Author: Tripti Garg

Are you an aspiring entrepreneur looking to scale your startup but confused about the fundraising process? Well, this blog will demystify the startup funding process in India in detail.

What is Startup funding?

It refers to acquiring capital for a relatively small, new, or early business venture. There are various sources through which capital can be raised, such as angel investors, venture capitalists, bank loans, crowdfunding platforms, etc.

Startup funding refers to obtaining capital for a new or early-stage business. This capital can come from various sources, such as angel investors, venture capitalists, crowdfunding platforms, and bank loans. The capital raised can be used for multiple purposes, including day-to-day operations, product development, hiring, marketing, inventory, etc.

However, to raise funds, startups should showcase the potential to scale in the near future, along with a sustainable and stable business model.

What is the need for Startup Funding?

A startup needs funding to expand its business. However, founders must be clear about why they want to raise funds and have a detailed plan before reaching out to potential investors.

How to Raise Money for your Startup?

Raising funds for your startup is not easy since it requires a proper business plan and networking with potential investors. Not only this, but startups also need to present financial projections and traction and have a clear idea for a profitable venture. A startup must develop a milestone-based plan along with clear timelines regarding what it wishes to do in the next 2, 4, and 10 years.

Note: The funds offered largely depend on the business’s financial needs and requirements and vary according to size and type.

• Angel Investors
  An Angel Investor is an individual or group with a high net worth who invests their money into high-potential startups and young businesses in return for equity. In other words. Their main objective is to support businesses that show high potential but may not have access to traditional financing.
• Crowdfunding
  is another way to use small amounts of capital from many individuals to finance a new business venture. There are various types of crowdfunding, such as reward-based crowdfunding, donation-based crowdfunding, equity-based crowdfunding, and loan-based crowdfunding.
• Government Loan Schemes:
  To boost the startup ecosystem in India and easy availability of capital for entrepreneurs at the early stage of growth, such as the Startup India Seed Fund Scheme(SISFS).
• Venture Capital:
  Venture capital (VC) is a form of private equity funding offered to early-stage startups and companies. It is often offered to firms that show significant growth potential and revenue creation, thus generating potential high returns.
• Banks/Non-Banking Financial Companies (NBFCs)
  Funds can be raised from banks and NBFCs as the startup can show market traction and revenue to validate its ability to finance interest payment obligations.
• Friends and Relatives
  If any other form of lending is not a viable option, funds can also be raised from friends and relatives, which comes with little or no interest.

Frequently Asked Questions

What does an investor look in a startup before investing?

An investor looks for various things in a startup before investing, such as the business’s ability to solve a unique customer problem, the passion and skills of the founders, the market size, obtainable market share, product adoption rate, historical and forecasted market growth rates, macroeconomic drivers for the market your plans to target. Not only this, but they also look at the cashflows over the years, investments required, exit avenues, and more.

What are the stages of startup funding?

There are various stages of startup funding, such as Pre-Seed funding/Self-Funding, Seed Funding, Series A Funding, Series B Funding, Series B Funding, Series C Funding, Series D Funding, Series E Funding, etc.

In business, where its entity and the owner are same, it is referred to as sole proprietorship. There are various other names for a sole proprietor, such as a sole trader, individual entrepreneur, etc.

Any individual who wants to start a business or company with less or more investment can register for a sole proprietorship. The control, decision-making, and execution will be in the hands of the sole proprietor.

Moreover, the business owners are entitled to apply for business loans which can help with the investment capital for business. Now that we have discussed sole proprietorship meaning, let us further discuss it in detail.

Sole Proprietorship: Key Points

• The owner has full control of the business and bears all the profit and losses alone
• The business finances and the owner’s finances are one and the same thing
• Sole Proprietorship requires minimal documentation hassle-free registration process
• Sole proprietorship is different from One Person Company
• These are easy to establish, which makes the quite popular among small business owners and entrepreneurs
• In Sole Proprietorship, the business is also taxed as an extension of the owner

Features of Sole Proprietorship

Below are the key features of sole proprietorship:

• Complete Ownership: There is no separate existence of a sole proprietor hence all the debts can only be recovered from him
• Easy Process: There is no elaborate or lengthy registration process for establishing proprietorship firms
• Flexibility: The operational strategies are flexible, which makes it easier to understand and operate them
• Undivided Profits: The owner is the only person to accumulate the profits and further invest it in the market and other ventures

Documents Required for Sole Proprietorship

For sole proprietorship registration, the following documents are required to be submitted:

• Aadhar Card
• PAN Card
• Bank Account Number
• Registered Office Address

How to Start Sole Proprietorship in India?

