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Funding for Startups!

Welcome to the blog of Nitin Garg from Brown Leaf Ventures……In this section I would like to share my knowledge about various avenues for the startups funding and various types of funds that a startup can access

Every startup or business needs money depending on the stage of the business.

The challenge is banks don’t extend any credit to startups as they don’t qualify in the bank’s criteria of credit worthiness considering the risks involved in the business being in the early stages without much proven business model. Typically banks need some assets or some of guarantee against the credit facility which the generally startups are not able to provide.

Each stage of the startup life cycle have different need and avenues of accessing the funds.

Ideation / MVP Stage – Boot fund and crowd funding is the ideal source of raising funds during this stage.

Revenue Stage – During this stage Startups can use the bank credit facility to raise debt using various banking products depending on the nature of business against giving some asset as mortgage. Other option is to approach Seed or Angel investors for funds against equity. There is always a tradeoff between debt vs equity in terms of right valuation, dilution and getting the debt

Growth Stage – As the starup keeps growing in revenue different entities enter in the funding space depending on the amount of funds required starting from Accelerators, Venture debt, Venture Capitalists and PEs further going to IPO….

Funding depends on each business case and there is no single solution for everyone, however I am tried to explain the basics in my article above. In most scenarios startup founders should approach the enablers of the ecosystem for guidance such as mentors, advisors and incubators for guidance.

While this subject is much deeper and needs a thorough understanding of the sector and model I have address the basics on a higher level. If anyone wants to have more clarity and guidance they can reach me at bitsgarg@gmail.com

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