Money is most essential for any startup or a full-fledged enterprise to begin. So how does one go through this initial hurdle? A substantial amount of money is required before beginning the actual business operations and of these, certain amount of money has to be set aside for addressing any contingencies, unprecedented expenses and also for sustaining the business for the initial scheduled period of time. At times, the initial requirement of money is met from within the promoter’s contribution with funds accumulated from savings or family to meet the business expenses. Usually, the scheduled commercial banks, non-banking financial entities or other financial firms refrain from funding any enterprise which is going through the seed stage.
The business should have a successful running history of at least a year or have distinguished investors or seasoned promoters. If not, they find it extremely difficult to fund the monetary requirement from banks and other major lending companies. In order to meet the initial funding requirements for a business, there are several options apart from a bank who are willing to provide seed funding for business operations and other related expenses incurred in incorporating a business.
Venture capitalists are investors and/or private equity firms who are willing to invest in startups and other enterprises of various scale and sizes during the launch stage, or even in the growth and expansion stage. Venture Capital funding startup ventures or support small companies in expanding but do not have access to equities markets. Such firms would generally eye a handsome return on the invested money in a matter of 2-3 years from the incorporation of the business.
Angel investors in comparison, are almost opposite to the Venture Capital firms. Angel investors don’t work exactly as only as a funding organization. Angel investor can be either a businessman, an experienced investor or even a board member of a leading enterprise. Some prominent Indians who are active angel investors are Ratan Tata, Rajan Anandan, Vijay Shekhar Sharma, Vikas Taneja, Ajeet Khurana, Kunal Shah, Nikunj Jain, T.V Mohandas Pai and Sachin Bansal etc.
Crowd funding is another alternative for funding a startup or a small scale business expansion. Crowd funding is typically a platform which enables funding through a number of different investors interested in a business proposition. With the help of crowd funding, an entrepreneur or a group of people starting an enterprise can seek a size able quantum of funding by presenting a definitive business plan which can suit the requirements of small investors. In India, the accessibility of crowd funding platforms is still at a nascent stage, but there has been active involvement and growth to a meaningful level, with increased participation from the local players, other market participants and growing awareness among the entrepreneurs.
A strategic partnership or a strategic alliance is an association between two commercial enterprises, usually formalized by business contracts. A strategic partnership will usually not measure up as a legal partnership entity, agency, or corporate affiliate relationship.
Strategic partners are the enterprises which extend monetary support to other relatively small-scale enterprises. They invest a proportionate quantum of funds in a business which is required to meet a definitive goal or a desired objective. Strategic partners either demand a stake in equity or work on a set rate of return which is mutually agreed between the organizations.