Private Equity Funding

Posted 13 Aug 2019, Editor's Desk

How to Get Funding For Startup?

Introduction

  • Are you unable to get funding for your startup?
  • How to get funding for startup through PE/ VC/ Angel Investor? 


Being an entrepreneur the most essential things is getting funding for your startup. 


So, let’s understand how to get funding for a startup with four significant stages as given below-




Stage #1: Start-up Stage of Business

In this stage, you arrange money from family, friends, and fools (FFF).


Friends - They are always ready to help you and mostly become the first investor in your start-up business.


Family - Next is your family members, who can be a valuable support to get funding for your start-up business.


Fools - (who comes easily in your words without analyzing the future scope of your business) - If you have convincing skills you can also collect funds from such people who can easily believe in your business model.  



Stage #2: Early Stage of Business

In this stage of business, Angel Investors supports you. Angel investors refer to those investors, who invest less and gain less but they work like a necessary supplement to your business and help to move your business to the next level.  



Stage #3: Growth Stage of Business 

Venture capital (VC) is the major source to get funding for your startup. “VC brings seed capital to your business.”  VC invests in your idea.  


Important Facts about how to get funding your startup from VC -

  • VC investor usually invests only in Software, Technology or Biotech Business. 
  • VC starts with low investment in the business. 
  • VC focuses on Topline in P&L account, sales or big market share. 
  • VC determines the valuation of a company. He roughly calculates the potential of a company to jump from Rs. 1 crore valuation to Rs. 100 crore. And his money will become Rs. 30 crore from Rs. 30 lac.  
  • VC is a fast mover and works on valuation so he invests in the business.
  • From the very start, VC works at high risk. 
  • VC exits through another investor. 
  • VC invests in many companies and knows very well that out of 100 companies at least 10 companies will give him desirable profit so he focuses on those 10 companies, which are growing rapidly.


Stage #4: Maturity Stage of Business 

  • Private Equity helps you get funding for a startup when your business expands on a vast level. So “Private Equity brings a growth capital in your business.” 
  • PE will invest in your business when he will found Profit / Compounded Annual Growth Rate (CAGR)/ Stability in your business. 
  • PE investors focus on every stable business. 
  • PE can go inside portfolio i.e. Manufacturing, Retail, IT and FMCG business because he is in the search of stability in the business.
  • PE starts with high investment. 
  • PE expects to profit from the business and focuses on the bottom line of the P&L account. 
  • PE is stable and wants both profit and expansion in parallel. 
  • PE works at low risk. 
  • PE exit through IPO.


Loan (Debt Financing) and PE (Private Equity) invests in business in the same stage, when operations, sales, and profitability of the company are stable. At this stage, you can take a loan and private equity both for the expansion of the business.


If profitability and cash flow are very good in your company, then don’t invite Private Equity. Better you take a loan on the nominal interest rate. And if you feel risk in your business also unable to pay EMI, then invite Private Equity.

This essential information about how to get funding for your startup will give immense growth in your business, and no one can stop you from reaching the top position in your industry.

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