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Startup Financing

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10 views

Startup Financing

Uploaded by

Aruver Sharma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Entrepreneurship Management

Sources of Start-up Financing

Dr Divya Singh Jamwal


Start-up Financing

•Startup capital is the money raised by


an entrepreneur to underwrite the costs
of a venture until it begins to turn a
profit.

•Venture capitalists, angel investors, and


traditional banks are among the sources
of startup capital.

•Many entrepreneurs prefer venture


capital because its investors do not
expect to be repaid until and unless the
company becomes profitable.
Why Funding is Required for Start-ups
Types of Start up Funding
EQUITY & WORKING CAPITAL DEBT FINANCING GRANTS
FINANCING
Brief Equity financing involves selling a portion of a Debt financing involves the borrowing of money and A grant is an award, usually financial, given by an
company's equity in return for capital. paying it back with interest. entity to a company to facilitate a goal or incentivize
performance.
Nature There is no component of repayment of the invested Invested Funds to be repaid within a stipulated time frame There is no component of repayment of the invested
funds. with interest funds

Risk Financer: There is no guarantee against his Financer: The lender has no control over the business's Financer: There is a risk of the startup not meeting the
investment. operations. goal or objective for which the grant has been provided.
Startup: Startups need to give up a portion of their Startup: You may need to provide a business asset as Startup: There is a risk of the startup not receiving a
ownership to shareholders. collateral. portion of the grant due to several reasons.

Threshold of While startups are under lesser pressure to adhere to Startups need to constantly adhere to repayment timeline Grants are distributed in different tranches w.r.t the
Commitment a repayment timeline, investors are constantly trying which results in more efforts to generate cash flows to fulfilment of the corresponding milestone. Thus, a
to achieve growth targets meet interest repayments status is constantly working to achieve the milestones
laid down.
Return to Capital growth for investors Interest payments No Return
Investor

Involvement in Equity Investors usually prefer to involve Debt Fund has very less involvement in decision-making No direct involvement in decision making
Decisions themselves in the decision-making process

Sources Angel Investors Self-financing Family and Friends Banks Non-Banking Financial Institutions Government Central Government State Governments Corporate
Venture Capitalists Crowd Funding Loan Schemes Challenges Grant Programs of Private Entities
Incubators/Accelerators
Stages of Startups and Source of Funding
Steps to Startup Fund Raising

•Assessing Need for Funding

•Assessing Investment Readiness

•Preparation of Pitchdeck

•Investor Targeting

•Due Diligence by Interested Investors

•Term Sheet
What do investors look for in startups?

Objective and Scalability and


Problem Solving Sustainability Sales & Marketing

Management and Customers and Financial


Team Suppliers Assessment

Competitive
Market Landscape Exit Avenues
Analysis
What do investors invest in startups?
Startup India Funding Support
1. SIDBI Fund of Funds Scheme
• The Government of India formed a fund of INR 10,000 CR
• Fund of Funds for Startups (FFS),
• Approved by the Cabinet and
• Established by the Department for Promotion of Industry and Internal Trade (DPIIT) in June 2016.
• SEBI-registered Alternate Investment Funds (AIFs), (daughter funds)
• Investments in venture capital and AIFs that in turn invest in startups.
• Funding is provided to startups across different life cycles.

 As of 31st May 2021, SIDBI has committed INR 5,409.45 Cr to 71 AIFs


 INR 1,541.79 Cr has been distributed to 51 AIFs.
 INR 5,811.29 Cr has been injected to boost 443 startups.
Startup India Funding Support
2. Startup India Seed Fund Scheme (SISFS)

 Department for Promotion of Industry and Internal Trade (DPIIT)


 Outlay of Rs. 945.00 CR,
• proof of concept,
• prototype development,
• product trials,
• market-entry, and
• commercialization.
The scheme will support an estimated 3,600 entrepreneurs through 300 incubators in the next 4 years. The Seed
Fund will be disbursed to eligible startups through eligible incubators across India.

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