5 Basic Tips for Students to Get Funding for their Startups

Obtaining the funds to build a startup is a significant challenge on its own, especially if you are a student and don’t know where to start. Some may consider it as difficult as cracking a tough competitive exam like the UPSC exam! However, with the advent of investor marketplaces and financial tools, startups have many different options to secure the financial backing that they need for their business. Therefore, it has become more accessible than ever to get funding for your startup! Here are some tips for you to get some funding for your company:

Crowdfunding

If your startup is into creative projects, crowdfunding is a great way to raise funds to collect the initial capital that can kick start your venture into reality. You can choose from a variety of crowdfunding models and decide on the one that suits you best, like rewards or equity-based crowdfunding. Irrespective of the model you go for, crowdfunding is the perfect low-risk option for students who wish to get the word out about their startups while also getting the funds to make it survive. Not only this, at the end of the crowdfunding process, you will also have a pool of early adopters who can provide valuable feedback on your initial product prototypes. For instance, Exploride, a Kerala-based startup, raised $500k within forty days of its launch through crowdfunding. Another benefit of crowdfunding is that other investors are more likely to consider investing in your startup when they other people are putting money in your idea. If you want to retain control over your business, then rewards-based crowdfunding is a great option.

Angel Investing

Angel Investing has always been a popular option for startups that need funds to grow their business. Must See India, Capillary Technologies, Druva Software, Instamojo, TargetMantra are some of the startups which have flourished through Angel Investing. It is an excellent way for students as it not only provides funds but also gets them the help and mentorship of an experienced investor. You can reach potential investors for your startup by merely networking in the right places with the right people. This involves engaging people on social media through LinkedIn, guest blog posts, etc. The aim is to spread the word about your startup. The more positive reviews you get, the more interested investors will be to recognise the potential benefit of supporting you. If you decide that seeking out an angel investor is the right choice for you, look for someone who is in the same field as your startup, or has previously had success. Focusing on investors that have superior expertise in your target market might be the added benefit that your startup needs. Once you have reached a certain size and obtained a certain level of success you may no longer consider your selves a start-up and therefore suitable for angel investing. This is not the case as many start-ups go through several rounds of funding and can remain in the start-up phase for up to 5 years before maturation, as has been outlined in this excellent article on the start-up lifecycle by Tinkerpop Book.

Friends and Family

Friends and family can prove to be the lifeboats students need in an otherwise turbulent venture capital marketplace. These are the individuals who already know your capabilities and talents, and are thus more likely to support you. While friends and family can easily provide you with the funds you need for your startup, you should also keep in mind that borrowing money from them might change your relationships with them. That being said, choosing family members or friends who are aware of the risks of investing and who possess some knowledge about how to run a business might be of more use. It is also important to remember that regardless of the fact that they are people you know, they are still your investors, and ought to be treated like professional investors.

Competitions

Many competitions allow prospective entrepreneurs to get funding and publicity for their business ideas. These competitions encourage innovation by offering financial rewards to the best business model idea. For instance, Amazon Web Services (AWS) Start-Up Challenge rewards $50,000 plus $50,000 in AWS credits to businesses each year to new and inventive concepts. Thus, startup challenges and competitions are beneficial as they offer a low-risk option that gets your idea in front of investors. Not only do they provide you with the potential of winning money for your startup, but just showcasing your plan may also grab the attention of prospective investors who can help your startup succeed. Students can also check with their alma mater to see if they offer any competitions to undergraduate or graduate students. Typically, many B-schools and graduate colleges/universities alike conduct similar contests once a year.

Government Programs

Several government programs provide business owners with the necessary capital they need. Under Indian Prime Minister Narendra Modi’s Make in India campaign, several policies and schemes have come up which aim to boost the startup ecosystem of the country. In the Union Budget of 2014-15, the Government of India launched a Rs. 10,000 Crore Startup Fund to encourage more people to invest in startups. If your startup is about an innovative product, you can also seek funding from the ‘Bank of Ideas and Innovations’ program. In its effort to promote more startups, the Government has also launched ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)’, which starts with an initial corpus of Rs. 20,000 crore to SMEs. Interested people are supposed to submit their business plan, and once approved, the loan gets sanctioned, and you are issued a MUDRA Card. This MUDRA Card functions like any other credit card, and you can use it to take care of your expenses.

Conclusion

There are numerous methods available to students for financing their new startup venture. Getting funding for your startup can be a long process, and while it may be not as cumbersome as getting into UPSC, not getting the funding is equally demotivating. So start with taking stock of the options available to you, and then narrowing it down to the one that works best for your idea. It is important to know that while you might receive funding from a lot of people, it also means they are a part of the company and they might be expecting returns for the trust they place in you. So, maintain a fine line between formal and friendly interactions with your investors.

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