Raising Capital for startups

 Different ways of raising the capital

The hardest challenge a young entrepreneur will face is raising capital. Convincing someone else
to believe in your dream takes resilience, planning and a strong presentation. To grow the business
capital is very necessary so from the following ways we can raise the capital for startups.

1. Bootstrapping or personal funds

Bootstrapping refers to a situation where an entrepreneur starts a business with little or no financial
backing or assets. Although, bootstrapping can be a difficult way of raising cash. It requires
unconditional devotion to the success of the business, and personal sacrifices often arise as a result.
Your own savings or taking on personal debt (when it’s sensible for you to do so) could be easy
ways to drive business expansion in the earliest days of your startup. You won’t have to
demonstrate your business profitability to banks and investors, and you won’t have to give away
equity.

2. Family, friends, and private investors

The next option could be family and friends. Like self-funding, family and friends likely won’t
require onerous documentation and business plans to be convinced that you’re running a promising
business that will give them a great return on their investment. If you have acquaintances who
would make great private investors, you could also consider approaching them for a capital
injection. However, you must be careful with friends and family. To ensure they are fully on board
with your project, ensure you ask them carefully and respectfully. Communicate the risks of the
business and have the agreement in writing.
 3. Seed funding

Seed funding is a type of financing designed especially for startups. You approach investors with
your innovative or groundbreaking concept and demonstrate how it has the potential to become
profitable in the near term. Seed funding usually means the investor gets in very early in the startup
and they give you capital upfront in exchange for a stake.

4. Pledge future earnings

An innovative way to raise cash is to pledge your future earnings. You can commit to giving a
percentage of your lifetime earnings to investors in exchange for upfront capital invested in your
startup. For example, you could get hundreds of thousands of dollars right away in exchange for,
say, 5% of your future lifetime earnings.

5. Venture capitalist

Venture capitalists tend to invest in more mature companies than angel investors, and operate out
of a firm, rather than working alone. Compared with angel investors, venture capital firms invest
in a lower ratio of businesses that apply for funding - but when they do, they generally invest more
money.

6. Business Loans

Business loans are a more traditional debt-based funding route. VC firms and investors take losses,
but banks do not. Government-backed loans come with low interest rates, but have strict
requirements. Personal loans require good credit, higher interest rates and can be difficult for
startups with no track record to qualify for. If you go this route, shop around and compare prices
beforehand.
 7. Crowdfunding

Crowdfunding is the pooling of money from many individuals through either an organization or
website to support the startup cost of a specific project or company. Contributions may take on the
form of donations as well as trading equity or tangible rewards (i.e., merchandise, exclusives and
memorabilia) for capital. If you go the rewards-based route, you also retain much more control of
your business. (Kickstarter, Crowdfunder, SoMoLend and AngelList are just a few examples.

 Ways that are available in Nepal

The last decade has played a vital role in the development of technology in Nepal. With the
growing technology, startups Nepal, there are more than 300 startups in Nepal, with many yet to
come. So here the ways of raising funds in Nepal are:

1) Participate in startup meets

Nepal entrepreneurial society organizes start-up meet every year where the best among the ideas
is selected. It is an excellent platform to pitch in your idea to policymakers, diplomatic agencies,
and investors. They aim to groom 10000 start-ups in 10 years. There are few other start-ups meets
event of similar nature organized every year. Start-ups need to have a registered company and
should have a market presence of 2-3 years. Therefore if you think your idea has the potential of
being transformed into business for nation-building, start-up meet is the right place for you.

2) Subsidy from government:

The government of Nepal has announced seed capital for innovative start-ups with required skill,
knowledge, and expertise. Ministry of Finance said it would grant 50% of the project cost up to
the maximum of Rs.5 million to the selected innovators through open call procedures. You can
apply to the call where a committee formed will evaluate your idea and select it within 30 days to
fund seed capital.
 3) Venture capital:

A venture capitalist invests in equity closely monitoring the business and exit through an IPO.
However, if you are going to venture capital to be flexible for inputs and close monitoring. If you
have a good team and traction you can go to venture capitalists currently existing in Nepal like
Gurkha Development bank ltd, Vibhor Bikash Bank Ltd, CG ventures, etc.

4) Angel Investment:

Angel investors are high net-worth individuals having surplus funds seeking maximum return on
their investment. They usually work individually or in a network to find out potential start-ups.
Some of the angel investors currently working in Nepal are Marita Schultze, Deepak Khanal,
Bishal Shrestha, Nikhil Sapkota, etc. However, they expect high returns due to risk involved and
invest lesser quantum than a venture capitalists.

5) Bootstrapping:

Bootstrapping means self-funding. This is one of the best ways to get started by investing your
own saving or asking help from your family and friend. It is indispensable in most cases as you
are less likely to get investment from the market in the initial stage as they want to see your traction,
market presence, and potential success possibility. It is helpful as when you invest your money
you are glued to the business. However, this option fits those businesses having small capital
requirements. Therefore if your business fits bootstrapping, go for it as investors tend to consider
it a good point.
  Example of Company Raising Capital In Nepal

The companies that are funding the startups in Nepal are as follows:

1. Idea Studio:

Idea Studio is a platform to turn promising ideas into solutions and ultimately ignite social change
by enabling youth potentials in favour of entrepreneurship through innovation.The program aims
to promote practical knowledge to put text into context. The program will provide students with
knowledge, investment and pitching opportunity to pave their path towards their startup venture.

