You are here
Home > Business > What Startup is and types of Funding

What Startup is and types of Funding

Let’s start the topic from the very beginning letter of it which is startups. So, the main questions arise in our mind after reading this word are that what actually the startup is, what is the importance of this concept in today’s world. And I literally think that this is the best time to understand the real meaning of the word, as this pandemic situation leaves many people empty-handed on their beds. So, the startup is generally the first step towards where you want to go. It is simply executing your ideas in such a way that they are visible to the whole society and provide benefits to them.

These are a very important part of our lives these days as we saw in this pandemic situation that many people lost their jobs and many are not even able to get food two times a day, which is a very bad thing. But on the other hand, the people who have started some side work other than their jobs will not get such an extent of difficulty in gaining their goals even in this worse situation. So, what is the real meaning of that side work, that side work is generally the type of startup that we talk about.

But, to begin a startup idea is not an easy task one should need proper planning, need to give enough time to how to execute the ideas in people and one of the most difficult tasks is to arrange to fund that idea. As if we don’t have any money source then how it is possible to execute our idea to such a extend that it will benefit people as well as us.

So, let’s talk about some of the ways in which we can arrange funding for our ideas.

The first way is of Self-Funding: As it is very clear to us by the word self that this type of funding is generally related to ourselves. So, in this type of funding a person is able to invest in his idea by himself.

  • Advantages of this type of funding: So, the advantages are very clear that we don’t have to share our profit with anybody, we are the only one who has control over that particular thing. There is no discussion over them about the work that how we are going to do that particular work?
  • Advertisement
  • Disadvantage: The one big disadvantage is the losses are only bear by one person which sometimes not considered a pretty good idea.

The second way of funding is Joint Venture: This type of funding is all about the partnerships as it is very clear by the word ‘joint’. It is generally the business entity created by two or more parties. It is also characterized as shared ownership.

  • Advantages of this are: Risks are shared as not only one person is going to put his money on that particular idea. Have lot more chances to gain success in the future before the expected time, just because of more mind working on one single work. Profits also going to divide between the partners. Losses will also be going to share.
  • Disadvantages are: Everyone’s approval is required to run on a particular program, no single one can take that decision on his own.

Many of the companies or the parties pursue this type of funding as this is a healthy way to finance something as well as a practical way to introduce some new product as well as a new company on large scale. As a partnership with previously setup companies provides a large customer base which is very essential to stand a new product in the market.

So, that’s why this is considered to be one of the best ways to begin a startup.

The third way is of Venture Capitalist or VC: These are generally the people who invest their money in particular fields just to make their money work for themselves. This type of funding comes into space when someone buys shares of that particular company and become a shareholder of that particular company.

To arrange this type of funding for your idea is not an easy task as no one going to fund you without any solid reason to build money by money. This is only possible when your idea is convincing to the VC, who going to invest his money in your idea.

And this is also considered to be one of the riskiest ways of funding as one going to lose his/her whole money on the failure of the idea. These types of funding are mainly done by the big entrepreneurs who established their roots in the market and have less risk to lose them.

One such venture capitalist named Chamath Palihapitiya started his own fund named “The Social+Partnership Capital “with his wife. What this fund does is that this fund provides money to the sectors related to health care, education, financial services, and software makers. He invested his money in many big companies like GLOOKO, YAMEER, SECONDMARKET, etc.

So, these are some of the ways that how to establish funding for the ideas that you have in your mind. But at that time, we have also one question that resides in our mind that how these types of funding can be arranged in one single step, so that step is known as series funding. 

Series funding involves some of the major steps to how to build up your idea to a billion-dollar company by taking some good steps;

  1. Pre-seed stage: Also known as Ideal Stage. At this time the person doesn’t have anything to accept an idea. So, he has to think about how to fund the idea of how this can be done is the next step.
  2. Two way to fund the idea:
  • Boot Strapping: Simply finance by ourselves or self-funding.
  • Context Funding: Funding by the help of family and friends. In this stage, you have to convince them of your idea and also convince them that you will be going to get success soon in the future.
  1. Seed stage: At this stage, your main work is to execute your idea in a better way to get success at a small level so that you will be market-ready as soon as possible.
  2. Now comes Series A, Series B, and Series C stage: Series A means that now you have acquired a good place in the market and are able to collect good revenue for it. Now it’s the time to build your company a bit larger you have to expand your roots and try to fly a little high. And this will be done in Series B and C. At this time investors are keenly interested in investing in your companies.
  3. After all these things the last thing remain in this index is EXIT: Here exit doesn’t mean that your company going to shut down, it means that now you are good to go in the market for the public. Now the public is good to go in investing you. All Owners can sell their shares to the public to raise their revenue. And your company now become (IPO)

(IPO: Initial Public Offering)

So, this is all about the startups and the findings and now I think that you are good to go with your idea. I hope that you all will go to gain success in the future. So, All the best to everyone for your future life.

Advertisement

Similar Articles

Top