After successfully launching your business idea, the very next step is to scale it, and that happens only when you are able to convince those mighty brains sitting on the other side of the table, who are going to fund your business idea (only if it makes a lot of sense to them).
Last year in 2014, India’s IT hub ‘Bangalore’ was ranked 5th globally, after San Francisco, Beijing, New York & Palo Alto in terms of attracting maximum funds from venture capitalists. Technology startups these days are getting a lot of momentum, reason being the current generation is digitally evolving by leaps & bounds.
Moreover, the startup culture is prevalent very much amongst youngsters due to its unique attribute of having work autonomy & decision making processes, unlike in jobs these days.
They say – if you are looking for funding then never ever send your business plan to any investor before you speak to them in person. When you get their interest, only then is the right time to do so. Irrespective of the nature of business they are in, every startup has one thing on mind that is to get funded by big houses (i.e. venture capitalists, angel investors, etc.)
There are various terms in fundraising which everyone of us get wrong or use it interchangeably, knowingly or unknowingly. We try here to explain it to you one by one:
1) Seed Money: The initial money that you need, just to check if your business has the wings to fly or not. Generally not so large money is involved in it & it is used for basic pilot project or research job.
2) Startup Capital: The money needed to finance a proven business idea, which is already in application. It carries a low risk attached to it in comparison to seed money.
3) Later-round financing: Few businesses raise money in phases i.e. for setting up manufacturing facilities, for developing marketing channels, for infrastructure etc.
4) Bridge Capital: The money required to run the business, before it goes public. As generally, it takes a lot of time for completing the formalities to launch an IPO.
VCs tend to invest in companies which showcase fast growth, having ability to pay back their money in short period & those that are going to be acquired by giants in near future.
Do you have anything insightful to share about startup funding? Please do comment and let us know.