To start a sole proprietorship in India, applicants must first register the business as a sole proprietorship under the Registrar of Firms under the Government of India. This is only possible when the applicant has a current account. Not only this, but the application form is also required to be submitted deposit along with a minimal registration fee with the respective authority or Registrar of Firms.

Frequently Asked Questions

Does an owner require a separate bank account to register a sole proprietorship firm?

No, the owner can also register for a proprietorship firm from the personal bank account.

Are there chances of others investing in a sole proprietorship? 

Yes, other people can make investments in a proprietorship firm. However, they cannot become a partner or member of the firm.

Is it mandatory to have ownership of the office for business operations?

No, even a rented office can be used for the registration of sole proprietorships. However, the landlord’s rental agreement and a NOC must be submitted as proof.

Is GST registration mandatory for sole proprietorship firm registration?

GST registration is mandatory for a sole proprietorship if the annual turnover is more than Rs. 40 lakh; otherwise is an add-on for your registration application.

How much time does it take to start a proprietorship firm?

It takes 15 days approx. for starting a sole proprietorship firm.

When the shares of a company are offered in the capital markets (stock exchanges) for trade, it is known as an Initial Public Offering or IPO. The shares are commonly offered to institutional and retail investors (i.e., individuals).

For an IPO to take place, a private company is transformed into a public company. Every private company wants to achieve this milestone because it helps them raise capital for various business ventures and provides exit paths to investors. Post the company is listed, its shares are listed on the stock exchange for trading in the stock market. Read on to learn more about IPO in detail.

IPO: Key Points

• A company and its existing shareholders offer fresh and existing shares to the public in exchange for capital, and the company then uses this capital for growth
• Once the company is public, it gives them a good shot at building a brand since IPOs are covered by the media, extensively
• The approval for Initial Public Offering, i.e., listing on stock exchanges, is granted by a regulatory authority and in India, it is the Securities and Exchange Board of India (SEBI)
• It is a perfect opportunity for the company to create wealth for the key stakeholders
• Going public has its benefits for the employees who have ESOPs as well they can publicly trade their shares post exercising
• Fixed price for an IPO is determined based on the number of bids at different price points and the valuation of the Company.

What is the Need for IPO?

• The foremost reason companies want to offer their shares via an IPO is easy to access huge capital easily and instantly
• Another important reason companies want to get publicly listed is that it adds credibility to the company in the industry.
• Approval for IPO by SEBI is granted post thoroughly going through various disclosures by the Company on its business, regulatory and litigation risks etc, thus a final approval speaks volumes of company’s credibility.
• It offers an exit route for private investors who wish to sell off their shares at huge profits
• The company gets valuable leverage for negotiating lower interest rates on loans for future needs

Eligibility Criteria for Filing an IPO

• Below mentioned are the most requirements for filing an IPO:
• The company should have at least existed for three years
• Having a PAN no, Demat is of utmost importance for filing an IPO
• The net worth of the company should be positive
• At least 25% of the company must be owned by the public (i.e., not held by promoters or related parties)

How Does the Initial Public Offering Work?

Before an IPO is approved, it undergoes a long process by the regulatory authority to determine eligibility for filing an IPO. The steps involved are as follows:

1. Filing IPO Application with SEBI: To start the Initial Public Offering process, applying with SEBI along with all the relevant details is necessary, such as:
   • Number of shares to be issued
   • The price set (in case it is fixed price IPO)
   • Previous records of the company
   • Proposed use for the funds to be raised, etc.

2. Appointing an Investment Bank: (also called the Left lead): This person is approached on a contract basis and is responsible for managing the sales of the IPO. They guide the company in raising capital and act as intermediaries between the company and its investors. They are also an intermediary between the Company and SEBI. T
3. Filing of Draft Red Herring Prospectus: The company issues Draft Red Herring Prospectus (RHP) with SEBI containing details about the IPO, the company’s business, its capital structure, risks, regulations, and litigation as per the materiality threshold.
4. Roadshows: Before the IPO is open to the public, companies usually create a buzz in the market by advertising the impending IPO across the country via various presentations to help investors better understand the positive aspects of the particular IPO.
5. Deciding the IPO Price: As the next step, the company initiates the IPO price through Fixed Price IPO or Book Binding offering.
6. Launching the IPO: The company launches the IPO after finalizing the size and brand. It is the responsibility of the lead manager to contact all potential investors.
7. Allotment of Shares: As the last step in the IPO process, shares are allotted to the investors on the basis of the bids made. The allotment process is done through a computerized system, which ensures that the shares are fairly priced.

