Last Updated 26 Jan 2021

Why Funding Is A Lever And Not A Driver For Startups

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Over the past few years, the ‘Startup Industry’ has witnessed the arrival of massive investment opportunities. Any fledgling business venture, irrespective of which industry it belongs to, requires a substantial investment in the form of business capital to help it get off the ground, and accelerate its development, at least in the first couple of years.

Whether it is through Bootstrapping, Angel Investors/Venture Capitalists (VCs) or Crowdfunding; it is an integral part of any new business to maximize their reach and upgrade their business operations.

While scalability is important, new business owners need to make sure that they have set a strong base for their business to fulfill long-term goals in the future. So, how can one figure out which option is the best for their business?

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Let us explore some of the funding and / or investment opportunities which can help startups to gain a strong foothold among other competitors.

Bootstrapping: Although achieving significant funding via investors can help one in quickly scaling their business operations, it should be noted that it is the entrepreneur and not the VCs who leads that business. Despite its risks, one of the biggest advantages of raising capital through this method is the fact that entrepreneurs can retain full control over their company, which is not possible when investors are involved. Bootstrapping allows entrepreneurs to raise funding for their business without the assistance of investors. It mainly involves investing capital from the entrepreneur’s own savings which they can utilize to build their business, at least during the initial stages.

Know when to raise funds: As previously mentioned, all new businesses require some form of funding in order to improve various aspect to maximize scalability. When you know that your business has gained some momentum, determine its scalability. If you expect it to give more than double in ROI, that is the time you should consider raising more funds for your business. It is usually at this stage where investors and other growth drivers come in.

Analyze every single factor prior to raising funds: Go for fundraising only if you feel that your product is a risky & time sensitive bet, and you may need investors to help upgrade it. If not, there are different channels to raise money that you can explore, such as partnerships, incubation, or secured bank loans.

How to raise funds: Funding is like a sales process that may include cold emails and cold calling to potential investors. You have to keep reaching out. A lot of people will say ‘No’ to you, but you shouldn’t get demotivated. This is a rigorous process that requires lots of follow ups and you need a dedicated person to do this job. A lot of market research goes into finding the right investor for your business, and you need to be as extensive as possible. Therefore, it is important to find somebody, who believes in your idea and leads the investment. As soon as you gain one, others will follow in no time.

Execution of funds/investment: Once you are able to raise funds, you need to execute that capital to upgrade various aspects of your business, like production. While executing, make sure that you own your business and not the VCs. Remember, as the entrepreneur, only you hold the reins of your business.

Every established company, irrespective of size or product, was once a startup, and even they needed some sort of investment opportunity to get where they are today. So, it is important to know that fundraising is not the end, but just the beginning of creating a flourishing business that validates an entrepreneur’s ambitions in the long run.

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