Funding Alternatives: Beyond Venture Capital.

In today’s fast paced and competitive world, starting a startup is relatively easy, but ensuring its survival and raising funds are crucial factors for business growth and expansion.  Raising funds means that many entrepreneurs and new business owners frequently reach out to venture capitalists or angel investors and Convincing them to invest in your startup can be a daunting task.

So In this blog, let’s start with a short story and explore alternative funding options beyond venture capital.

Once upon a time, there was a brave and adventurous young man named Vijay Paul. He lived in a small village, but he dreamed of exploring the world and facing new challenges. One day, he decided to go on a big adventure. With that spirit, he made a bold decision to go on an adventure to a place over 1000 miles away.  The journey was very difficult. There were mountains, forests, and bad roads. Many people had tried to make the journey, but only a few had succeeded. Vijay Paul knew that the journey would be difficult, but he was determined to succeed. He packed his bags and set off on his adventure.

Paul’s journey started well, but the road soon became more and more difficult. He rode slower and slower, and when he got hungry, he would stop to make a meal. After about 500 miles, his fuel ran out and he didn’t have any snacks left. Tired and hungry, he had to push his bike along the road. Paul was too tired and hungry to keep going, so he decided to rest for a while. While he was catching his breath, he looked at his map and saw that there was a village nearby. He thought that he could ask someone for some money and promise to pay them back when he finished his journey. With new hope, he started pushing his bike again and made his way to the village. Finally, he reached the welcoming gates.

Paul thought that he should visit the village head to secure money quickly, assuming that the village head, as a leader, would have more funds. After gathering information on the village head’s identity, Paul approached him, explained his situation, and requested financial help. Unfortunately, the village head declined, expressing doubt, saying, “How can I trust you? You’re not trustworthy.

Paul felt discouraged and pondered, “How can I get money? Should I not have started this journey? Should I turn back?” These questions weighed on his mind, but after some thinking, Paul decided not to give up.

Initially, he approached the villagers, borrowing money from some who were willing to help, while others declined. However, the money he collected fell short of his needs. Paul remained in the village for two days, engaging in various tasks to earn money, but it still wasn’t enough.

In his quest for more funds to continue his journey, Paul turned to his gold ring. He pawned it to a local goldsmith, obtaining the money he required for the entire journey. Feeling re-energized, he began his journey with renewed enthusiasm. However, he encountered many hurdles along the way, including climbing mountains, crossing forests, and facing numerous challenges. Despite these obstacles, his determination never wavered. One day, after overcoming all these hurdles and challenges, he finally arrived at that adventurous place.

We can gain a clear understanding of funding through Paul’s journey. Let’s say Vijay Paul initially approached the village head, whom we can consider as a venture capitalist. However, the village head denied him funding. After giving it some thought, Vijay Paul then turned to the villagers and asked for money to support his journey. This can be seen as an example of crowdfunding. Nevertheless, the funds collected were insufficient, so he decided to work for two days in the village, which can be likened to bootstrapping or other forms of fundraising. When even this wasn’t enough, Vijay Paul pawned his gold ring, which can be seen as a form of loans or revenue-based funding. This example offers a deeper insight into the various methods of funding.

Crowdfunding:

In the above story Vijay Paul first went to the village head but he denied his request next time he went to every villager and asked for the money so this is crowdfunding, in real world also happens the same there are many and many startups built by crowdfunding.

Crowdfunding is a way to raise money for a project or venture by asking a large number of people to donate money, typically via the internet. Crowdfunding is a form of crowdsourcing and alternative finance.

Crowdfunding can be used to raise money for a variety of projects, including creative projects, such as films, music albums, and books; business ventures, such as startups and small businesses; and social causes, such as charity projects and political campaigns.

Did you know the Telugu film “C/O Kancharapalem,” released in 2018, was funded through crowdfunding? In the same year, another movie named “Manu” was also financed through crowdfunding.

This company called Oculus VR is an American technology company that develops virtual reality (VR) hardware and software products. Raised $2.4 millions in 2012 on kickstarter. The company was acquired by Facebook in 2014 for $2 billion.

There are many platforms available for crowdfunding some famous platforms are kickstarter, indiegogo, crowdrise, and patreon etc..

In these platforms we have different types of fundraising options:

Donation based crowdfunding:

Donation-based crowdfunding is a way to raise money for a project or cause by asking people to donate money without expecting any rewards in return. It is often used to raise money for medical bills, funeral expenses, and other personal needs, as well as for social causes.

Reward based crowdfunding: 

Reward-based crowdfunding is a way to raise money for a project or venture by offering backers rewards in exchange for their donations.

Equity based crowdfunding:

Equity-based crowdfunding is a way to raise money for a business venture by offering investors a share of the company in exchange for their investment.

Debt based Crowdfunding:

It is a way to raise money for a project or venture by borrowing money from investors who expect to be repaid with interest.

Revenue financing:

Revenue financing is a unique funding method that allows startups to secure capital based on their future revenue. It operates on the principle that startups can borrow money from investors and repay it over time as a percentage of their sales.

Uncapped: This revenue-based financing platform has supported over 1,000 startups, helping them secure more than $1 billion in funding.

Lighter Capital: Another revenue-based financing provider, Lighter Capital, has empowered over 1,500 startups to raise more than $500 million in funding.

Clearco: Clearco is a revenue-based financing platform that has assisted over 3,000 startups in raising more than $1 billion in funding.

Accelerators and incubation centres:

If your startup’s idea is extraordinary then these accelerators and incubation centres will help you in funding. Not only funding, they provide mentorship, guidance and office space etc. Some famous incubation centres in India are T-Hub, Y-combinator india, and Startup village etc.

If you want to learn more about incubation and accelerator please read our recent article about T-hub.

These are not only the options for funding, we have many options to get funding  in today’s world like bootstrapping, angel investors, grants and competition etc. The only thing that we need for funding is valuable startups that can impact the respective market.