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Eight Types of Early-Stage Startup Funding Options in India – POD

Starting and sustaining a business requires a lot of capital! It is the key contributor to building and expanding a startup, and that’s why entrepreneurs often ask - “how do I raise capital?”

Below are different types of early-stage startup funding options in India -

  • Angel Investor
  • Angel Syndicate
  • Angel Investment Platform
  • Venture Capital Funds
  • Crowdfunding
  • Incubators
  • Bank Loans
  • Government Grant

 

Angel Investor

Messiah for early-stage startups! Angel investors are high net-worth individuals (HNI) who are constantly looking to back the next 'big-idea' at the earliest stage with their time, money, and expertise.

These high-risk taker investors work independently, which means they vet and screen the startup on their own before investing in a startup.

Benefits –

  • High net-worth individuals
  • Risk-takers looking to financially back early-stage startups
  • Adorn advisor role and help the startup streamline their operation
  • Propagate startup idea among their network which will garner traction

(In recent research conducted by Harvard Business School, startups backed by angel investors are more likely to remain in business longer, induce substantial growth, and reward a more significant return rate to their investors.)

 

Angel Syndicate

A syndicate is an investment vehicle/group that allows individual investors to co-invest with a reputable investor (a leader) in the startups. Syndicate leaders are business angels who have been part of the industry for many years and possess experience identifying early-stage investment opportunities.

For example, AngelList is one such example of Angel Syndicate where a lead identifies and vet a startup to present to its syndicate. Who, in turn, studies and decides whether they want to invest in the startup collectively or not.

Benefits –

  • Invests collectively to cover a significant chunk of ‘Funding in Ask’
  • Only invitees accredited investors to be part of an elite group
  • Connection with an extensive network of backers

 

Angel Investment Platform - POD

The introduction of an angel investment platform is a boon for an investor who wants to kickstart their angel investment journey with less money. Angel investment platform, such as POD, introduces promising early-stage startups to its network of accredited and non-accredited investors, where they can invest individually for a higher sum of equity.

Even though the investment in early-stage startups comes with high risk, POD follows a stringent vetting process and only introduces promising deals to their network of angel investors.

Benefits –

  • Raise funding through both – accredited and non-accredited investors
  • Safe investment environment for both investors and startups
  • Total number of investors on the platform - 10-1000
  • Low ticket size to invite more investors

 

Venture Capital Funds

These are pooled investment funds of high net-worth investors who seek private equity stakes in startups. A Fund Manager manages this fund pool and decides on the startups to invest in.

Benefits –

  • Usually invests during later funding rounds (Series A and so on)
  • Invests heavy sums in startups
  • Lead by one decision-maker (Fund Manager), who will seek a seat on the board

 

Crowdfunding

It's a way for startups to raise money for their revolutionary idea. A startup can raise capital in exchange for equity, rewards, debt, or nothing at all.

Benefits –

  • Easier access to capital
  • Startup gains early adopters and loyal advocates
  • Doubles media exposure

If you’re keen to explore this option, here are the top crowdfunding sites in India for startups to raise funds.

 

Incubators

These are organizations especially designed to launch and nurture early-stage startups by providing seed capital, mentorship, etc., in return for an equity stake in the company. In addition to that, they offer a wide range of support during their tenure with the company, including "accelerator" programs that accelerate growth by linking founders with experienced mentors and investors.

Benefits –

  • Offer mentorship
  • Exposure to industry leaders
  • Give access to professional resources

Here's the list of 10 Startup Incubation Centre in India.

 

Bank Loans

Entrepreneurs usually knock on the door of a bank for the startup loan before exploring other funding opportunities. Getting the funding primarily when the business is in its early stage is a challenge. Still, if a startup can demonstrate the ability to repay, they can avail 'Startup Business Loan' from SIDBI (Small Industries Development Bank of India).

"There are more than 39,000 startups in India who have access to much private equity and debt funding options."

 

Government Grants

"It is an award of financial assistance in the form of money by the government to an eligible grantee with no expectation that the funds will be paid back."

Benefits –

  • Easy access to funds
  • Tax holiday for 3 years

Here's the extensive list of Government Grant Programs –

Check the eligibility criteria for the Government Grant available for Indian startups.

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