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India has transformed into one of the leading startup capital of the world, with over 50,000 startups in its boundaries. Moreover, India has also been ranked as the third-largest startup unicorn following China & the United States, according to the Hurun Global Unicorn List 2019.
With a higher number of startups successes, India has been on the top of the list for many investors. The funding plays a crucial role in the functioning of any startup and is even more challenging to gather when it comes to talking in real-terms.
In this article, we’ll be discussing how to get seed funding India and angel funding for your startup, but first, let’s learn what is seed funding and what is angel funding.
What is Seed Funding?
Seed funding (1) is when an investor invests capital in a startup company in the form of a security offering in exchange for an equity stake or convertible note stake in a firm during the early stage of a business or startup.
The seed funding works as a capital, which helps a startup build its product until it starts generating its cash or until it is set for further investments.
Note: A seed funding round usually consists of 15 or fewer investors investing anywhere between $50,000 to $2 million in a startup (2).
What is Angel Funding?
Angel funding (3), as the name describes it, refers to capital funding provided by an affluent individual, known as the angel investor, to a startup in exchange for convertible debt or ownership equity usually when no investor is ready to back-up the startup.
Note: Some of the famous angel investor networks in India are India Angel Network (4), Binny Bansal (5), Sanjay Mehta (6), VC Karthik (7), etc.
Checklist for raising seed funding or angel funding:
A startup must fulfill the following conditions or terms to raise seed funding or angel funding,
- A dynamic marketing opportunity
- Filling in the market gap
- Team’s execution & coordination
- Traction of the firm
- Investor relevance in term of the startup industry
- The X-factor
How to Get Seed Funding for Your Startup?
Seed funding serves as a crucial source of capital during the early stages of the venture that covers for the startup’s insufficient funds, diminishes the founder’s risk in the business, brings forth opportunities for strategic partnerships, gives access to working capital and assists in scaling up the startup growth.
You can raise seed funding India through some of the ways given below:
1. Crowdfunding
Currently, equity-based crowdfunding is illegal in India (8). In contrast, donor-based & reward-based crowdfunding is entirely legal with over 500 crowdfunding platforms that have become one of the most famous avenues of seed funding. Crowdfunding platforms allow you to display your business idea or product indiscriminately to any terms.
2. Incubators & Accelerators
Incubators and accelerators help provide the necessary working capital and working space to startups in the early stage so that they can commence functioning as a business. While incubators offer small seed fundings & support beyond funding, accelerators assist in scaling up a startup venture.
Some of the popular incubators & accelerators in India are 500 Startups (9), TLabs (10), Cisco Launchpad (11), Microsoft Accelerator (12), etc.
3. Bootstrapping
The only person who believes & has faith in your business idea more than anyone else is you! Have some extra savings at hand? Invest them in your startup as a startup seed funding and focus all your energy on building your empire, not on returning the finances.
Remember, billionaire Elon Musk (13) allocated all his money into his ventures SpaceX (14), Tesla (15), and Solar City (16), and we know the rest.
4. Corporate Seed Funds
Usually, big companies and corporates are on a lookout to invest in innovative products and services, assisting in building an early audience for the startup because of the big corporate name linked with them.
Big corporates like Google (17), Apple (18), and Intel (19) have been providing early-stage startups with seed funding.
5. Philanthropic Impact Funds
If you’re building or have built a product for the betterment of the society that would serve the world with a social impact, then you can approach philanthropic impact investors that are looking to make seed fundings in social startups.
During recent times, various social ventures accumulated seed funding through this source of seed funding.
How to Raise Angel Funding for Your Startup?
Angel funding is one of the leading ways of raising finance for an early-stage venture. However, you need to research the right angel investors for your startup based on your startup industry and the industry the investor invests in, your mutuals with the angel investor, and more.
Here are the things an angel investor looks for in a startup before making an investment:
- Vision and belief of the startup founders
- Traction and scalability of the startup idea
- Good management team
- Target market size
- Reasonable in valuations
- Viable exit strategies
Prepare a pitch that explains all of the above-given factors that make your startup stand out, along with details about your business model and more.
Follow these steps to raise angel funding from angel investors:
1. Research the Right Angels
The internet has enabled us to Google anything from anywhere and about anyone. Use this technology to find an angel based on your industry or startup niche. Usually, you can easily find angels on professional networks like LinkedIn (20) or Twitter (21).
2. Network
Start attending the business meets, and investors summits to check how the angel investors select business pitches. Having a first-hand experience will give you a head start in pitching your idea to the investors later.
Moreover, you never know how building contacts and networking before presenting your pitch might benefit you in the long run.
3. Prepare your Pitch
By this time, your pitch deck must be prepared to be presented to potential investors. Make your presentation simple and easy to interpret to enable a higher understanding of your startup during the presentation.
Include and elaborate upon your concept or idea, business model, target market, competitors, and team in the pitch presented before the investors and convince them how beneficial this strategic partnership can serve both the parties.
4. Be communicative & present confidently
Writing a story is not considered good enough if it cannot be presented boldly. You might hold a flawless pitch deck, but performing it vaguely can land up your pitch in the trash.
Hence, it is essential to be confident and communicative while presenting the pitch deck to your potential investors for angel funding as your confidence in the stage determines your confidence in your startup.
Overall, these were the ways in which you can win over potential investors and raise seed funding or angel funding for your startup. Different people rely on various funding opportunities for their startups. Carry enumerative research and create your perfect pitch deck and turn your startup dreams into a reality.