Note: The IPO is open for subscription by eligible investors only for a specified period. The investment bank arranges the issue’s opening on behalf of the company according to SEBI guidelines.

Also, the process of IPO can be complex and time-consuming, and it may take several months or even years for a company to go public successfully.

Frequently Asked Questions

What does the price band mean in IPO?

The Price Band refers to the lower and upper limit of the share price within which the company decides to offer its shares to the public. The investors can bid equal to or between these lower and upper limits.

Can I apply for multiple IPOs from the same name and company?

No, multiple applications are not accepted by SEBI for IPO.

Who are Investment Bank?

Investment Bank is an independent financial institution appointed by the company going public to manage the IPO on its behalf. They are also called Book Running Lead Managers and are registered with SEBI to act as an intermediary between SEBI and the Company.

What is Red Herring Prospectus?

A red herring is a preliminary prospectus filed by a company in connection with the company’s initial public offering (IPO).

E-Banking or Electronic Banking in simple words refers to various banking transactions over the internet, which is end-to-end encrypted making it convenient, safe, and secure to use. The primary purpose of e-banking services is to promote paperless and cashless transactions in the digital world. This blog highlights the key benefits and differences between e-banking and traditional banking.

E-Banking Features

Below are the key benefits offered by e-banking in India:

• It promotes transparency since services are offered online
• The user has access to the bank services 24/7
• The user is sent notifications and alerts with updates relating to banking transactions and changes in the rules
• It lowers transaction costs for the banks
• It is convenient and easy for customers since a bank branch is not required
• It also saves time, manpower, and resources for the banks

Advantages of E-Banking

E-Banking has different benefits for customers, banks, and businesses:

For Banks:

• It enables lower transaction cost
• It increases efficiency and reduces manual errors
• Digital records reduces paperwork
• Experience higher loyalty from its customers

For Customers:

• It is convenient for the customers as they can access their account anytime, anywhere
• Lower cost per transaction as the customer is not required to visit the branch for every transaction
• There are no geographical barriers for the customers to use e-banking services

For Businesses:

• E-Banking improves productivity with the help of automation
• All the business transactions are recorded on a banking portal for future references
• It helps to reduce errors in regular banking transactions

E-Banking Services

There are two types of e-banking services i.e., financial services and non-financial services:

Financial services

Take a quick look at the financial services offered by e-banking:

• Enables the transfer of money to other private and national bank account holders instantly
• Helps to purchase goods and services and use business-to-customer payment methods such as credit cards, debit cards, net banking, mobile banking, various payment gateways, wallets, etc.
• Provides facility for making business-to-business transactions using electronic modes such as NEFT, RTGS, and IMPS options, etc. depending upon the business size and the transaction amount

Non-Financial Services

Below listed are non-financial services offered by e-banking in India;

• Allows user to view the balance sheet for both the savings and current accounts
• The customer can keep a track of the history of transactions done with huge historical archive limits
• Submitting chequebook requests
• Downloading Bank Statements as and when required
• View loan status or EMI Summary, if any
• Details relating to Mutual Funds, Demat Accounts, and insurance policy can also be monitored online

To know more, visit EnKash.com. You can also click below on Signup Now and we will reach out to you soon.

One Person Company also called OPC is a company formed by a single person who is an Indian Citizen and a resident of India as per the Company’s Act 2013. This single person can be the director and the member as well. Previously, to form a Private Company, it was required to have a minimum of 2 directors and 2 members. 

It was mandatory to have at least 3 directors and 7 members to establish a Public Company. One Person Company’s meaning can also be seen as an example of a ‘One Man Army,’ which led to the recognition of a new way of starting businesses in India that ensures flexibility and hassle-free processes.

Now that we have discussed what a One Person Company means let’s dive deeper. Further, this blog will discuss One Person Company in detail, including its features and benefits, eligibility criteria, required documents, and more.

