Start-ups and new businesses are trending in India today. Every second smart millennial has a business idea that theyhope to launch. But every aspiring entrepreneur faces a big hurdle: funding. Banks and other traditional lenders tend to be wary of lending to new businesses. So, getting a start-up capital is far from easy.
In that case, what is the best way to kick-start a start-up?Bootstrapping could help.That means starting out with your personal savings. Of course, your savings cannot grow overnight. If you have an entrepreneurial mindset, you must start planning well in advance.Invest with care to bootstrap your business.One efficient way to achieve this is by investing in mutual funds.This can help you createthe start-up capital you need.
Investing for capital generation
Entrepreneurs who are conceptualising a business need to have somefinancial acumen.Only then can they invest smartly to bootstrap the business. They must plan their investments for funding the business.It helps to do thissome years in advance of the launch date. Investing one’s savings in the equity markets through mutual funds is one such option.
How to invest for start-up capital
Aspiring investors could consider two options in order to build start-up capital. First, start investing before you quit your day job.You could invest in equity funds throughsystematic investment plans (SIPs).It helps to have a ballpark figure in mind. Try to remain invested in equity diversified funds for at least five years. Wait until you reach the ballpark figure necessary for launching the start-up.
Second, you could even consider investing a lump suminstead of taking the SIP route. How should you accumulate this lump sum?Put together the annual bonus, tax refunds, and incentives from your day job. Finally,invest this amount in a liquid fund. As your next step, you couldturn to a systematic transfer plan (STP).Try an STPin an equity fund over a longer period of time.This will enhance your investment returns until your business is ready for launch.
Alongside this investment, set aside a part of your savings in a liquid fund. This is importantfor facing contingencies and unforeseen costs when launching your start-up.
To sum up
Where does the key to bootstrapping your business lie? It lies in smart planning and being thrifty with your finances. Saving through the mutual fund route offers one big advantage. You can leave the job of efficient money management to professional fund managers.Meanwhile, you can focus on the critical task ofpreparing a blueprint for your business. Take the SIP route well ahead of the launch.This can help you tie the business launch to a financial goal. That goal is bootstrapping in this case.
Bootstrapping a start-up can be a great confidence-booster for an entrepreneur. The efficient planning and use of finances that it involves will ready him for the future.The entrepreneur might need to approach an investor or a lender at a later stage. He will be better prepared in that case.