Equity Based Seed Funding Sources
Reshma Kanase | Sept. 8, 2020, 2:17 a.m.
There are also non-equity funding options existing, which are discussed in previous blogs. While in this blog, many different equity-based seed funding options are discussed.
An investor invests in a company to get more capital back, in the end, there are many different ways this occurs which are listed below.
Angel Networks:This is a group of people, of which each member contributes to the investment/ fund provided to the entrepreneur. They also provide their expert advice and a network. Example - AUC angels, Keiretsu forum,Angel list,Indian Angel Network, and Band of Angels.
Angel investors:They are individuals or institutes which provide capital to startups in the infancy/initial stage. Some of India's angel investors are Mr.Anupam Mittal, Mr.Rajan Anandan, and Mr.Mohandas Pai.
Venture capitalist (VC) and MicroVC’s: Venture capitalists are investors who provide companies with higher chances of succeeding in exchange of equity to business which seems to bloom in the future. Micro Venture capitalists are investors that provide capital to startups which are in their initial stages. Example -Speedinvest, Seedfund, Accel Partners, Sequoia, India quotient, Saama capital, ICP Inventus.
Accelerators: Provides capital in exchange for equity. The term 'Accelerator' is also used interchangeably with incubators. Example: AngleIPad- the #1 Accelerator in the U.S.(based on a real study from MIT/Brown University),YCombinator, Kicklabs, Startup chile, Dreamit venture, 500 startups, andTechStars.
Incubators cells:These are present in colleges like IITs, NIITs which provide funds to student entrepreneurs. Do go through thisblogto know more about incubator cells.
Non-Banking Financial Companies (NBFC): They provide financial services and baking facilities without meeting the legal definition of a bank, offer loans and credits facilities. Example - Bajaj Finance Limited, Tata capital financial services, and HDB finance, and many more.
Then is crowdfunding which also can be categorized as Donations crowdfunding, Reward crowdfunding, Equity crowdfunding, and Equity crowdfunding.
Crowdfunding:Crowdfunding is capital brought from friends, family, relatives, customers, and investors. This type of funding is preferred as investors don’t expect any returns from the enterprise nor do they have control over the enterprise.
There are a few types of crowdfunding, such as -
Donations crowdfunding is when people just invest without expectation of any returns.
Reward crowdfunding is some gifts/rewards that are given to investors when the enterprise makes a profit.
Debt crowdfunding is where investors expect returns from invested capital with interest.
Equity crowdfunding is when investors expect some shares from enterprises in exchange for capital.
There is much crowdfunding online as well as offline platforms. Example -Ketto, Kickstart,Indiegogo,Crowdfunder,gofundme, and Crowdera.
Mezzanine financing:It is a type of funding that bridges the gap between debt financing and equity financing. It is either a form of debt with warrants or convertible debt. When a company is well established and requires funds for scaling up/diversification/expansion, may take mezzanine funds. It begins as a loan, which is later converted to equity if the loan is not repaid or certain returns are not provided to investors on time.
Convertible notes:It is capital obtained as a loan from an investor, which is then after some time converted into equity. The mezzanine can be later converted to convertible notes.
OurFeatured storiesandCurated newsshow how these featured teens funded their startups. Those are the real case studies that you can explore from our website and learn through them.
References :
1.Qadir, Rawaz. (2020). Small Businesses in Developing Markets Funding Options & Reasons Research Paper Essay. 10.13140/RG.2.2.24770.20167.
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