While a lot of startups and MSMEs consider bootstrapping during the initial days of the business, some businesses which is unable to do so go ahead and try to procure funding for the same. Now there are several avenues through which funding can be acquired. Initially, money usually comes in through friends and family in exchange for a percentage of the stocks. This money is what sustains a business for its initially couple of months unto which point that a larger source of funding is required. Here we have angel investors, incubators, accelerators and excubators who provide you with funding and other services (maybe even mentoring) for a percentage of the company.

Now one thing we must remember is that every time a company goes out for funding or a third party decides to invest in the business, it is for a share of the pie. The question which surfaces most often in the minds of entrepreneurs is whether this kind of dilution in your share in the company is bad. The answer is no, because the assumption is that your pie is getting bigger with each investment as the business grows. But, yes, dilution has its shortcomings as you are losing control of your company.

It is only when the business has set itself up, established and gained traction with its initial customers that it goes for seed funding. They invest an amount which is usually north of 2 crores which is disbursed over a period of time. This level of funding is what facilitates the scaling up of the company. Your first VC round is your series A. Now you can go on to have series B,C etc.

At some point either of the three things will happen to you. Either you will run out of funding and no one will want to invest which will result in your business dying. Or, you get enough funding to build something a bigger company wants to buy, and they acquire you. Or, you do so well that, after many rounds of funding, you decide to go public.

Technically an IPO is just another way to raise money, but this time from millions of regular people. Through an IPO a company can sell stocks on the stock market and anyone can buy them. Since anyone can buy you can likely sell a lot of stock right away rather than go to individual investors and ask them to invest. So it sounds like an easier way to get money.

Other ways of procuring funding for a company includes going for crowdfunding or securing a government grant (which usually requires you to carve your niche). This is usually a lot simpler for businesses which are based on more development-oriented, social entrepreneurial ventures whereby the target is to maximise benefit and development through optimal pricing and steady profits and not profit maximisation through market-driven prices.