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How to Invest In Indian Startups?

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The startup culture has penetrated the Indian market in the last decade, and young entrepreneurs love this trend. Though foreign countries have been way ahead in adopting the startup culture, it's now high time for Indian startups to take off and break the norms.

With a population of approximately 139 crores, the young guns of India will likely continue venturing towards mind-boggling entrepreneurship ideas and ventures. Talented youngsters and their astounding startup ventures have made headlines in the past few years, and the trend is estimated to skyrocket to another level in the coming decades.

Due to the consistent surge of budding entrepreneurs, individual investors and venture firms are becoming more prevalent in India. What was nothing but an imagination a few years back is happening in India today.

In fact, investment patterns in India have undergone a massive transformation due to the evolving startup culture in India. Enterprises and industrialists alike are giving opportunities to emerging entrepreneurs by investing in their ventures.

If you are among the enthusiastic investors looking to invest in a flourishing startup, you need professional assistance to make the right call about your investments. After all, you can only invest with a bit of strategizing. We suggest you go through this entire blog to explore innovative ways to invest in startups in India.

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What Are the Key Funding Types?

Before investing in small startups in India, it’s important to build familiarity with the key funding types. It’s bizarre to assume that every startup will approach you for similar funding types. So, you better know about different types of funding. To keep it short, there are three primary types of funding. Let’s elaborate on them-

Equity Financing- In this case, you acquire a certain fraction of the company’s equity in exchange for your investment. This type of funding enables your investment to grow along with the startup's growth. Based on the latest stats equity financing is India's most popular funding strategy. Most investors aim to invest in startups in India through equity financing.

Debt Financing- Debt financing involves borrowing funds from an individual or an organization to launch a startup. The founder must repay the borrowed fund and an interest amount in this case. The interest rate is usually negotiated between the investor and the borrower beforehand. You can opt for this financing to invest in startups in India.

Grants- Grants can be considered financial rewards offered to a startup to help it achieve a certain level of growth.

How To Invest In Startups In India?

There’s no straight answer to this question. You need to choose how you want to invest in startups that can multiply your investments. Investments can be made in different methods, and we are mentioning the topmost ways to help you out-

Venture Capital Venture Capital organizations primarily collect investments from different investors or companies and compile them into a single fund. After that, the representatives of these organizations finalize investment deals with entrepreneurs who seek investments. Venture capital can be considered a safe investment to bet on for an entry-level investor.

Angel Investing Startups that have recently started their operations prefer angel investments over other investments. In angel investing, a startup founder most likely asks for investments from acquaintances, including family members, friends, and mentors. If you want to try your luck at investing, you can also opt to become an angel investor. Noticeably, a large percentage of all small startups in India are backed by angel investments.

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How Can You Shortlist The Best Startups to Invest In?

As an Investor, you may be approached by hundreds of entrepreneurs every week. Naturally, it's only possible to entertain some entrepreneurs' ask. Also, the shortlisting process becomes pretty tiring if you don't approach it systematically. There are certain factors that you must check about a startup before investing in it. Let's discuss them in detail-

Innovativeness A startup that doesn't have a strong differentiator is less likely to be a profitable investment option in the long run. Every startup should have the edge over its market competitors to grow fast and scale fast. You should drop the idea of investing in a startup that can't stand out among similar companies, no matter how good the pitch is.

Scalability It's a given fact that scalable businesses ensure higher returns from investment perspectives. Certain business ideas may sound very catchy, but they might not be as scalable as you want. On the other hand, some pitches may sound cliche but scalable. You should pick scalable startups to invest in without getting trapped in dilemmas.

Equity You need to evaluate the equity offered when you receive an investment ask. You need to judge whether your investment against the equity offered will add value to your investment portfolio. If yes, then it's a green flag.

Market Size Is it profitable to invest in a market with limited potential opportunities? Of course, not from an investment perspective. So, always consider the target markets of the startups and prioritize investing in those that cater to bigger markets.

Fund Usage Generally, investors have long discussions with the founder(s) before finalizing deals. Take advantage of that discussion, and ask them how they will utilize the fund you're offering. If the pre-planned utilization framework seems like it could be more satisfactory to you, discard the idea of investing in the startup.

Before shortlisting the best startups to invest in India, you must consider the abovementioned factors.

Why Are Startups Pivotal For the Growth of the Indian Economy?

