How Can We Ignite Entrepreneurship With Funding Challenge?
Start-ups need funding as a crucial element to its success, though there are equally important and critical elements that constitute the making of a start-up. It starts from ideas, process panning, team building, and generating and executing a business plan. Several businesses are capital-intensive. This capital-intensive venture-driven business needs special attention towards funding, and here the funds' issues are in plenty. Any scarcity of funds may pose liquidity and working capital challenges which may endanger the survival of the business venture. Let’s have a hovercraft understanding of some of these.
The funding scenario
Today, entrepreneurs have several types of funding available to them as per their stage of start-up and the requirements of the venture. e.g.
· Seed Capital is the primary source of investment for a start-up, which is generally funded by family and friends, crowdfunding, credit cards or personal savings.
· Angel Investors come in when a start-up needs growth. The money shall be invested to either scale or invested for product development, marketing, team expansion, etc.
· Venture Capital financing assists in scaling the business to new business channels, customer segments, or to increase marketing efforts for additional customer acquisition.
· Private Equity investment is undertaken by High Networth Individuals (HNI) with deep pockets who can invest for a long period, enabling the start-up growth.
There are several questions on the selection of various funding sources and handling the funding procedures.
Key questions
It is clearly understood that finance becomes the backbone for seeding any kind of enterprise. This can be a painful task and journey, especially in identifying and sorting out the source based on needs.
1. Which type of financing is best suited for built environment ventures?
2. How to approach prospective investors?
3. What are the major focus areas of investors while evaluating the start-up potential?
4. What common challenges do entrepreneurs face while raising funds?
5. How to manage post-funding activities and challenges?
These become critical questions and soul-searching is required to respond to them, suiting the specific needs of the incumbent entrepreneur.
Observations
The fund-raising process though similar in understanding changes from each start-up. There are several insights and checkpoints that most investors look in startups. These could be in the form of a clear vision, purpose and intent towards establishing a business. What is the overall impact the business is likely to make to the investments and to the society at large may follow some intriguing questions?
Entrepreneurs are likely to undergo volatile, uncertain, complex and ambiguous business environments. How do they intend to mitigate this posited turbulence and evince from them? With the world witnessing a sea change post-pandemic, adopting the new normal of a digital world, the challenge is immense. Yet there is a clear message, “never give up on your dreams.”
Let’s not forget that in the world we live in, businesses are undergoing fierce competition. A unique idea that one claims can be an extension of an existing or exploited by another entrepreneur in a similar field, yet in a different market. A different challenge can be in the form of unrealistic expectations both by the leader and the investing partners. Funding agencies scout for a suitable team that is more realistic, aggressive, persuasive and passionate about the business. These can be crucial towards partnership decision-making. Then comes the important element of how financial management is to be undertaken. Considering the digital world, with transactions ferrying between gateways, investors look out for the cyber security aspects to edge their funding. And most importantly, how is the start-up team in a position to win the trust of customers in the longer term, becomes the central theme of discussion on a continuous basis.
Twitter: @aseem_chauhan Linkedin: https://www.linkedin.com/in/aseemchauhan/
Dr. Aseem Chauhan is a Founding Trustee of the Amity Education Group and currently serves as Chancellor Amity University. He is an institution-builder with a vision to help make Amity one of the leading education providers in the world. Dr. Chauhan is the founder CEO of Amity Innovation Incubator. He is the principal author of “VUCA in Start-ups”.
Twitter: @mjvuca Linkedin: https://www.linkedin.com/in/manoj-joshi-38a26821/
Dr. Manoj Joshi is a Fellow Institution of Engineers, Professor of Strategy, Director, Centre for VUCA Studies, Amity University, with 32+ years of experience in industry & research. He has authored 40+ articles, co-authored three books “The VUCA Company”, “The VUCA Learner” and “VUCA in Start-ups”, is also on the Editorial Board of several international refereed Journals.
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