Startups are new business, that are still in the early stage of growth. They typically have limited resource & experience and they often need to raise capital from investors to fund their operation and growth.
Why do Startups Need Funding?
There are many reasons why startups need funding. Some of the most common reasons include:
1. To Develop and Launch Their Product or Service
Developing and launching a new product or service can be costly process. Startups need to invest in research and development, product design, manufacturing and marketing. Without adequate funding- it can be difficult for startups to get their products and service to market in a timely and efficient manner.
2. To Hire and Train Employee
Startups need to hire and train employee in order to develop and launch their products or service, as well as to operate their businesse. Employee need to be paid and startups also need to invest in training and development program to ensure, that their employee have the skills and knowledge they need to be successful.
3. To Expand into New Market
Once a startup has established a successful product or service in one market- it may want to expand into new market. This can involve developing new products or service- translating existing products or service into new language and opening new office or distribution center. Expanding into new market can be costly process and startups need funding to support this growth.
4. To Conduct Research and Development
Research and development (R&D) is essential for startups to maintain competitive advantage and develop new products and service. R&D can be expensive and startups need funding to support these activities.
5. To Weather Unexpected Challenge or Setback
Startups often face unexpected challenge and setback- such as product delay, customer churn or economic downturn. Having adequate funding can help startups to weather these challenges and setback and continue on their growth trajectory.
6. To Comply With Government Regulation
Depending on the industry in which they operate, startups may need to comply with different government regulation. Compliance can be costly and startups need funding to support these cost.
How Can Startups Raise Funding?
There are numerous ways that startups can raise funding. Some of the most common methods include:
1. Bootstrapping
Bootstrapping is the process of funding a startup using the founder’s own resource- such as personal saving, credit card and loan from friend and family.
2. Angel Investor
Angel investor are individual, who invest their own money in startups. Angel investors are typically accredited investor- meaning that they have a high net worth and income.
Check Your Eligibility — Indian Angel Network
3. Venture Capital
Venture capitalist are professional investor, who invest in high-growth startups. Venture capitalist typically invest larger amount of money than angel investor and they often provide startups with mentorship and guidance.
4. Crowdfunding
Crowdfunding is a way to raise money from a large number of people through an online platform. This platform allow startups to raise money from both accredited and non-accredited investors.
Check Your Eligibility — Ketto
Tips for Startups Seeking Funding
If you are a startup seeking funding, there are a few things you can do to improve your chance of success:
- Develop a strong business plan that outline your business model, target market, competitive advantage and financial projection.
- Build a team of experienced and qualified professional.
- Get traction by generating sales or attracting users.
- Network with investors and venture capitalist.
- Be prepared to pitch your business to investor.
Conclusion
Funding is essential for startups to grow and succeed. By understanding the primary reasons why startups need funding and the different ways to raise funding, startups can improve their chances of success.
