How to Raise Funds For Startups in 2021

1. How to raise fundsfor startups in 2021 The trends and methods of Finding proper funding for a startup

2. Startup ecosystem: How to begin? • Presently thriving with multiple opportunities and investors • Requires a combination of planning, foresight, and finding the right set of investors • A business idea must sustain itself for the long term • Different types of business funding can be used to achieve different objectives

3. Checklist for when you are looking for a funding source • Start with a detailed understanding of your startup’s financial requirements • Pick the funding source that matches the nature of your business, risks involved, returns, and the amount of involvement required from investors • Find an effective source that will help your business thrive at whichever level you are planning to get the investors

4. Types of funding sources • Self-funding/bootstrapping • Angel investors • Venture capital funds • Crowdfunding • Initial Public Offering

5. Self funding / Bootstrapping Can be in the form of your own savings, support from friends and family, and a personal debt Pros • Bootstrapping or self funding is beneficial for smaller business requirements at the initial stage • Beneficial in the testing stage, not for creating a long term funding Cons • Long working hours • Financial stress • Conflict among equity shareholders • Risk of losing all your financial savings

6. 2. Angel investors High net worth individuals who fund entrepreneurship for an equity stake in the business Pros • Established on the principle of ‘High risk high returns’ • Funding could be offered as a one-time investment or as and when required • Investors’ involvement can be pre-decided Cons • Pressure of funders’ expectations • Intervention while decision making, demand of rational explanation • You might need to give up the managerial independence • Claims on returns as per agreements and contracts

7. 3. Venture Capital funds A form of private equity provided to startups with long-term growth potential. Pros • A go-to source for emerging businesses anticipating future success or established companies seeking expansion. • Helps connect you to other investors and founders, leading to mutually beneficial business relationships. • Establishes a mature team that helps in guiding your decision-making process and minimizing risks. Cons • You might need to give up a sizable portion of stake which could in some cases be a majority stake in equity, and the decision-making • The process of seeking venture capital is a long and tedious one • The investors may also put pressure on you to expand your business more rapidly than you expected.

8. 4. Crowdfunding A method used to help raise money to fund startups, projects, or any other ventures with contributions from a vast network of people Pros • This model is not limited to only business people and investors but can also include family, friends, customers, or shareholders • Minimizes time spent in growing your business, which traditionally would take months • Most effective way to collect funds faster for urgent business needs Cons • Building premium successful campaigns is expensive • A lot of time and money is spent on marketing and positioning it well • The campaign might backfire • Not suitable for every business

9. 5. Initial Public Offering Pros • Any individual can buy a company’s shares directly from the company which makes it fruitful for both the company and the investors • Can be ventured into once a business is well established and well-trusted by the customers • An ideal way to gain capital to meet the long-term goals of the company by sharing the rewards with the public. It is a process through which a private company opens its share issuance to the public Cons • Additional regulatory requirements and disclosures that are expensive • Market pressures become troublesome for company leaders as more focus is laid on targets • Founders may lose control over their company as public shareholders retain more power • Higher transaction costs

10. As a startup founder seeking funding, begin by developing a thorough understanding of: • Amount of funds required • Purpose of funds • Amount of control you wish to retain • Metrics, costs, expenses, and future growth projections • Type of support you are seeking : financial or strategic • Short-term and long term business goals

11. Choose what fits best • Outside funding is crucial if you want to grow fast • A thorough analysis of the financial assistance required need to be conducted although there are numerous options • It’s better to start from the beginning with good corporate governance as it might get hard to go back later and try to exert fiscal discipline. • To address these concerns, invest in a good accounting software and keep your finances in order

12. Discover how to support your start up at every step To read the full article visit: https://www.jupitercapital.in/2021/08/18/how-to-raise-funds-for-startups-in-2021/