The startup ecosystem in India: Funding patterns
In the last two decades, the startup ecosystem in India has evolved immensely. With access to easy technology and social media worldwide, the startup ecosystem is blossoming every day. One of the crucial elements in the ever-growing race is the funding patterns of startups.
Earlier, only a few investors used to take part in the funding process, but after the launch of initiatives such as “Startup India,” by Indian Prime Minister Narendra Modi, a strong boost was seen in investments.
In India, the city of Bangalore is often referred to as the Startup Hub, with more than 600 start-ups launching every year.
These engines of economic growth are responsible for creating more jobs, thereby helping India reduce its unemployment rates. According to a survey, in 2018, startups across India were responsible for 2.64% of total jobs creation. In 2019, this rate was increased by an additional 1%.
Due to these reasons, the Government of India decided to lend financial support to startups in need by creating a funding pattern for them. Until 2018, around 660 startups received business support and around 132 were part of the funding process.
India, one of the largest economies in the world, is capable of creating an entire market for itself. Although funding is a relatively easy initiative in such a case, the choices and funding patterns would be time-consuming for investors.
The main question that would arise for investors is to properly figure out the funding pattern of a startup and make the right choices while investing in it. In the following, the common funding patterns have been listed.
Funding pattern #1: Diverse sectors
An investor cannot have an equal amount of knowledge in all fields. They would have niche expertise in a specific industry.
Therefore, choosing a startup in your niche sector would be the ideal way to go. In this way, you will be able to make an informed decision and even guide and provide inputs to that startup in their times of need.
As an investor, the funds you contribute to the startup would be put to its best use in the area of your expertise.
Funding pattern #2: Scaling an Indian startup
Scaling an Indian startup is easy with respect to the general population in mind; however, it can be challenging when targeting a niche audience. Leveraging social media can be a great way to help scale the startup while scaling.
To scale a startup in India, or any other country, one must be aware of the needs and demands of the target audience. Moreover, when advertising on social media and other platforms, it is important to maintain the tone of the region and conform to the set rules.
Depending on the chosen sector, scaling could be time-consuming in terms of the understanding and implementation of various factors involved in the scaling.
The funds invested in a startup can help in its scaling.
Funding pattern #3: Hiring process
When a company has just started its journey, hiring the right personnel is quite essential. The right workforce can help the startup stay on its path to success.
It is important to conduct a thorough interview process and choose the correct candidates who can help achieve various milestones in a startup’s journey.
The funding provided can help in the efficient hiring process of a startup as well.
Funding pattern #4: Market experience and needs
The market needs are constantly changing. The funding allotted to a startup can also be utilized towards conducting relevant research in order to stand out from the competition.
On a daily basis, many startups are being launched; therefore, staying updated and knowledgeable would be a worthwhile investment.
Funding pattern #5: Evolution
The funding patterns in India have pushed startups to stay on the path of evolution. The successful startups have been working round the clock to evolve and grow their businesses in today’s ever-growing market.
The investments received by the startup investors should be utilized to provide a boost to the business idea.
These funding patterns have been commonly noticed across startups. When investing, investors should analyze the growth chart of the business and the market needs.
Frequently asked questions:
1. What are the stages of startup funding?
- The stages of startup funding include seed capital, angel investor funding, venture capital financing, mezzanine financing, and bridge loans.
2. How does a startup get funding?
- A startup commonly receives funding on the basis of the Ideation/Pre-Seed Stage. Bootstrapping a startup can also help grow your business with little or no venture capital; this means relying on your own savings and revenue to operate and expand.
3. What are the different rounds of funding for startups?
- Funding rounds are lumped into three groups: Series A, Series B, and Series C funding, each corresponding with the stage of the company. Many startups will go through various funding rounds, which are periods during which companies seek different types of funding.
4. What is startup funding used for?
- Startup funding is the money needed to launch a new business. It can come from a variety of sources and can be used for any purpose that helps the startup go from idea to actual business.
5. How can I fund a startup with no money?
- You can fund a startup via small business loans, trade equity or services, bootstrapping, or crowdfunding.