When any entity or any individual sets up a new business with a new and innovative concept is referred to as a 'startup'. The process of setting up a start-up involves multiple challenges and adequate risk. Despite the roller coaster rides, people prefer to establish a Start-up entity mainly because of monetary gains, the creation of own brands, be own boss, self-actualization, economic independence, etc.
Startup companies can come in all forms and sizes. The process of the formation of start-ups can be clubbed into different stages.
1. Pre-startup: Discovery by identifying a potential scalable product/service idea for a big enough target market and validation of the service or product discovered hits the market, looking for the first clients ready to pay for it.
2. Startup: Maintenance by maximizing benefits and facing problems derived from the global dimension that the business has achieved. Sale or renewal is the decision to sell the startup to a giant or acquire huge resources that the brand will need to continue growing.
3. Growth: Efficiency of the startup is when the entrepreneur begins to define the business model and looks for ways to increase the customer base. Scale up stage is pushing the growth of the business aggressively while increasing its capacity to grow in a sustainable manner.
Among the several challenges, the major challenge is to establish a business is the source of fund. Generally, traditional bankers are risk-averse towards lending to startups because of the high risk involved in their business model. The popular source of lenders to start up is :
Funding by Angel Investors/ Seed Funds: Early-stage Startups rely on angel investors and seed funding. Invest solely in the entrepreneur with an idea. Does not encumber the entrepreneur with any corporate governance formalities
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