Important Things to Know about One Person Company

• One Person Company is also known as Single Person Company
• An individual, once registered for One Person Company, cannot incorporate the same again
• The nominee to the memorandum of OPC shall not be eligible to become the nominee for another One Person Company
• The director and the shareholder can be the same person in One Person Company
• One Person Company can have maximum 15 directors
• A minor cannot become a member or a nominee of OPC

One Person Company Features and Benefits

Take a look at the One Person Company’s features and benefits: 

• One Person Company can be registered as a private limited company, only
• Funds are easily accessible to OPC
• Fewer compliances as compared to a private company
• Incorporation of One Person Company in India is easy as it requires minimal documentation
• More remuneration is taken home by the owner as compared to other companies
• It is provided the same legal status as that of a private company
• No annual general meetings are required
• All the shares and investments of the OPC are handed down to the nominee in the event of the death of member
• Foreign funding is accepted unlike in the case of sole proprietorship and partnership
• Complete ownership of the company is with the single person

One Person Company Registration Process 

Follow the steps mentioned below for One Person Person Registration process:

Step 1: Apply for the Digital Signature Certificate (DSC)

Step 2: Apply for Director Identification Number (DIN)

Step 3: Now, select and file for Name Approval Application with Ministry of Corporate Affairs (MCA)

Step 4: Applicant must sign the draft of  Memorandum of Association (MOA) and Articles of Association (AOA)

Step 5: Collect and submit all the required documents along with registration fee and stamp duty

Step 6: Filing and approval of application forms with MCA

Step 7: Obtain  a Certificate of Establishment or Incorporation

One Person Company Eligibility Criteria and Documents Required

Take a look at the eligibility criteria and documents required:

• To form One Person Company, an individual must be a resident, as well as a citizen of India
• He/she can be the member and nominee of the company
• Applicant must submit the following documents to form One Person Company in India:
• Application form and owner’s passport size photographs
• Copy of owner’s updated Aadhaar Card and Voter ID card
• In case the property is rented, owner’s PAN Card, Property papers, and ent agreement must be submitted
• Company’s utility bills, NoC from the landlord or any other document required by the Registrar of Firms

Difference Between One Person Company and Sole Proprietorship

Often there’s confusion between One Person Company and Sole Proprietorship in terms of ownership, liability, and more. Below are the two key differences between the two:

Frequently Asked Questions

Here are a few frequently asked questions relating to One Person Company:

Q. Is Goods & Services Tax  (GST) mandatory for One Person Company?

Yes. Similar to other types of companies in India, GST is also mandatory for One Person Company.

Q. What is the minimum age requirement for starting a One Person Company?

The minimum age required for starting One Person Company is 18 years, and the applicant must be an Indian citizen.

Q. How much capital is needed to start One Person Company?

The maximum capital required to start One Person Company is Rs. 1 lakh. However, the applicant does not need to invest that amount in business.

Q. Is it possible to operate more than 1 One Person Company at the same time?

An applicant cannot run more than one One Person company simultaneously.

Udyog Aadhaar is a 12-digit Unique Identification Number that facilitates registration for the small business sector. It was issued by the Ministry of Micro, Small, and Medium Enterprises (MSMEs) of the Government of India in September 2015. Moreover, the process of Udyog Aadhaar registration is similar to MSME registration, which is free of cost and entirely online.  The reason behind Udyam Aadhaar is to boost the SMB sector in India. Keep reading to learn more about Udyog Aadhaar registration.

Udyog Aadhaar Benefits

Udyog Aadhaar offers numerous benefits for the small business sector. Some of the benefits Udhyog Aadhar Card are mentioned below: 

• It is free of cost and has a hassle-free paperless and online registration process
• More than one Udyam Aadhaar can be registered
• Self-declaration facility is also available
• No documents or proof are required to be uploaded for registering an MSME. Only Aadhaar Card is sufficient for Aadhar Udyam Registration
• Preference for efficiently procuring government tenders 
• Protection against delay in payments from buyers

Documents Required for Udyog Aadhaar

For Aadhar Udyog Registration, only Aadhaar Number is required along with the following details:

• Name of the Owner
• Category
• Name of Business 
• Type of Business
• Official Address
• Date of Commencement
• Details of Previous Organization (if any)
• Bank Details
• Number of employees
• National Industrial Classification Code (NIC)
• Amount invested in Plant & Machinery
• Details of Industry Centre (DIC)

Note: It is to bring to your notice that the Udyam Aadhaar Registration form is only available in the English language as of now.

Udyog Aadhaar Registration Process

To boost the small businesses in India, the Government initiated the Udyog Aadhaar Registration (UAM), which has now been changed to Udyam Registration for availing various benefits to the Micro, Small, and Medium Enterprises (MSMEs). If the entrepreneurs fail to migrate to Udyam Registration, then UAM will not be valid, and they will be required to register again for Aadhaar Udyam Registration.

