same page regarding the way to proceed.

    It is rightly said that only a fool would make peace with the first valuation he gets of his business as there are complexities and human factors involved.

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    Vicky Jain – Founder, uKnowva

    Vicky Jain - Founder, uKnowva
    Vicky Jain – Founder, uKnowva

    Startup valuation is not an exact science. Factors can include the industry, the present market, the team’s credentials, and other forces that might be taken into account. The valuation of a start-up is the measure of how much investors think the company is worth right now. One of the simplest ways to measure the value of a startup is with the scorecard method. By weighing up parameters of success like team experience, competition, the strength of the product, etc.) subjectively, this method enables comparisons between a startup and other “average” startups within the industry and area. If the startup looks to have more than average qualities as per the calculations, then the chances of getting a higher valuation increases and so does the investment opportunity. There is another method known as the discounted cash flow method that approximates how much flow of cash a startup will produce over a long period of the term. By predicting this and calculating the expected return on the rate of investment, assumptions can be made about a start-up’s value.

    Sharan Goyal – Founder and Director, Crozzo

    Sharan Goyal - Founder and Director, Crozzo
    Sharan Goyal – Founder and Director, Crozzo

    Valuation in today’s day and age has taken a very sinister meaning. Valuations are through the roof, with no stopping in sight. I prefer to find a reasonable multiple of EBITDA or revenue (in the case of a cash flow negative company) and compare that to that of an existing business which has raised funds at a particular multiple. For example, a D2C business in the food space with a solid distribution network is often valued at 15-20 times forward revenue. It would be fair to assume that a company with a similar profile can be valued at a similar multiple.

  • 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.

  • How to Raise Seed Funding for your Startup? (8 Ways)

    India’s startup ecosystem is booming with innovations and passion that has made the country to be the third largest when it comes to market size. Inevitably, it has attracted a lot of investors to the industry as the returns and the revenue will be humongous if the startup becomes successful. However, starting a business and expanding it is a humongous task.

    The amount of uncertainty and risks involved makes it difficult to get funding for a business. The first thing that you need before starting a business is seed funding. It is the total sum of money that you need to cover the expenses related to expansion, product development, market research et cetera.

    Amongst the different stages of funding that every startup has to go through seed funding can be considered as the initial stage. The major intention of the very idea of seed funding is to obtain enough working capital so as to start the business grinding. There is absolutely no doubt that seed funding is the default process of any business.

    How to Raise Seed Funding for your Startup?
    FAQ

    How to Raise Seed Funding for your Startup?

    The right kind of pitching to the right person or company at the right time is the popular and yet the secret ingredient behind finding an investor to fund your startup. You might not get your pitch approved on the first try. However, always remember that every interaction with a prospective investor is an opportunity to improve yourself. Here are a few places where you can approach to get seed funding for your startup.

    Startup India Seed Fund Scheme (SISFS)

    Startup India Seed Fund Scheme is an initiative by the government of India that aims at improving entrepreneurship across India. By recognising the need for capital at the nascent stages of an enterprise they provide financial assistance to startups.

    It covers areas like content development, prototype development, product trials, market entry and commercialisation.

    This scheme ensures that they facilitate the entrepreneurs to shape their startups in such a way that they will be capable of raising investments themselves from venture capitalists, angel investors or through loans.

    This initiative by the government of India is under the Department for Promotion of Industry and Internal Trade or DPII. Their call for applications is open throughout the year.

    NIDHI-Seed Support System (NIDHI-SSS)

    The National Initiative for Developing and Harnessing Innovations – Seed Support System or NIDHI – SSS of the Department of Science and Technology hosts seed funding with a corpus of 10 crores under the Entrepreneurship Development Centre.

    They provide financial assistance to those startups that have with them; promising ideas and technologies. This Seed Support System is considered to be a bridge for the startup between its development and commercialisation.

    The financial assistance includes product development, testing, test marketing, mentoring, professional consultancy, IPR (Intellectual property rights) issues et cetera. The selected startups are incubated at the venture center and must have completed three months of residency at the place during the time of seed fund investment.

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    Idea2PoC

    Idea2PoC is the scheme of startup policy of the government of Karnataka. Under this scheme, startups receive early-stage funding for their ideas and concepts that are yet to be released.

    With the objective of encouraging innovators to commercialise their inventions, the scheme gives grant in aid up to 50 lakhs rupees. The fund is released as per their requirements and milestones of the project that are agreed upon in the memorandum of agreement that is signed between the respective startups and the Karnataka Biotechnology and Information Technology Services (KBITS)

    Seedfund

    Realising the need for a reliable help center to facilitate seed funding for the budding startups. Seedfund was established in the year 2006 by Bharati Jacob, Mahesh Murthy and Pravin Gandhi.

    After being joined by Paula Mariwala and Sanjay Anand Ram, they have revolutionised the investment experience for a plethora of startups. They have seeded diverse startups belonging to different sectors across India. Red bus, Car Wale, Jeevanti and Valsalya etc are a few popular startups funded by them.

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    Khosla Ventures

    Khosla Ventures was founded in 2004 by Vinod Khosla and this firm provides venture assistance and strategic advice to those entrepreneurs who are working on breakthrough technologies.

    One thing that makes them stand out from the rest of the firms of their kind is its broad range of areas that covers, including consumer, enterprise, advertising, financial services, big data, agriculture, robotics, sustainable energy et cetera.

    For a person who has an amazing idea that has significant potential with a strong team then Khosla ventures will be an excellent option.

    Angel Investors

    You can find angel investors who are accredited investors with a high net worth and a passion for investment. Mostly these people will be working towards diversifying their portfolios through investments in startups.

    Apart from funding, their experience in the industry will also give a clear understanding to the entrepreneurs about the timelines required, the funding required and the mismatches in your nascent plans

    Friends and Family

    Apart from the government, investors and corporate firms, family and friends of the entrepreneur can also invest in the startup. It is one of the most common ways in which people obtain seed funding recently. The flexibility with the timeline of repayment is one of the most important factors that has popularised this form of seed funding.

    Crowdfunding

    Cloudfunding is another popular form of gaining capital for seed-stage startups. Today there are more than 500 websites that help entrepreneurs to raise crowdfunding for their startups.

    A website named Kickstarter is one of the most popular websites for people looking at the source of obtaining seed capital. According to various reports, this website raises billions of dollars through them for various startups.

    Conclusion

    Getting a clear idea of your business and seeing it materialise and expand is a dream come true for all entrepreneurs. Getting the seed capital is the foundation for all the dreams that they have built.

    One thing that is to be kept in mind before venturing into any of these options for procuring funds is to have a clear formal business plan. The entrepreneurs should have a very clear idea regarding the product, product development and project timeline.

    Another thing to be noted is that seed funding is only for the initial stages but for the years to come as well. An entrepreneur who makes strategic plans should be able to make use of the initial fund to be capable enough to raise for their investments on their own.

    FAQ

    How many rounds of funding can a startup take?

    A startup can receive as many rounds of funding as possible, there is no restriction on it.

    How to raise seed funding for Startups?

    Angel Investors, Family and Friends, Crowdfunding, Incubators, and Accelerators are some of the common ways to raise seed funding for your startup.

    Why do startups raise funding?

    Startups usually raise funding to expand an grow their startup.

  • 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?

    19 Startup India Benefits by Government for Every Aspiring Entrepreneur
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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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    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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    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.