2. Startup Idea Call Program

It is nonprofit social entrepreneur concept developed by the collaboration of government, private

sector and financial institution that target the youths who want to become an entrepreneur.

3. Faster capital

FasterCapital is an online incubator which is operating in Nepal. They help accelerate/incubate

startups in Nepal. They usually help by providing work per equity. The work can be technical
development per equity or business development per equity. They can also help startups Raise
Capital or find funding for the startups from Nepal or any country in the world. They help startups
and businesses in raising capital from angel investors, getting funded by Venture capitals in Nepal,
other accelerator/incubators (with whom they have partnership), getting small business grants for
startups in Nepal, and getting funded through crowdfunding for startups in Nepal.

4. Biruwa Advisors

Biruwa Advisors is a business and management consulting company. They will not only help in
investment but also in market research, mentoring, networking, consulting, and various other
advisory and legal services that one might need.
  Example of Company Raising Capital In US

The largest and most sophisticated economy in the world, the US is a paradise for startups and tech
companies, with the world-leading support ecosystem and massive venture capital ready to back
promising businesses and some are as follow:

1. Seedinvest

SeedInvest is an equity crowdfunding platform that connects startups with investors online. The
company was founded in 2012 and launched in 2013. SeedInvest has focused on building liquidity
in the platform by attracting high-net-worth individuals, family offices and venture capital firms.

2. Kickstarter

It is an American public benefit corporation based in Brooklyn, New York, that maintains a global
crowdfunding platform focused on creativity. The company's stated mission is to "help bring
creative projects to life.

3. Sequoia Capital

Sequoia Capital is an American venture capital firm. The firm is headquartered in Menlo Park,
California and mainly focuses on the technology industry. It has backed companies that now
control $3.3 trillion of combined stock market value, equivalent to 22 percent of Nasdaq. The
companies that Sequoia invested in early on include Apple, Google, Oracle, YouTube, Instagram,
Zoom, WhatsApp, LinkedIn, and PayPal. Sequoia has been regarded as one of the top venture
capital firms in the world, managing multiple investment funds including funds specific to India
& Southeast Asia, Israel, and China, in addition to the US.

4. WeFunder

With WeFunder you can raise between $50,000 and $50 million from investors. Most campaigns
take between one and three months to reach their goals. From a small restaurant to tech startups,
you will be able to solicit funds from more than 150,000 WeFunder investors. It is free to create a
WeFunder profile and they don’t charge management or transaction fees. Administrative fees are
charged to investors to cover all the costs of operating WeFund.

 New way of raising the capital

Money doesn’t grow on trees, there are number of ways we can seek funding for our business and
some methods are given below:

1. Bridge Financing

It is the method of financing which helps in the procurement of short term loans to cater to
immediate business requirements until long term financing is secured.

2. Crowdfunding:

One of the modern ways of raising capital for a business is through crowdfunding. Crowdfunding
is whereby we fund our business venture or project by raising small amounts of capital from a
large number of people, usually via the internet. There are two primary types of crowdfunding:

a) Rewards crowdfunding: Entrepreneurs pre sell a product or service to launch a business

concept without incurring debt or sacrificing equity/shares.
b) Equity crowdfunding: The backer receives shares of a company, usually in its early stages,
in exchange for the money pledged.

3. Collaborate With Nonprofits

Another way to raise capital is by getting involved with nonprofits in the industry and collaborating
with them to drive real outcomes for their goals. By presenting the results to the board of the
nonprofit who are usually people leading prominent companies. If they're happy with what that
person does, they'll naturally want to know them better. When it's time to raise funds, one can tell
those connections.

4. Invest In Marketing First

There may be many people with good business ideas looking for money and there are many
talented people chasing investors. One must consider using resources on marketing first before
meeting investors and also, look for talent that works on similar projects.

5. Strategic Partners

If you have a relationship with a supplier, distributor, or even a customer who can benefit from
your product or service, it doesn’t hurt to ask them to get involved. It help them see what they can
gain by partnering with your startup, and they may be willing to cut costs, provide you with
services, or invest directly in your budding business.

6. Business Incubators

Another way to raise money for business is to get involved with an incubator. Business incubators
provide money (small amounts), tools, training, and networking to startups and small businesses
in their area. Most business incubators are located in major cities, but don’t dismiss this option if
you live in a small town. Do a little investigating and you may be surprised what’s available.

7. Contest

It may not seem like a viable way to raise money for business, and you may not make everything
you need in one fell swoop, but competing in entrepreneurial showcases (that offer cash prizes)
can supplement the money you raise from other sources. And whether you win or lose, media
coverage of the event can give your business some much-needed exposure.