Starting a business in India - Capital generation opportunities - Kotak Bank
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Ideas are dime a dozen. It's all about nourishing the idea passionately and executing it to perfection. A lot of ideas fail to transform into business owing to lack of funding. And among those who manage to take off, about 94% fail in the first year of operations — for the same reason. While some entrepreneurs give up at the first sight of trouble, others jostle through the difficulties, trying to make their business ends meet. If you are somebody who is on the lookout for funding to nourish your business, here's a list of ways you can generate funds:


Bootstrapping or self funding is basically starting a business with your own money. The best thing about bootstrapping is that you are not answerable to anyone! Also, it works to your advantage when you are looking for investors at a later stage; as the investors would then have greater confidence in your project and commitment. On the flip side, with self-funding, everything is on the line and you do not have any safety cushion against mishaps. But bootstrapping is probably the best option if you have enough money, as it allows you to be in control of everything.

Bank Loans

If unable to bootstrap, Bank loan is generally the first option many consider. Banks generally provide two types of financial assistance:

  • Working Capital - This is the loan that helps in running one complete cycle of revenue generation. To put it in simple terms, it is the amount required to run a business for one cycle of its day-to-day operations. It includes the money required for producing a product and delivering it. There is a limit for working capital though, and it is calculated by predicting the difference between the liabilities and assets.
  • Funding - As the name suggests, it is simply additional funds for your business. This would entail the bank having confidence in the business plan and the valuation parameters of the business, as presented by you. So it is imperative for you to get your pitch right. Check out the article for preparation for capital generation pitch.

In a market that offers a range of similar products, you would be better off choosing a loan that fits your needs well, and service that makes your life convenient. 

Government start up programs

Start-up India, the government initiative, is focused on assisting and encouraging the start up culture in India. Pradan Mantri Micro Units Development and Refinance Agency Limited (MUDRA) and various programmes run by different states provide financial aid to start-ups. You can read more about Startup India on their website.

With a full throttle dedicated support from the government, it is probably the best time for any start-up to start a business in India. It is also the time to tread with caution. While there are multiple options for you, and you may be eligible for more than one category of loan, be sure to review the options at hand thoroughly, and see which fits you the best. It would be the classic case of 'problem of plenty' if you miss out on an opportunity even despite so many options.

Crowdfunding / Angel Investors

Crowdfunding is the most perfect idea on paper. There is something in it for the entrepreneur and something for the investor. How? Well, the 'common man' doesn't trust the market but still wants to grow his/her money. So if they invest in a local business they trust, their risk factor reduces and the entrepreneur gets an investor on board making it a win-win situation! If your business is local, and you have good contacts in your area who are willing to invest in your idea, then crowdfunding is the way to go. There are many platforms for crowdfunding, and many angel investors invest through crowd funding. Some of the popular platforms for crowdfunding are Indiegogo, Wishberry, Ketto, Fundlined and Catapooolt.

Unlike a Venture Capitalist, which will be discussed later, an angel investor will not necessarily understand and foresee the economics of the business; all he/she wants is an emotional connect with your idea. So, apart from displaying sound business acumen, you'll need to be expressive about your idea when pitching to your investors. A problem with Angel investment is the sheer quantity of investors involved. If it is a small project, then you might be good with a couple of investors, but for slightly larger project, you will require multiple investors as a single investor may not be able or willing to invest a sizeable amount in your business , making it difficult for you to manage multiple egos and debts.

Read Also: How to Finance your business

Incubators help a company right from conception to execution and operation. Apart from the financial help, they also offer business expertise, training and tools to succeed. There are many examples of successful businesses that started off with the help of incubators. You can find them in every major city across the country. In India, some popular incubators are TLabs, Startup Village, Amity Innovation Incubator, Angel Prime, CIIE, IAN Business Incubator, Villgro etc. 

Incubators are a good option if you are looking for expert advice. Problems arise when there are conflicts of interest —where you see the company a certain way and the incubators do it in another way. Manage this efficiently and you can have a good business partnership.

Venture Capitalist
You just read about all the options for small and medium scale funding. But if you are going big, or rather HUGE, then you might want to look for a Venture Capitalist. These are huge organizations investing in start-ups and/or in organizations against equity, until the organization goes public or is acquired. Along with the monetary investments at various stages (from seed funding-initial, at the very beginning, to later for growth and expansion), they have teams advising you and working with you to run the business.

Some of the well known Venture Capitalists in India are Nexus Venture Partners, Helion Ventures, Accel Partners, Canaan, Sequoia Capital etc.

'Sharks' is a term given to Venture Capitalists because they are considerably huge and 'want' huge from the market. So, they generally invest in companies with great potential and scalable ideas. If you are not looking for anything that huge, they might not be the best option for you.

Other ways to generate capital
There are many other ways you could consider to raise funds. You could participate in start-up business contests or even get advance purchase orders (share your ideas with customers and get pre-orders from them).

If you have an idea you truly believe in, you'll find opportunities aplenty. Work hard towards implementing your plan, and make sure you do everything to succeed. To leave you with a motivational story, KFC founder Colonel Harland Sanders, started his company after he was contemplating suicide, at the age of 65. With a small cheque of just 105 dollars, he went door to door selling his fare, and eventually went on to sell his company for 2 million dollars, and which now has about 600 franchises across the globe.

So, believe, dream and work towards it.

Read Also: Business Strategies to Boost Working Capital

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.