11 Ways to Raise Funds for Startups in India

Starting a business in India is an exciting but challenging journey, especially when it comes to arranging adequate funding. From tech innovations to sustainable ventures, India’s startup ecosystem is thriving, but securing the necessary capital often remains a primary hurdle. Fortunately, there are several avenues available for aspiring entrepreneurs to raise funds in India. Here are 11 detailed ways to raise funds for startups in India, covering both traditional and modern funding options.

1. Bootstrapping (Self-funding)

What it Means:

Bootstrapping involves funding your business using your own savings or revenue generated from initial sales. This is the most common starting point for many entrepreneurs, especially those who want full control over their business.

Pros:

• Full ownership and control.
• No debt or equity dilution.
• Builds financial discipline.

Cons:

• Limited capital may restrict growth.
• High personal financial risk.

When to Use:

Ideal for early-stage startups with low initial costs or those validating a product or service before seeking external investment.

2. Friends and Family

What it Means:

Raising funds from personal networks such as friends, family, or close associates. This method is often used in the early stages when formal investors might hesitate due to a lack of track record.

Pros:

• Quick and flexible.
• Lower or no interest expectations.
• Emotional support.

Cons:

• Can strain personal relationships.
• Lack of legal documentation can lead to misunderstandings.

Tip:

Even with close contacts, maintain proper documentation and clarify terms to avoid future disputes.

3. Angel Investors

What it Means:

Angel investors are high-net-worth individuals who invest their personal funds in startups in exchange for equity. They often provide mentorship, industry connections, and strategic guidance.

Notable Angel Networks in India:

• Indian Angel Network (IAN)
• Mumbai Angels
• Chennai Angels

Pros:

• Capital along with guidance.
• Flexible investment terms.
• Potential for follow-up rounds.

Cons:

• Equity dilution.
• May require strong pitch and traction.

Best For:

Startups with a minimum viable product (MVP), some early revenue, or proof of concept.

4. Venture Capital (VC)

What it Means:

VC firms invest pooled funds from multiple investors into high-growth startups in exchange for equity. These firms are typically more involved and can offer mentorship, scalability strategies, and multiple funding rounds.

Prominent VC Firms in India:

• Sequoia Capital India
• Accel India
• Matrix Partners
• Kalaari Capital

Pros:

• Large capital for rapid growth.
• Credibility and brand association.
• Expert mentorship and networking.

Cons:

• Extensive due diligence.
• Significant equity dilution.
• Pressure to deliver high returns.

When to Approach:

Post early traction, with a scalable model and large market potential.

5. Startup Incubators and Accelerators

What it Means:

These are programs designed to support startups with seed funding, mentoring, office space, and access to investors. While incubators focus on early development, accelerators help scale existing businesses.

Well-known Programs:

• Y Combinator (global, supports Indian startups)
• T-Hub (Telangana)
• CIIE IIM Ahmedabad
• GSF Accelerator

Pros:

• Access to a vast network.
• Training and mentorship.
• Exposure to investors.

Cons:

• Competitive selection process.
• Short duration of programs.

Who Should Apply:

Startups in the ideation or early-growth stage looking for mentorship and funding.

6. Government Schemes and Grants

What it Means:

The Government of India actively promotes entrepreneurship through various schemes under initiatives like Startup India and Atal Innovation Mission.

Popular Schemes:

• Startup India Seed Fund Scheme (SISFS)
• MUDRA Loans
• Stand-Up India Scheme
• SIDBI (Small Industries Development Bank of India) funding

Pros:

• Non-dilutive capital (grants).
• Low or no interest loans.
• Support infrastructure.

Cons:

• Lengthy application process.
• Bureaucracy and compliance.

Ideal For:

Early-stage startups, especially in priority sectors like agriculture, health, education, and technology.

7. Bank Loans

What it Means:

Traditional bank loans remain a reliable funding method. Some banks offer special loan schemes for MSMEs and startups under priority sector lending norms.

Options:

• Working capital loans
• Term loans
• Overdraft facilities

Pros:

• No equity dilution.
• Structured repayment.

Cons:

• Requires collateral (in most cases).
• Stringent eligibility criteria.
• Interest burden.

Suitable For:

Startups with stable cash flow or tangible assets.

8. Crowd funding

What it Means:

Crowd funding involves raising small amounts of money from a large number of people, typically via online platforms. It works well for consumer-facing products or social ventures.

Types of Crowdfunding:

• Donation-based (e.g., Ketto, Milaap)
• Reward-based (e.g., Wishberry)
• Equity-based (e.g., Tyke, LetsVenture)

Pros:

• Market validation.
• Public exposure and marketing.
• Alternative to VC.

Cons:

• Requires significant effort in campaign promotion.
• May not meet funding target.
• Platform fees involved.

Best For:

Startups with innovative products or strong community appeal.

Corporate Venture Capital (CVC)

What it Means:

Large companies invest in startups aligned with their industry to foster innovation and tap into new markets. Unlike traditional VCs, CVCs bring strategic partnerships along with funding.

Examples:

• Reliance Jio investing in startups.
• Tata’s investment in health tech startups.
• Mahindra’s agri-tech and mobility investments.

Pros:

• Strategic alignment.
• Access to distribution and infrastructure.
• Long-term collaboration potential.

Cons:

• Limited autonomy.
• May prioritize corporate interests.

Ideal For:

Startups in fintech, health tech, edtech, agri-tech, or deep tech sectors that complement large corporates.

10. Revenue-Based Financing (RBF)

What it Means:

In RBF, investors provide capital in exchange for a percentage of future revenues until a fixed return is achieved. It’s an alternative for startups that prefer not to dilute equity.

Indian RBF Players:

• Klub
• GetVantage
• Velocity

Pros:

• No equity dilution.
• Flexible repayments based on revenue.
• Quick approval process.

Cons:

• Higher cost compared to traditional loans.
• Works only for revenue-generating startups.

Ideal For:

D2C brands, SaaS companies, and eCommerce ventures with predictable revenue.

11. Initial Coin Offering (ICO) and Token Sales (For Web3 Startups)

What it Means:

Blockchain startups can raise funds through ICOs by offering digital tokens in exchange for fiat or crypto. Though risky and regulatory in nature, it has gained traction globally.

Pros:

• Access to global investors.
• Immediate liquidity.
• No traditional intermediaries.

Cons:

• High regulatory risk in India.
• Potential for fraud/scams.
• Requires deep tech and legal knowledge.

Suitable For:

Crypto, DeFi, NFT, and blockchain-based startups with a well-developed whitepaper and token utility.

Final Thoughts

Raising funds for a startup in India is not a one-size-fits-all strategy. The right funding source depends on your startup’s stage, industry, growth potential, and long-term goals. Most successful entrepreneurs combine multiple funding strategies over time—starting with bootstrapping and moving toward angel investment, venture capital, or alternative financing as the business scales.