As already mentioned, Indian startups are taking the Indian economy to a different level. Further, the rapid growth of the Indian startup culture will likely strengthen India's global presence considerably.

Experts predict a drastic and consistent escalation in the Indian economy as many out-of-the-box entrepreneurship ideas are coming out of their shells and becoming fruitful. Here are a few points that will help you understand how accurate the prediction above is.

Innovative Concepts and Ideas Being the second most populated country in the globe, India will surely never run out of innovation and game-changing business ideas. Young people from different corners of India are conceptualizing innovative business models. More importantly, they are equally good at implementing their ideas and turning them into reality.

The good news is that we can soon watch India becoming an economic powerhouse owing to the contribution of a thriving startup community. Needless to say, this growth will contribute to the Indian economy largely.

Solving Daily-Life Problems Multiple startups have grown by leaps and bounds by solving daily-life problems with ease. Trendsetting startups like Byjus, Unacademy, Flipkart, and Paytm have disrupted industries by helping people gain easy access to education, payment options, groceries, and other necessities. Besides contributing largely to our country's GDP, startups have completely altered our way of living.

Improving Employment Rate Have you ever thought about what would have happened if the Indian startup giants weren’t there? Thousands of working individuals would have lost their jobs and got doomed in the sphere of insecurity. Large-scale startups in India have increased the employment rate of the country significantly.

The government has also started backing startups lately, and approximately 6.5 lakhs job vacancies were unlocked due to this initiative, according to reports. The employment increment rate will only pick pace in the coming years.

Five Indian Startups and Their Success Mantras

The startup giants of India have successfully demonstrated ways to capture different niche markets. Analyzing the success mantras of the business unicorns of India will help you evaluate the vision of any early-stage startup you want to invest in.

BYJU’S BYJU has taken over the ed-tech sector in India almost completely since its launch. The business model of BYJU is distinctive, and the strategies implemented by the founders helped the application reach where it is today. The fundamental strategy of BYJU is to endorse individualized learning. The ed-tech platform attempts to curate a personalized learning program for every paid subscriber, and that idea has become a hit.

OYO OYO has disrupted the travel and tourism sector by making hotel bookings more seamless than ever before. Apart from hotel bookings, OYO is aiming to capitalize on its ventures in different business directions related to the hotel industry to unlock new heights of success.

Big Basket Big Basket has successfully expanded its reach across the country by making doorstep delivery of everyday necessities effortless and convenient. They have emerged as a market leader in grocery delivery by retaining high-class service quality. The startup focuses on delivering everything fresh and fine on time to ensure customer satisfaction.

Nykaa Nykaa has brought revolutionizing moderations in the supply chain of beauty products and cosmetics across India. Keeping the target audiences engaged with enchanting advertisement campaigns is Nykaa's success mantra. Their USP is offering branded cosmetics and beauty products at discounted rates. It's also one of the best startups to invest in in India.

Paytm Paytm’s launch has unlocked new horizons in the world of payment gateways in India. Offering hassle-free and quick payment facilities without substantial charges is Paytm’s unique selling proposition and success mantra.

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Importance of Business Networking for Both Startups and Entrepreneurs

Every entrepreneur aspires to scale up their business venture to the next level. Business networking leaves a crisp and effective contribution to the process. You can unlock incredible growth opportunities as you ace this particular skill. As an investor, you need to inspect the business networking strategy of an entrepreneur before handing over funds to him. The following pointers will describe the necessity of business networking in terms of venture scaling.

  • Planned curation and prompt execution of business networking strategies bring more business and ease up the task of business expansion.
  • Comprehensive implementation of business networking tricks can unfold new opportunities for a startup.
  • Expanding your business network helps create backups for your startup that can turn out helpful during financial turbulences.
  • Inexperienced and fresh talents get exposure to more knowledge as they come across seasoned minds through business networking. Proper mentorship endorses better business expansion.
  • The expansion of your business network acts as an inducer in terms of brand-building.
  • It becomes more straightforward for a startup to get exposure in the market with creative business networking strategies.

Wrapping Up

Your investment journey starts with the thought of investing in startups. We have educated you about how to invest in Indian startups in an explanatory manner throughout this blog. We hope everything is clear to you about investing in Indian startups. So, take advantage of this golden opportunity of investing in potential startups to multiply your returns.


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