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Startup in India Guide or FAQ on Startups
 

Startup in India Guide or FAQ on Startups

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Startup in India Guide or FAQ on Startups

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    Startup in India Guide or FAQ on Startups Startup in India Guide or FAQ on Startups Presentation Transcript

    • 'Startup' “Before we talk about the technicalities of financing a startup, we need to know what a startup is. A Startup is a company which has a minimal history of operation. In other words, any venture which has been recently started by a person or a group can be termed as a startup.” For example, companies like Google and Naukri.Com were startups.
    • Definition of 'Startup' A company that is in the first stage of its operations. These companies are often initially rolled by their entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand. Due to limited revenue or high costs, most of these small scale operations are not sustainable in the long term without additional funding from venture capitalists.
    • Financing a Startup  One of the major challenges faced by an entrepreneur is  financing his venture. Entrepreneur  should  be  able  to  recognize  where  the  organization is in its life cycle. Also, specify which financing option has to be used.      “And then, decide whether a certain option has to be sustained during further stages, or another option has to be considered, based on the requirements of the organization.”
    • FUNDING THROUGH “SEED CAPITAL” The small amount of money required to prove that the concept of the startup is viable and feasible, is known as seed capital. It is generally not used to start the business on a wide scale, but to investigate its different possibilities. Seed capital is more like a securities offering, wherein the parties who have some connection to the startup, invest the necessary funds to start the business. This is done to ensure that enough funds are generated in order for the startup to sustain itself for a period of development, until it reaches a state where it is able to continue funding itself, or has created enough in value so that it is worthy of future funding. The people investing in such ventures are known as Angel Investors. Seed capital options can also be generated from crowd funding.
    • FUNDING THROUGH “VENTURE CAPITALIST” Once a startup manages to emerge out of the Valley of Death and break-even, there are two stages of financing. 1. Early stage financing: In addition to the seed capital, a certain amount of funds are required to get the business organized and operational. This start-up capital is also termed as first-stage financing. Also needed is the initial working capital, to support the first commercial sale of the start-up’s products. 2. Expansion/ Later stage financing: This is the second stage of financing, and it is concerned with expanding the business beyond the breakeven point and positive cash flow levels. This supports trade debtors, stocks, supplies, and expenses. At this point, however, the venture might not have achieved a positive cash flow. For both these purposes, Venture Capital is preferred.
    • FUNDING THROUGH “PRIVATE EQUITY” Private Equity funding is one of the least cost funding available for high growth prospect companies. PE Funding do not require any fixed commitment of returns and are looking for medium term capital appreciation of their investments. This funding option are mostly viable for high growth prospect companies requiring financial resources for future expansion “Private equity firms pool money from investors to buy companies they consider undervalued. Investors include financial institutions, pension funds, foundations, endowments and sovereign wealth funds. According to the industry trade group Private Equity Growth Capital Council, in 2009 private equity firms invested mainly in five industries: business services, consumer products, health care, industrial services and information technology. You can raise money from private equity funds by finding a fit between your business plan and a fund's investment criteria.”
    • AFTER RECOGNITION AND ESTABLISHMENT OF BUSINESS
    • Listing of sme’s on Bse sme exchange ELIGIBLITY CRITERIA: • It is mandatory for the companies with post issue face value capital less than rupees 10Cr. have to do the listing on the BSE SME Exchange / Platform. • The criteria for listing on the Main Board norm has been changed from a minimum post issue paid up capital of Rs.3Cr. to Rs.10Cr. • The SMEs with post issue paid capital between Rs.10Cr. and Rs.25Cr. has been given the option to list either on SME Exchange or on the main board. • The issues shall be 100% underwritten and merchant bankers shall underwrite 15% in their own account. This implies that the SMEs willing to raise the equity capital will be successfully listed on the BSE SME Exchange, even if there is shortfall in subscription.
    • • • • • • • All the existing members would be by default the members of the SME exchange. The minimum application and trading lot size shall not be less than Rs.1, 00,000/The merchant bankers shall be responsible for market making for a minimum period of 3 years. The merchant bankers to the issue will undertake market making through a stock broker who is registered as market maker with the SME exchange and there can be up to 5 market makers for a scrip All the market makers put together are required to provide two way quotes for 75% of the time in a day. The same shall be monitored by the exchange. Minimum regulation and compliance requirements