So you have decided to start an Indian ecommerce store and you have found the right product to sell. But now you need some cash to get things off the ground?
Read on to find the best sources of funding for your new startup in India.
Every business runs on money and an online business is no different.
You will need sufficient working capital to manage an ecommerce store successfully. Because you cannot survive on a light pocket when you’re into an ecommerce business.
We share with you some effective strategies to raise funds for your new business in India.
You must be the first investor in your business. You will never persuade someone else to invest if you have not first sacrificed your own cash.
Want to know why?
Because no other investor could possibly have your passion. Besides, investors rarely make a move during the infancy of your company.
So when it comes to financing your startup business in India – your investment is the first fuel to boost your business. You can rely on your savings for investing in your ecommerce store.
Cut down your daily expenses. It doesn’t sound awesome. But it’s the only way to invest in your business if you don’t have a deep pocket. It’s time to skip that luxury meal!
There is also another reason:
If there is no cost to failure there will be no desire to succeed. If your new business fails there must be a financial cost to you – it needs to hurt!
The psychology of humankind say we do not value things that are free. Adding a cost the success or failure of your enterprise will actually help you to achieve more to make it a success. There are many Indian startups succeeding and yours can be the next one
Make your friends/family investors
Your friends and family are potential investors in your Indian startup. They can help you out if you have a reliable plan to materialize your ecommerce idea.
You must have a clear idea of what you’re gonna do with their investment. Moreover, you should clarify all their concerns. For instance, they might ask what you can offer them in future.
Investment from friends and family can be used to propel your business and get noticed. It is one of the best sources of seed funding for your startup. At this stage you should take small steps and build your business.
It’s good to have people you know on board. It gives you more flexibility.
You must make legal agreement to define your partnership with investor. Because it may help whenever a conflict arises in future.
In India crowdfunding is a great way to raise funds for your business.
How crowdfunding works:
The concept is simple. You can raise capital through collective efforts of your friends, family and other investors.
Thus you will have a large pool of investors to support your business financially.
Using crowdfunding platforms you can easily reach out to the extensive community of accredited investors from across the globe.
You can present your business idea before the masses and elicit their response. The expert opinion about your business will give you a chance to improve yourself. Thus you get an opportunity to check the viability of your business idea.
Startups mainly deal with two kinds of crowdfunding- equity based and reward based.
Only accredited investors can participate in equity-based crowdfunding. The accredited investors may acquire shares of your company in exchange for their investment.
Reward-based crowdfunding, on the other hand, can have anyone as your investor.
For instance, through reward-based crowdfunding you can raise money from your friends, colleagues and other investors.
But there are no stock options. You typically offer the investors a reward in exchange for their funding commitments.
Whenever you think about beginning an ecommerce store you must think of joining a startup incubator or accelerators.
Because they give you first hand knowledge on how to take your startup to success.
Incubators take care of your ecommerce startup from the beginning stage and devise different strategies to nurture it. They provide essential infrastructure to carry out your business.
Accelerators help you take the giant leap in business. They take your startup to a profitable domain.
Moreover, incubators provide funding options. That is, you can raise capital from operational partners of the incubator.
Government Startup Schemes
Government of India has launched a number of schemes to promote startups and entrepreneurship.
If you have an innovative product with high potential, you can register your company with Startup India programme to avail exclusive benefits.
To promote young entrepreneurs the government has exempted startups from income taxes for three years. Moreover, It has allocated ₹10,000 crore for startups from annual budget.
So if you have a scalable business model, you would probably receive funding from the government. The greatest advantage here is even your ideas get funded!
Business loan is a common way to raise capital for an ecommerce startup. You can approach a bank to avail loan to commence your business.
Now almost every bank provides loans for startups. Business loans guarantee you a fixed amount of money for a certain period with low interest options.
However, there are certain criteria to provide loans.
The bank will check your eligibility. Generally, you’re required to have a decent credit score to impress the banks! Your financial commitments will be assessed before offering a loan.
The chances of getting a business loan is usually higher if you have good credit score.
Keep in mind:
If you’re a defaulter, your credit score dips and it affects your chances of getting a loan.
Angel investors are one option once your ecommerce store manages to do decent business. Because most angel investors help you expand the business.
They give you the essential initial funding to push your business forward.
Is it easy to get an angel investor?
According to the latest statistics by Fundable, only 0.91% of startups get funded by angel investors. Since angel investors often come in the early stage of a startup, they assess the growth and potential of your business before making an investment.
They often look straight into the numbers. So make sure your business is financially stable even if it’s small.
While meeting an angel investor you must have convincing answers to these questions:
- What are you selling?
- What is your uniqueness?
- How do you generate revenue?
Provide accurate data of your company to angel investors and explain the scope of your business from different perspectives.
Think of raising funds from venture capitalists (VC) once your business tastes success and starts to get noticed.
At this stage you could bag multi-million dollar cheques if play your cards right! Because only big bets happen here.
VC is a hard nut to crack. According to a survey conducted by Fundable, only 0.05% of startups get funding from VCs.
Venture capitalists look at the size of the market and examine how your business stands out in it. This way, they assess the potential of your startup.
Every VC wants proof for what you claim. You cannot build castles in air and approach a VC.
You get a cheque only after your company’s progress is evaluated. So closing a deal with VCs isn’t a piece of cake.
Want to know how to reach out VCs?
Here’s a tip:
You can make use of your network to approach a VC. Get introduced to the VC through a reputed entrepreneur.
Raising funds is a crucial step in your startup’s lifecycle. Approach investors keeping in mind the size and scope of your business.
Tell your investors what your company holds for future. Because they step back if your startup doesn’t have potential in future.
Be crystal-clear on different aspects of your business and address all concerns of your investors. Give an outline of what you could do if your startup gets funded and how you’re going to do it.
Share how you raised funds for your startups in the comments below.