Alternative Ways To Finance Your Start-Up

 

For a start-up to truly be successful it needs the starting boost that finance provides. Financial capital is what helps a start-up grow to its full potential. There are many traditional sources of finance including bank loans and private equity that many entrepreneurs use to finance their start-ups. However, more and more entrepreneurs are looking to find alternative and innovative ways to secure funding for their start-ups. As a Small Business Start-up Advisor in Mumbai, I help start-ups acquire different kinds of funding. As such I know of a few alternative sources to finance your start-up.

The type of funding you get is also very dependent on the type of start-up. So here are some of the alternative ways that I think you can fund your start-up.

 

Venture Capitalist

Venture capitalists invest in start-ups that they think have the potential to make it big in the industry. They provide their expert minds on the scalability and sustainability of the start-up. They evaluate the business in many ways to see how it can succeed. The way that venture capitalists work is that they will invest in a start-up against the equity and they exit when there is an acquisition or an IPO. Using venture capitalists for your emerging start-up is a good opportunity because they only invest in businesses they see true potential and scalability in.

 

Crowdfunding 

This is one of the newer and more innovative ways to secure funding for your start-up. How this form of financing works is that you take your start-up idea directly to the masses. You provide a detailed write-up about your company and what it’s all about. If the people like your idea, they can invest in it to help the company grow. The positive aspect about crowdfunding is that it doesn’t just help with the finance part but is also a good marketing tool to promote your product or service. 

 

Business Incubators and Accelerators

Many early-stage start-ups acquire their funding from business incubators. These programs are known to assist thousands of start-ups yearly. Incubators help promote and advance the business by providing training, tools and other forms of help to the start-up. On the other hand, accelerators help nurture the business in the same way but also help the start-up take giant leaps and bounds the industry to create waves and garner profit. These incubator and accelerator programs normally take 9 months and require dedication on part of the employees as well as the business owner. Start-up advisors are keen for their clients to pursue this route because it helps increase the contacts and customer base of the start-up.

 

Convertible Debt

This form of financing occurs when the start-up borrows money from an investor group or an investor and a collective agreement is made between them. The agreement stipulates that the debt that the business owner is in will be converted to equity in the future. For this form of financing to work, the business owner must be comfortable with relinquishing some amount of control from the company. These investors are guaranteed some amount of returns in the year until the business can convert the debt into equity. What attracts start-ups to this form of financing is that it doesn’t place a strain on cash flow.

 

To Sum Up

Finding innovative ways to secure funding for a start-up is hard work and requires constant effort. However it’s an imperative step in assuring the success of the company. Further for any newly formed start-up, the best way to decide if it requires an angel investor or additional start-up funding is by having a complete business plan. Your business plan should also include a One-Page Business Plan. I have developed a one-page business plan for all start-up founders and entrepreneurs. This business plan helps you ideate what you would like to achieve the following year as well as the activities you are willing to give up. It helps you to understand the shortcomings of the previous year as well. 

 

For a start-up to truly be successful it needs the starting boost that finance provides. Financial capital is what helps a start-up grow to its full potential. Here are some alternate sources of funding that start-up owners can employ to help their business grow. 

 

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About the Author

Devansh Lakhani

Devansh Lakhani, the director of Lakhani Financial Services, clasps a rich experience of 5+ years in the finance industry. A Chartered Accountant by qualification, Devansh has expertly handled funds for HNI clients, been part of an IPO on SME platform to tune Rs. 10+ crores, conducted the right issues to tune Rs. 10+ crores, and accomplished block deals of Rs. 35+ crores in the past. Now, with a zeal to boost startups, Devansh's heart and soul lies in Lakhani Financial Services. To date, LFS has helped 85+ startups with advisory, business plan & pitch deck preparation. Devansh is one of the most respected people when we talk about startup funding, advising, and mentoring. With the support of Devansh, 6 startups raise funds to the tune of 4+ crores. He aspires and is on the mission to boost and scale 1000+ startups in the next 5 years.

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