Thinking of 'Start Up' !!!###????

Saturday, May 2, 2009

In the last few months, I find quite of few people trying to take up entreprenuership, This might be due to various factors, recession? might be one, if you read this article in Business Today
or it might be purely out of passion to be on one's own.

If you are trying to find out as how to legalize a start up and then read on.

In Indian scenario, Indian business entity can primarily take four different forms

  1. Sole Proprietor.
  2. Partnership firm.
  3. Private Limited.
  4. Public Limited.

If you are are a new startup, I feel its better to concentrate on the product and getting it into the market so that your capital can be churned out into revenue . Hence sole proprietor or Partnership firm would better suit for a small start up who is particularly focusing on running the business legal entity on a small budget.

On Partnership & Proprietory I found an interesting article in this link which provides an

VC & Debt Financing : If lucky enough and if you are able to entirely finance your start up from concept to till the stage of self sustenance, then I think you have achieved the objective of being totally on your own. If you are looking for financing you dream, then you need to look at the options through debt financing or venture capital funding.

Debt financing is the 'loan' from financial institution or any third party. Financial institution like bank do offer loan but getting a loan for a business might not be as easy as a home loan for a salaried person. In case of home loan, it much more easier for the bank to arrive at the loan amount, which is naturally based on your salary and on top of it property is also morgaged to them. However, in case of business loan, banks need to be sure of your repayment capacity and hence would ask for 'project proposal' in case of a start up and on top of it, in most of the case, they would naturally insist on a 'collalateral security' in the form of morgage.

Venture capital is much more attractive. But unfortunately, venture capital funding org should trust your concept/project and have confidence that your start would provide adequate returns in the near future. Venture capital is an 'equity' participation in your legal entity, which mean there is no interest or principal repayment involved and only agreed upon profit sharing at later stage. The venture capitalist would be a shareholder in your business entity and hence most likely they would look for a Pvt Limited or a Public limited company.

Which is best venture capital or Debt financing?, each one has its own advantage, venture capital is much more advantageous, since unlike 'loan' there is no interest outflow during early days of your venture where business returns are very less.

Well, world over, I believe its passion which drove the inviduduals to take up entreprenuership and I am sure you can find so many real life examples who had started in a small room and went on to realize their big dreams!!!

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