Raising Funds for Startup: 5 Tips from Leading Finance Experts (Part 1)

According to CB Insights, 38% of startups fail because they either run out of cash or fail to raise funds. Funding is basically the fuel on which young startups thrive before hitting profitability goals. No wonder, a lot of startups, especially those for which we manage accounting and AR/AP, often ask how to raise funds.

In this blog, Finsmart Accounting – trusted for accounting outsourcing in India – will share a list of 5 useful tips and ideas with startups to raise capital. If you are struggling with finances for your dream venture, here are some noteworthy tips to keep in mind:

#1 Self-finance to get started

You might have heard the quote, “If you want a job done right, do it yourself.” Our first tip to raise funds for your startup is all about that! A recent study suggests that 77% of entrepreneurs, especially first-timers, self-fiance their businesses. And why wouldn’t they?

Young entrepreneurs often struggle with fundraising since they don’t have traction to show. Even if they have a solid plan in place, financing sources such as bankers, venture capitalists, and government bodies need proof of success to back the venture.

Raising funds on your own gives you complete control of your company and increases its equity. Finsmart recommends startups to self-finance by:

Doing a thorough inventory of assets: For those who don’t know, asset inventory is a method using which accountants list and document assets owned by startups. By doing a thorough inventory of assets, businesses are able to identify valuable properties that can be used for raising funds for your startup.
Investing from your savings: The easiest and most cost-effective way to raise money for kickstarting your startup business is to use your personal savings. According to experts, young entrepreneurs can raise startup capital by setting aside a portion of their income each month.

Running a business already but want to raise funds for another business? No worries. Accountants at Finsmart can help you save on taxes, manage cash flow, make correct forecasting, and stamp out mistakes in account books.

Seeking funds from friends and family: This one is a no-brainer. Your friends and family already know your strengths and circumstances. What’s even better, they are more likely to be flexible in repayment schedules and interest rates.

Note: Self-finance works well for micro startups only. It might not work well if you need a significant influx of funds to get your venture off the ground.

#2 Consider Crowdfunding

We bet most of you are aware of crowdfunding. For those who aren’t, it’s a method of raising capital with contributions that come forth either in small or large amounts through a network of individuals. Earlier, this method was used by non-profit organizations for social causes, charities, disaster relief, and events but now it is a significant fundraising force for Indian startups.

Our experts believe that crowdfunding platforms can be great places to get that initial funding, especially if it is in the embryonic stage. All you need to do is to produce a compelling story about your business, product or service, and propose a momentous reward for donations.

Many startups have been able to raise tens of lakhs of rupees via crowdfunding campaigns. Platforms like TheHotStart, Indiegogo, GoFundMe, and Start51 are considered the best options for entrepreneurs to raise funds for their startups in India.

Key accounting compliances every startup in India should know

#3 Find Angel Investors

Not all angels have wings, some have a lot of ready. In the startup world, they are known as angel investors. These high net worth individuals have helped build now-established companies including Google, Yahoo, and Alibaba.

Finding angel investors in India is not that easy since they prefer to invest in ideas that display high-growth potential so that they can earn high returns. We suggest considering these tips to get in touch with investors for funding support:

Create an amazing deck. Make sure the deck quickly helps them understand your startup and its approach to fulfilling an unmet need, room to scale, financials, competitive landscape, industry, and regulatory challenges, and confidence in the management team.
Start your search for an angel investor in your local community. You can also call up established entrepreneurs in your network to become your angel.
Take every opportunity to network. Join business and trade organizations and regularly attend meetings. Attend fairs and events. Show your face, speak about your startup, and meet as many people as possible.
Use connection services available on the internet. Platforms like AngelList India, Ah! Ventures, Mumbai Angels Network, and Venture Catalysts can help you hook up with angel investors to raise funds for your startup.

#4 Apply for Loans under Government Schemes

Angel investors aren’t the only ones funding startups in India. Central and state governments also have a lot of programs to fund promising startups in 2023. There are various loan schemes started by the Indian government that can be selected, as per the nature of the startup and requirements.

Not to mention, these schemes allow selecting tenure as per the convenience to repay the loan in easy installments. While managing accounting books and finances, our team makes ensures that paperwork is in order and the business credit score is solid. This helps in faster loan approvals and low-interest rates.

Here are some schemes by the government of India to raise funds for startups in 2023:

Credit Guarantee Scheme (CGS)
Pradhan Mantri Mudra Yojana (PMMY)
Stand Up India Scheme
Coir Udyami Yojana
Bank Credit Facilitation
Market Development Assistance (MDA)
PSB Loans in 59 minutes

A comprehensive guide on making your startup recession-proof

#5 Raise Funds by Winning Contests

Everyone loves winning contests but winning a startup competition delivers a lot more. In addition to the opportunity to secure funding, participating in a startup contest will also help validate your startup idea.

Startup competitions ask participants either to create a product or prepare a business plan that stands out from the crowd and is comprehensive enough to convince anyone it is worth investing in.

The Next Startup Event by Fail Safe, Xartup Fellowship Mumbai, Enterprise Next, Microsoft Brizsparks, and Hindsight Ventures Accelerators are some popular startup contests for entrepreneurs to raise funds in India.

How to Prepare for Raising Funds for a Startup?

We bet you have already determined which option is best to raise funds for your startup. If the answer is YES, then, congratulations! You have reached a major milestone in your fundraising journey. Now, it’s time to work on identifying and attracting fundraising opportunities by forming relationships and preparing a pitch that does justice to your financial needs.

Of course, this part is more complex than the first one. That’s why we will be covering this one separately in detail.

Follow Finsmart on Linkedin to get updates on the latest blogs and resources!

Raise funding for startups in India

While the above are useful tips and ideas to raise funds for your startup in 2023, it is completely fine to use your own cash and bootstrap a venture. It’s also important to have your books and financial health in order if you wish to keep raising funding. Therefore, don’t forget to partner with a seasoned accounting firm to manage your accounting work.

Got any queries to ask? Send them to info@finsmartaccounting.com and have them answered by our experts.