According to Forbes, raising funding for businesses is among the biggest challenges startups face. In fact, Fundable found that less than a percent of startups receive fundings from VCs and Angel Investors. Although, gone are the days when raising capital from VCs was any startup’s best shot at securing funding to fuel their business. With the advent of the internet and a flourishing industry, the world has seen many equally credible avenues with differing costs and benefits. For themselves, founders now have to judge whether they want to give up a degree of autonomy by giving up equity, taking on debt, or adopting modern finance platforms like GetVantage.
Here is a breakdown of some common ways startups are fueling their businesses –
- Venture Capital/Angel Investors – One of the apparent upsides is that the capital raised from angel investors or venture capitalists is not supposed to be paid back. Although this is a double-edged sword, as founders pay for this capital with their precious equity. This was one of the many reasons why UrbanMonkey’s Founder and CEO, Yash Gangwal decided to go with the founder-friendly approach of Revenue-Based financing. Raising money through VCs is an arduous process in itself, as historically, only 1 percent of startups have raised venture capital, according to HBR. Thus, raising money from VCs is extremely hard in its own regard, but it does unlock a wealth of publicity and exposure.
- Venture Debt – This type of loan offered by banks and non-banking lenders is designed for early-stage, high-growth companies with venture capital backing. Companies opt for venture-debt financing as it proves to be much cheaper for them when compared to funds from VCs, as they do not have to give up their precious equity to get some runway for their business. That being said, the interest rates of venture debt are higher when compared to other forms of loans to commensurate the relevant risk of the investment. The high-interest rates and inflexible payment plans are the biggest deal-breakers for all entrepreneurs regarding venture debt.
- Revenue-Based Financing (RBF) – This non-dilutive model of funding is increasingly becoming popular among founders due to its flexible nature. In Revenue Based Financing, repayments are a factor of the monthly revenue. This ensures that your business has enough capital for inventory and marketing needs and gives your business the boost it needs to scale quickly. GetVantage is an industry leader and is paving the way in perfectly implementing RBF to suit the needs of entrepreneurs. When raising funds through our RBF process, GetVantage demands no interest, no warrants, no collateral, no board seats and no grants. Thus, no pressure!
It is important to remember to explore and evaluate all your sources before taking on any financial commitment. And in case Revenue-Based financing is your pick, reach out to us on www.getvantage.co.in