Startup Funding & Branding

Unit-6
Contents:
• Sources of funding: Bootstrapping, Angel
Investors, Crowd funding, Venture capitalists
• Advantages of crowd funding
• Schemes of Government through Startup India
• Role of Institutional support and Commercial
Banks.
• Introduction to branding a startup and
developing branding strategies.
Sources of Funding
Putting all your eggs in one basket is never a
good business strategy. An overview of four typical sources
of financing for start-ups:
1) Bootstrapping
2) Crowd funding
3) Angel Investment
4) Venture Capital

1) Bootstrapping:
In order to succeed in your first time out in your business
startup, you must ensure that you have some saved up funds
you can easily access or funds you can obtain from friends or
family.
 The process of utilizing personal saved up funds or
funding from friends and family is known as bootstrapping
or self -funding.
Obtaining funding from family and friends is a unique
way to kick off your startup. Friends and family are usually
flexible when it comes to servicing your loan debt much
more than other external sources.
Pros
- Funds can easily be accessed
- Little or no bureaucratic obstacles
- Flexible interest rates
Cons
- Bootstrapping doesn't work for large businesses; it only
works for small-scale enterprises
2) Crowd funding:
Modern technology has made it easier for people to share
their problems on an interactive social platform. Crowd funding
platforms are basically set up for individuals to pitch their
business ideas or challenges to a community of investors or
people willing to support their ideas or cause.

Pros
- Crowd funding essentially creates public interest for your
business, thus running some free marketing and providing
finance for your business at the same time
- Crowd funding eliminates the intricacies involved in placing
your business in the hands of an investor or a broker and wields
that power to simpletons on the crowd funding platform
- Has a potential to attract venture-capital investment as the
business progresses.
 Cons
- The heavy competition inherent in crowd funding platforms
can prove to be difficult if someone or people are pitching the
same business idea as yours.
- If your business pitch isn't as solid as your competition, then
there is a probability that your business idea will be
overlooked or rejected.

3) Angel Investment:
Angel investors are basically people with a huge amount
of capital and are willing to invest it on over the edge business
ideas.
• Angel investors sometimes come together in
groups to scrutinize business proposals, in order to select the
perfect candidate to invest in.
Pros
- Angel investors offer mentorship alongside capital for
startups
- Angel investors are willing to take risks on business idea as
they anticipate heavy return on investment from your startup
Cons
- Angel investors provide lower investment capital to business
ideas compared to venture capitalists.

4) Venture Capital:
Venture capitals funds are managed by professionals that
have a keen eye for seeking out companies with great
prospects.
 Their modus operandi involves them investing in a solid
business rather than an equity. Once there is an acquisition of the
business they are partnered with, they then pull out and seek other
investments.
Venture capital will not takeup small retail business,they will
take up business that can ultimately take public and get big return
from.
Eg: Facebook,Intel,eBay,google,Microsoft
Pros
-Venture Capitals effectively monitor the progress of a company
they have invested in, thus ensuring the sustainability and growth
of their investment.
- The mentorship and expertise venture capitals bring to the table
can also sustain a business or company effectively
- Companies with astronomical growth rates such as Uber, Flip
kart have a pre-designed exit strategy that enables them to reap
huge profits that they can, in turn, re-invest in the growth of
their company.

Cons
- Venture capitals will remain loyal to your business till they
have recovered their capital and profits. This usually occurs
during a slim three to five-year timeframe
- You tend to lose control of your business since you're giving
up a large part of it to venture capital investors
- Venture capital investors seek bigger companies with proven
levels of stability and identifiable workforce. This could prove
to be an obstacle for you because business startups don't
usually have this level of stability.
Advantages of crowd funding:

Crowd funding is the use of small amounts of capital from

a large number of individuals to finance a new business
venture.
Crowd funding makes use of the easy accessibility of vast
networks of people through social media and crowd funding
websites to bring investors and entrepreneurs together, and
has the potential to increase entrepreneurship by expanding the
pool of investors from whom funds can be raised beyond the
traditional circle of owners, relatives and venture capitalists.

