- December 12, 2021
- Posted by: Robert Brown
- Category: Investing
A startup is a company initiated by individual founders/entrepreneurs to search for a repeatable and expandable business model. Startups refer to new businesses that intend to grow beyond the solo founder, have employees, and grow large with time. Startups also tend to face high uncertainty. You can register your company as a private company or a partnership company as your startup.
Steps for Starting a new Startup Business
Before starting a startup you should know about your strengths and weaknesses. The reason why you want to start a startup and you should clear about your goals and be determined enough to work hard to fulfil them. The services and products you are going to deliver to the people and is it to be a full-time venture or a part-time venture. When Evaluating yourself You should be clear about the above questions.
Conduct of Industry Research
After deciding which business fits your goals and lifestyle, evaluate your idea. Before putting your money in a business you should know all the important information about that industry. You Should Talk to people who are already working in your target industry and collect information of your interest. Reading and researching about the people who are a successful image in that industry can also help you in understanding the industry.
Have a Plan
A business plan will help you figure out how much money you will need to get started, what it will take to make your business profitable, what needs to get done when, and where you are headed. The business plan will help you to chart your progress according to what you planned and what position you are now according to it.
Have a plan for funding
Depending on the size and goals of your venture, you may need to seek financing from an investor. The financial help can be available from your friends or banks. When starting a new business you need a huge capital for making it work thus you have to plan your finances to see how much you are lacking in capital and how will you be going to arrange it.
Set up your space
You have planned your business, strategies for your business, you have funding, till now. Now you have to decide whether you want to set up a storefront for your business or you want to start your business online. If you want a storefront then are you going to open a home office or rent an office space. These decisions you have to make in this step.
Prepare for trial and error
Whether you are starting your first business or third expect to make mistakes. It is natural and you should always learn something new from your mistakes. If you do not make mistakes, you do not learn what to do less of and what to emphasize. Be open-minded and creative, adapt, look for opportunities.
Strategies for Funding Startups
Funding depends primarily on the nature and type of business. Once you have realized the need for fundraising, below are some of the different sources of finance available.
Bootstrapping your business
Self-funding, also known as bootstrapping. It is an effective way of financing a startup, especially when you are just starting your business. The first-time entrepreneurs usually have trouble getting funding since they do not get funding without first showing some plan for potential success.
Self-funding should be considered as a priority funding option because of the advantages associated with it. When you are funding your own business, you are tied to the business. At a later stage, the investors consider this as a good point. But this option is only suitable only if the initial requirement is small. Some businesses need money right from the day-1 and for such businesses, bootstrapping may not be a good option.
Crowdfunding is one of the newer ways of funding a startup that has been gaining a lot of popularity lately. It’s like taking a loan, contribution/investments from more than one person at the same time.
An entrepreneur has to put a detailed description of his business on a crowdfunding platform. He has to mention the goals of his business and the plans he has for making a profit, how much funding he needs and for what reasons, etc. Then consumers can read about the business and decide to give their money or not. Anyone can contribute their money in helping a business that they believe in.
Get Angel Investments
Angel investors are individuals who have surplus cash with them and want to invest in upcoming startups. The angel investors also work in groups of networks to collectively assess the proposals before investing in it.
Angel investors have helped to start up many leading companies, including Google, Yahoo, and Alibaba. This form of investing generally occurs in a company’s early stages of growth, with investors expecting up to 30% equity. They are ready to take more risks in investment for higher returns.
Venture Capitals for Funding
This is where you make the big bets. Venture capitals are professionally managed funds who invest in companies that have huge potential. They usually invest in business against equity and exit when there is an IPO or an acquisition. VCs provide expertise, mentorship and acts as a litmus test of where the organization is going, evaluating the business from the sustainability and scalability point of view.
Raise Money Through Bank Loans
The bank provides two kinds of financing for businesses. One is the working capital loan, and the other is funding. Working Capital loan is a type of loan required for running one complete cycle of revenue-generating operations, and the limit is usually decided by hypothecating stocks and debtors. Funding from the bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is sanctioned.
Govt Programs That Offer Startup Capital
Government-backed ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)’ starts with an initial amount of Rs. 20,000 crore to extend benefits to around 10 lakhs SMEs. The company is supposed to submit your business plan and once approved, the loan gets sanctioned. You will get a MUDRA Card, which is like a credit card, which you can use to purchase raw materials, other expenses, etc.