Funding is embedded into the very cells of all early-stage startups. While it is a daunting task by itself, combine it with a fluctuating market and economic uncertainty, and it becomes a full-blown challenge. In order to navigate the situation one needs to understand these circumstances and prepare to tackle them. There are always alternatives to explore that can help startups gain successful funding. With the right strategy and a good understanding of the industry, your funding woes can be handled in any situation.
A funding winter is usually the result of instability in the market, an economic crisis, a change in industry focus, or just the lack of interested stakeholders. During such times, finding investors becomes an uphill task. According to recent reports, there has been a steady decline in investments over the last couple of years. 2021 saw a dip in investments of about 27%, with that number going up to 35% in 2022. It is safe to say that the country is in the midst of a funding winter. The International Monetary Fund (IMF) has predicted that this situation will continue to grow globally in 2023 and beyond.
However, the IMF also states that the Indian economy will be the fastest to begin getting back on track. The startup ecosystem in the country has been gaining impetus over the last few years and is touted to grow stronger even in the face of these uncertain times. These new ventures, especially tech-based startups, are going to lead the way to a stronger startup industry.
Here’s how startups can plan to survive and nurture success through this funding winter.
Government grants
The Indian government is pro startups and small businesses. There are numerous schemes available that startups can benefit from, with lesser procedures and requisites than regular funding. Here are some examples of schemes that startups can explore and utilize to their advantage.
- Micro, small, and medium enterprises can utilize the various MSME schemes to raise funding for their business. Loans are made easier to apply for through this scheme, while banks also provide reduced interest rates to help promote new businesses.
- Another government scheme is the SISFS – Startup India Seed Fund Scheme , which provides funding for a startup’s research and development stages. This helps reduce the early financial challenges for new ventures, at a point when the startup is still finding its footing. According to this scheme, small businesses can avail of up to ₹20 lakhs as initial funding.
- VCA or Venture Capital Assistance is a scheme launched by the government to support agriculture-based businesses. This scheme offers interest-free loans to small businesses to help them during a financial struggle. Agri-startups can secure significant funding while staying clear of long-term debts.
- ASPIRE – A Scheme for the Promotion of Innovation, Rural Industries, and Entrepreneurship. This is a recent initiative by the Indian government targeted at strengthening entrepreneurial ventures. ASPIRE seeks to encourage startups to bring about innovative technologies in the agro-industry, with the help of technology centers in various rural areas.
- The Startup India Initiative is a government funding support catering to LLPs, private enterprises, and registered partnership companies. The main aim of this scheme is to reduce the tax burden for small businesses. New ventures are granted substantial tax exemptions that help them remain compliant and up-to-date with their taxes, while also keeping financial strain to the minimum.
Incubators
Another promising method to weathering a funding winter is through the use of incubators. A Startup Incubator is essentially an organization or program that is designed to facilitate the early stages of new startups. They provide seed funding, training, and development for the venture, and in some cases, even a physical workspace for the startup. The incubator acts as a springboard to enable the startup to grow and leap to greater heights. Some examples of top incubators in the country are Venture Catalysts, WE Hub, Villgro, AdvantEdge Founders, etc. Read more about them here.
Fundraising Platforms
Another valuable tool to tackle the funding winter is to work with fundraising platforms. These platforms allow you to raise capital through equity fundraising, enabling your startup to benefit from the investments of multiple small investors simultaneously. Equity fundraising has grown in popularity over recent years, with platforms like POD bringing more investors to the table. By signing up with platforms like POD, a startup can benefit from reliable funding sources such as angel investors, retail and non-HNI investors.
Fundraising platforms have an added advantage. They are open to startups from any sector as long as they have their MVP in place. Of course, the startup should display a high potential and a projection that supports month-on-month growth. Even during times of financial uncertainty in the market, fundraising platforms can support funding through their existing partnerships with investors.
To conclude, any startup or small business must remain persistent in its approach to funding. Keep various options in hand, be adaptable, and always maintain a positive mindset, regardless of the changing financial environment. These wise words by the co-founder of LinkedIn, Reid Hoffman, are apt to this situation - “Entrepreneurship is a marathon, not a sprint.” Stay focused, strategize, and have the right approach, and your startup will be able to overcome the funding winter & anything else that comes its way.
About the author
Vittal Ramakrishna is a seasoned serial entrepreneur and the Founder-CEO of POD World. With over 14 years of cross-sector and global work experience, he possesses unparalleled expertise in alternative funding and strategy. Vittal is dedicated to empowering early-stage startup founders to secure funding from investors in addition to developing a dynamic e-commerce platform for Indian creators.
