When you start a new business, you need money to get it off the ground. You need the money to rent or purchase space for the business, furniture and equipment, supplies, professional fees such as legal and accounting, as well as continuing the research and development of your product or service. You may also need money to pay employees. There are several places where you can get the money that a new business needs, but first you need to think about which type of funding will work best for your company
Friends and family and/or Private Investors
Before you use up all of your personal savings on advertising your business (which wouldn’t take long with today’s advertising costs), think about your other options. Tapping into the pockets of friends and family has some benefits, but it also has some drawbacks.
Overall, borrowing from friends or family is probably not your best choice, simply because of the strain it may put on relationships. However, it does work for many people and may even strengthen your relationship if your business takes off and is successful.
Startup incubators are a growing trend and a great thrust to support first time entrepreneurs in India.
The Centre for Innovative Incubation and Entrepreneurship (CIIE) , Indian Institute of Management, Ahmedabad is one such incubator that fosters innovation driven entrepreneurship in India through incubation, investment and training. Apart from incubating and investing in over 50 innovative ventures across the high-tech sector, CIIE has taken up several initiatives to strengthen India’s entrepreneurial ecosystem by providing mentoring, financial and knowledge inputs.
Angel Investors provide financial backing for small startups or entrepreneurs. The capital they provide can be a one-time injection of seed money or ongoing support to carry the company through difficult times. Angel investors give more favorable terms than other lenders, as they are usually investing in the person rather than the viability of the business. They are focused on helping the business succeed, rather than reaping a huge profit from their investment.
Venture Capitalists invest in a business venture, providing capital for start-up or expansion. Venture capitalists are looking for a higher rate of return than would be given by more traditional investments. There is a slight difference between an angel investor and a venture capitalist. A venture capitalist is a professional investor. He manages a fund and is looking for suitable investments for that fund. An angel investor is an individual who, while also looking for a suitable investment, is also looking for a personal opportunity.