Eight advantages of crowd funding:

1) It can be a fast way to raise finance with no upfront fees
2) Pitching a project or business through the online platform
can be a valuable form of marketing and result in media
attention
3) Sharing your idea, you can often get feedback and expert
guidance on how to improve it
4) It is a good way to test the public’s reaction to your
product/idea - if people are keen to invest it is a good sign that
the your idea could work well in the market
5) Investors can track your progress - this may help you to
promote your brand through their networks
6) Ideas that may not appeal to conventional investors can often
get financed more easily
7)Your investors can often become your most loyal
customers through the financing process
8) It’s an alternative finance option if you have struggled to get
bank loans or traditional funding
 Schemes of Government through Startup India:
Government Initiatives
• Startup Ecosystem facilitated through various government
departments & programs
• 4000+ Startups have benefitted in the last year through various
programs of the Central Govt.
• 960 core of funding has been enabled to Startups through
various schemes
• 828 Cr sanctioned funds for infrastructure

With the objective to build a strong eco-system for

nurturing innovation and Startups in the country the
Government launched a Startup India Action Plan that offers
the following support to recognized supports through:
 Tax Exemptions
• IT exemptions for 3 years
• Capital gains exemption to people investing such capital gains
in the Govt. recognized Fund of Funds
• Tax exemption on investments above Fair Market Value

Legal Support in Patent Filing

• Fast track of Startup Patent applications
• Panel of facilitators to assist in filing applications, govt. bears
facilitation costs: 423 facilitators for patent & design, 596 for
trademark applications
• 80% rebate in filing of patents: 377 startups benefitted

Easy Compliance: Self-certification and compliance of 9

environments and labor laws through Startup India web
portal/mobile app. Online self-certification for Labor Laws
enabled through ‘Shram Suvidha’ portal
 Relaxed Norms for Public Procurement: By easing the
requirement of prior experience and prior turnover in tenders
for application by startups

Fund of Funds:
• ₹ 10,000 Cr. Fund of Funds to be provided by Mar 2025: Avg.
₹ 1,100 Cr. Per year
• Operating guidelines has changed to incorporate the
following:
• 2x of FFS to DIPP Startups
• Allow funding of entity after ceasing to be startup (under
DIPP)
• 600 Cr (+25Cr Interest) given by DIPP to SIDBI which further
committed Rs 623 Cr to 17 VC. 56Cr has been disbursed to 72
startups catalyzing investments of
• Rs 245 Cr
 Credit Guarantee Scheme for Start-Ups
• Corpus of ₹ 2,000 Cr across 3 years
• Collateral Free, Fund & Non-Fund Based Credit Support
• Loans of up to 5 Cr. per Startup to be covered
• Status: EFC Memo circulated on 22 March 2017 to 6 Dept’s
• Impact: Credit guarantee to benefit 7,500+ Startups in 3 years

Industry/Academia Support: Providing and building

infrastructure across the country by setting/scaling up: 31
Innovation Centers, 15 Startup centers, 15
Technology Business Incubators, 7 Research Parks, 500
Atal Tinkering Labs.
Startup Recognition: 6398 Applications received; 4127
startups recognized; 1900 startups eligible for tax exemption
(900 processed, 1000 pending); 69 startups given tax
exemption.
Role of Institutional support and Commercial
Banks:
Introduction to branding a startup and
developing branding strategies:
Brand strategy is a long-term plan for the development of
a successful brand in order to achieve specific goals. A well-
defined and executed brand strategy affects all aspects of a
business and is directly connected to consumer needs,
emotions, and competitive environments.
The biggest misconception about brand strategy: Your
brand is not your product, your logo, your website, or your
name.
Many marketers consider more of an art and less of a
science, we've broken down seven essential components of a
comprehensive brand strategy that will help keep your
company around for ages.
7 Components for a Comprehensive
Branding Strategy
1) Purpose
2) Consistency
3) Emotion
4) Flexibility
5) Employee Involvement
6) Loyalty
7) Competitive Awareness
 1) Purpose:
"Every brand makes a promise. But in a marketplace in
which consumer confidence is low and budgetary vigilance is
high, it’s not just making a promise that separates one brand
from another, but having a defining purpose”.

