India’s thriving startup ecosystem…
In the past 2-3 years India’s startup scene has grown fast with massive investments from the investors’ community. Successfully raising money has allowed many startups to scale rapidly and outrun their competitors. Investors at all stages have taken notice and are capitalizing on this trend by significantly increasing activity in India.
However just like one swallow doesn't make a summer, a few unicorns do not represent the 4,000 plus startups launched in India, most of whom are struggling to get funds. For a successful start-up ecosystem to take roots in India, there is need for enough investors who can support the budding entrepreneurs at various stages of funding cycle.
Funding stages for startups…
A startup needs pre-seed capital right at the beginning and most of the time this is met by personal funds of the entrepreneurs as well as funds from their friends and family. The startup is just an idea at this stage.
It is the seed capital that enables an idea to become a startup company. Seed capital comes from angel investors, accelerators, equity crowdfunding and early-stage venture capital firms. Angels are high net-worth individuals from business or industrial sectors who invest directly or through a syndicate of angels. Accelerators are organizations which provide capital, mentorship and office space in exchange for equity.
Equity crowdfunding is done on online platforms, who screen the startups and carry out some due diligence. This data is put up on the platform, based on which interested investors decide to invest. Equity crowdfunding generally would have numerous investors each of whom invest smaller amounts.
Series A, B, C and following rounds are intended to scale-up the startup to maturity. These rounds are funded by venture capital, private equity funds, investment banks etc.