In the US it is quite common for a startup to get its 1st round of funding from SBA (small business association) or an overdraft of $100K from the neighbourhood bank. After that if cash flows can support you should be able to get more credit from the bank. Then there are Mezzanine funds which will give you convertible debt. Infact VC funding is considered very rare in the US.
In India most lending is asset based lending and not cash flow based, meaning you have to have some kind of asset such as a house inorder to raise any debt. Or you have to have parents and family that support you. But how does the average guy get started? There are some inspirational stories about how some did it and it would be great if we can hear them!
So how did you fund your startup?
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Institution funded:
For us, it will be too early to comment, we are yet to become a ‘story’, 🙂 But since RYK asked for an institution, i need to reply, we are Day 1 funded startup from NirmaLabs. We got associated with NirmaLabs, Ahmedabad exactly 2 years ago, and now we are about to exhaust their first seed investment of Rs.2 million (real cash). Will start pitching for next round soon. This fund comes at cost of 10% equity and also complete amount as soft loan. But there is no collateral, NL makes money when we make money. Funding has helped us in completing more that 70% of product development (Hardware), genuine technology development and we use to get sustenance allowance also to survive! All this is 100% full time activity. NirmaLabs funded us when we had a word document called Business plan. All because of a man who kept his word on promoting techno-entrepreneurship and trusted us, Dr. Madhu Mehta, Chief Architect, NirmaLabs.
For those who are not aware, NirmaLabs is a Technology Business Incubator based in sprawling (green) Nirma University campus in Ahmedabad. Details on http://www.nirmalabs.org . There are 5-6 more similar stories here.
Govind Agrawal
Anaxee Technologies Pvt. Ltd.
http://www.anaxeetech.com
wow, courageous stories indeed. That’s what I love about entrepreneurs that they go over, under, around the problem one way or the other.
is there anyone here that managed to get any kind of loan/debt from a bank/institution for his/her startup?
Some very basic down to earth ideas from personal experience:
1. Work a while. Helps: Diverse contacts (not just college budddies, all of whom tend to think alike), cash, real-world issues and handling, some business sense if you have the opportunity.
2. Invest! Not in iPods/Macs 🙂 There’s nothing like getting lucky in the stock mkt or with stock options. Builds up a decent stash and you don’t mind blowing up some “planned-growth” to pursue a dream or experiment with ideas (or even do an MBA if thats your dream).
3. Keep your books meticulously – down to every 2/- that you spend. If you know exactly how long you can sustain on amount X from step 2 above, you can tie in all other plans to a timeline. This is also a good habit for an entrepreneur anyhow.
4. Develop a good balance of optimism AND skepticism. Also practice how to respond after initial euphoria or despondence to something you hear/come across.
5. Once you’ve worked out a plan – go have fun!
– Sameer
I truely believe that it is foolish to quit a job and not have some kind of regular income to sustain yourself before venturing into the entrepreneurial world.
Belive me there are countless oportunities to earn a regular income to support yourself. It could be income from rent, lease, bank interest, business or anything. But make sure you go on a cruise control as far as income is concerned. Only then can we think of devoting 200% into the venture we want to persue.
I suggest reading this nice book “The Parable of the Pipeline” to set you in the groove.
-Vivek
Rehan,
you know my story. Lets see, if it can help others.
We pooled in 45 lakhs in Druvaa in which 6/7 lakhs was from my side.
And live 1 year on no salary bases.
This is how we managed.
I come from upper middle class and don’t have any “good friends and family” money sources 🙂 My dad was retiring from defense services and I had to help him build his house so, i couldn’t ask him any money either. 2 years out of college i had no money either.
So, I started consultancy and got a Big paying job at veritas and managed to save some 4 lakhs. Invested into stock market and luckily made 80% profit. And then asked my fiancee to fund my monthly expenses and then pored in my savings in Druvaa.
Ramani, the primary founder in my startup sold his flat in Bangalore, for which he was already paying some heavy EMIs. He used that money to pay off his house load and money for Druvaa
We further saved some good money buy buying second hand servers and signing up ISVs to save hardware and software cost. This was significant we saved about 5-6 lakhs here.
Overall we still did a lot of over-burning mainly coz we didn’t plan our budgets and fund raising in time.
– J