Purpose can be viewed in two ways:

• Functional: This concept focuses on the evaluations of
success in terms of immediate and commercial reasons --
i.e. the purpose of the business is to make money.
• Intentional: This concept focuses on success as it relates
to the ability to make money and do good in the world.
 While making money is important to almost every
business, we admire brands that emphasize their
willingness to achieve more than just profitability, like
IKEA.

IKEA's vision isn't just to sell furniture, but rather, to

"create a better everyday life." This approach is appealing
to potential customers, as it demonstrates their
commitment to providing value beyond the point of sale.

When defining your business' purpose, keep this

example in mind. While making money is a priority,
operating under that notion alone does little to set your
brand apart from others in your industry.
2) Consistency:
The key to consistency is to avoid talking about
things that don’t relate to or enhance your brand. Added a
new photo to your business' Face book Page
In an effort to give your brand a platform to stand on,
you need to be sure that all of your messaging is
cohesive. Ultimately, consistency contributes to brand
recognition, which fuels customer loyalty.
A great example of consistency Coca-Cola. As a
result of its commitment to consistency, every element of
the brand's marketing works harmoniously together. This
has helped it become one of the most recognizable brands
in the world.
3) Emotion:
Customers aren't always rational.
By providing customers with an opportunity to feel like
they're part of a larger group that's more tight-knit than just a
bunch of motorcycle riders, Harley Davidson is able to position
themselves as an obvious choice for someone looking to
purchase a bike.
Not to mention, belongingness -- the need for love,
affection, and being part of groups -- falls directly in the middle
of Maslow's hierarchy of needs, which aims to categorize
different human needs.
The lesson to be learned? Find a way to connect with your
customers on a deeper, more emotional level. Do you give them
peace of mind? Make them feel like part of the family? Do you
make life easier? Use emotional triggers like these to strengthen
your relationship and foster loyalty.
4) Flexibility:
In this fast-changing world, marketers must remain flexible to
stay relevant. On the plus side, this frees you to be creative with
your campaigns.
Flexibility enables you to make adjustments that build interest
and distinguish your approach from that of your competition.

“Effective identity programs require enough consistency to be

identifiable, but enough variation to keep things fresh and human“.

A great example Old Spice. Old Spice is one of the best

examples of successful marketing across the board. However, up
until recently, wearing Old Spice was pretty much an unspoken
requirement everywhere. Today, it's one of the most popular brands
for men of all ages.
5) Employee Involvement:
As we mentioned before, achieving a sense of consistency is
important if you wish to build brand recognition. And while a style
guide can help you achieve a cohesive digital experience, it's
equally important for your employees to be well versed in the how
they should be communicating with customers and representing
the brand.

6) Loyalty:
If you already have people that love you, your company, and
your brand, don’t just sit there. Reward them for that love.
These customers have gone out their way to write about you,
to tell their friends about you, and to act as your brand
ambassadors. Cultivating loyalty from these people early on will
yield more returning customers -- and more profit for your
business.
 Loyalty is a critical part of every brand strategy,
especially if you're looking to support your sales organization.
At the end of the day, highlighting a positive relationship
between you and your existing customers sets the tone for
what potential customers can expect if they choose to do
business with you.

7) Competitive Awareness:
Take the competition as a challenge to improve your own
strategy and create greater value in your overall brand. You are
in the same business and going after the same customers,
right? So watch what they do.
Do some of their tactics succeed? Do some fail? Tailor
your brand positioning based on their experience to better your
company.