• Also Read: Types of Business in India

Before this, a lot of paperwork was needed to start a business and get MSME registration done. Two forms were required to be filled: Entrepreneur Memorandum-I and Entrepreneur Memorandum-II (EM-II). However, Udyog Aadhaar Registration simplified this process for the MSMEs to avail the government schemes in the form of subsidies, loans at a low-interest rate, and more.

Take a look at Udyog Aadhaar Registration Process:

Step 1: Login to the official website of Udyog Aadhaar

Step 2: Enter the 12-digit Aadhaar no. and name of the entrepreneur

Step 3: Click on ‘Validate’ and ‘Generate OTP’

Step 4: Enter the OTP received on the registered mobile number

Step 5: Once the verification is successfully done, fill out the form with all the relevant details

Step 6: Review the form and click on the ‘Submit’ button

Step 7: Enter the OTP again received on the mobile number

 Step 8: Click on ‘Submit’ once for the final submission

Note: No Udyog Aadhaar registration fees is charged for this process. You can simply print the Udyog Aadhaar Certificate upon submission of the form.

In case you do not have a valid Aadhaar Card, you must immediately apply for Aadhaar enrolment as the MSME- DI, or DSC will file your application based on your Aadhaar enrolment ID slip or any other supporting document such as PAN Card, Voter ID, Driving License, Passport, etc.

Ever wondered why so many small businesses and startups collapse in the very beginning? Well, this might happen due to a plethora of reasons and one of the main reasons might be a failure to have proper HR practices and policies for running a business in a systematic way. Many small businesses misjudge that HR management is not an essential part of achieving business goals and ignore this role to the core. 

However, in this blog, we have compiled a list of the best HR practices for small businesses to help the business and the HR departments focus their efforts on these HR policies and practices to increase employee engagement, improve retention, and much more.

5 best HR practices for small businesses

HR Practices are a set of plans, principles, or ideas accepted by all the employees in a company offering them the best business execution. This is irrespective of which employee and the designation an employee holds in the organization. Moreover, these HR practices mostly revolve around the overall development of employees and aim toward the growth and expansion of the organization

• Also Read: HR Compliance Checklist for Startups

In simpler words, good HR practices refer to strategic human resources processes that include streamlining the hiring process, performance evaluations, and much more.

Matching the company’s needs with employee expectations

A Human Resource team is responsible for balancing the expectations of the company and its employees to create a positive work environment. This HR practice will help the employees meet business goals smoothly, especially when it’s a small business. To cater to employee and company needs, it is essential to find the right balance of structure and flexibility as well. Since employees always need clear and defined parameters for their projects, ways of working, and communication in order to fully sync with their managers and subordinates to meet business objectives.

Implementing Transparent and Effective Communication

This is one of the most important and good HR practices that every small business must adhere to for developing a favorable reputation among its employees and beyond. Transparency and effective communication evokes a sense of trust and also help the employees cope with the organizational change, especially in small business where the team processes, objectives, and functions change quite frequently.

Offer Employee Training at Regular Intervals

Under the HR practices and policies for small businesses, offering employee training by the HR team at regular intervals is very crucial for building their confidence and further improving their performance in the long run. Some of the types of training include sales training, management training, learning about new technologies and industry updates, and much more.

Fair Employee Performance Appraisals

It is imperative to have a fair employee performance appraisal as it is considered an essential component of a successful business. Not only this, but it also improves employees’ productivity and efficiency. All of this can only be done when the managers have clear feedback to the employees regarding their strengths and weaknesses. Moreover, a fair appraisal cycle can only take place when the employers consciously remove any kind of prejudice against the employees and evaluate them objectively. 

Making Offboarding Simpler and Smooth for Employees

No employee stays in one company forever. When the employee leaves a lot of exit formalities are done such as a laptop, ID Card, keys submission, and other documentation processes. A good HR practice is not limited to hiring the right people, implementing leave policies, working on a code of conduct, and more. In fact, it is also responsible for making the offboarding of employees smooth and easy similar to the onboarding process. An electronic employee HR checklist makes it easy for both the HR and the employees to save time and resources. 

Final Words

Stating the obvious, every employee is the backbone of every small business.  When HR follows the policy of ‘putting its employees’ interest first’ they clearly meet the business goals smoothly without much hindrance. When HR proactively works towards catering to the needs of its employees, they also in return work with great dedication and determination. Such HR practices and policies, when created, undoubtedly improve employees’ competencies for improving the business workflow.