Investing is the new buzzword, isn’t it?
The first half of 2021 saw a whopping $10.8 Billion total capital inflow towards the Indian startups. This humongous achievement won’t make sense without comparison with the situation a decade ago.
In 2010, the total funding raised by startups in India was $550 Million.
This highlights how investor sentiment towards the startup ecosystem is undergoing a revolution.
In fact, you may have heard a friend (or a friend of a friend) talking about wanting to invest or having already invested. The younger generation is the new economic backbone of the country – and they’re distancing themselves from the traditional investing methods like real estate or F.D.
Does the booming startup funding present an alternative opportunity?
Here’s a complete guide on investing in a startup:
What is a Startup, What is an Investment (and Why Do Startups Need Investment)?
Startups are innovative young companies aimed to scale a product or a service by making it marketable. They solve a problem or fill a gap in a niche to be irreplaceable for the customers.
Speed and growth distinguish startups from other entities. This rapid expansion generally needs funding. The first big challenge for any startup is to search for investors and pitch to them the validity of their idea. This is where investment comes into play.
Investment involves making a purchase of an asset with the intention of profit or accumulated gains.
There are many sources to secure an investment – friends, family, bootstrapping or self-financing, crowdfunding, angel investing, incubators, accelerators, venture capitalism, banks, grants, government schemes, and more.
Startups may need investment for the following reasons.
- Team Hiring
- Prototype Creation
- Product Development
- Sales
- Marketing
- Raw Materials and Equipments
- Infrastructural and Administrative Needs
- Legal Services
Entrepreneurs approach the investors not before objectively analyzing their detailed financial and structural plans to determine their needs.
Risk and Reward of Investment
Everyone invests with an intention to profit. But it is, of course, not always a gain-based ride. Investing in startups, for instance, is a high-risk venture.
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