Sources of Funding for Entrepreneurs

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In the last few months, I have conducted over 10 workshops attended by more than 100 entrepreneurs across 7 cities, and 1 question which has been commonly asked is the source of funding available for entrepreneurs. Funding is a huge pain point for all startups, and it will be beneficial to know what are the various means of financing and at what all stages of a company lifecycle are they available. Generally, all companies go through the below lifecycle:

Stage 1 – Concept

At the very early stage of company (maybe even before company formation), all that is there with an entrepreneur is a team and a dream. The idea itself may be powerful, and serves a paint point of customer, but there may not be anything tangible to show.

Sources of funds – Founder, friends, family (maybe father in law!), credit card, PF savings, previous job savings, Government bodies like DSIR (under TEPP scheme), MSME schemes (micro, small and medium enterprises), incubation centers (non-financial support mostly)

Stage 2 – Prototype

At this stage of the company, there is a physical shape to the entrepreneurs idea. If its a software, then the website will be operational, or the basic codes and executables will be ready. 1-2 early customers (either paying or free is ok) may be there, and the sales team will be slowly learning the art of sales. The company need not be profitable, but they can show that the product works.

Sources of funds – Angel investors like Mumbai Angels (, banks and lending institutions (supported by CGTMSE), high networth individuals

Stage 3 – Rollout/Expansion

This is the stage of the company where the only way forward is rollout of products and services on a large scale, whether fast or slow. Technology, marketing and commercial risk will have been taken care of. Customer traction would have started. The company may or may not be earning profits, but the potential is huge. Team is stable, new products may be in pipeline, new offices or geographies are being planned for rollout.

Sources of funds – Venture capital investors, large corporates (who want to grow by acquitition)

Stage 4 – Growth

This is the stage of a company which witnesses rapid changes in scale of business. It can witness growth coming from high growth existing business divisions and new areas of opportunity as well. The company would have established a 3-5 years presence and build some assets in their balance sheet.

Sources of funds – Bank loans, private equity

Stage 5 – Maturity

This is the stage where the company may be growing at or above the industry growth rates, having competitive pressures, customer retention challenges, HR challenges and would have taken the shape of a medium to large corporate.

Sources of funds – IPO (Initial Public Offering), mergers and acquisitions

Another point to note here is that equity funding vs loan funding – generally, loan funding is available at a late stage of a company compared to equity funding. An exception is the collateral free (no security) loan scheme available from financial institutions under the CGTMSE scheme for entrepreneurs. With the emerging startup scenario across the country, there is more government support expected in the future, along with emergence of more angel investors and venture capital investors.

Article contributed by Amit Grover, Founder, Nurture Talent Academy ( He can be reached at

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