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Types of Startup Funding – Know About Different Options

types of startup funding

The Indian startup ecosystem is on the boom. However, to keep the business running, the startups need to get some funding, which plays a key role in the growth of any business.

The current Indian startup ecosystem valuation is around 340 billion dollars. In 2016, the number of startups in India was only 400, which has now increased to 72,000.

Earlier, Startups had only Venture Capitalists and Angel Investors to fund their business. But now, Startups have a lot of options to approach for funding. We have listed a few such options in this article.

Different Types of Startup Funding in India

Angel investor

Angel investors are the ones who have a high net worth and invest small amounts of money in multiple startups. The investment varies from thousands of dollars to millions of dollars.

Startups can easily approach Angel investors as they can provide the early-stage capital, as the decision-making is in the hands of an individual. Moreover, Angel investors come with expertise in their subject, as they have already grown their business in the same space. This way, the time of the Startups is also well-spent.

Angel Investors also have good connections with other industries, which helps bring additional resources onto Startups’ tables.

When the Startups put their idea in front of an Angel investor, it will not only be showcased to that individual, but it is also visible to all the connections the Angel Investor has. If the Startup idea looks appealing to the Angel Investor, a network of other investors might invest in your business.

Some Angel Investors like to invest incrementally rather than releasing the entire capital in one go.

Venture capital

Venture Capital invests in high-potential yet risky Startups. Investors usually check for key parameters before investing in the companies. Venture Capital is run by several partners who have already raised a huge sum of money from Limited Partners. 

The partners in Venture Capital have a span of 7 to 10 years for investments within which they have to generate an outcome.

Accelerators & Incubators

Accelerators focus on investing in companies with a Minimum Viable Product with an established market. They try to speed up the growth of the company with their investments. The accelerators try to run the company like a Startup boot camp and usually set deadlines.

Incubators, on the other hand, focus on investing in early-phase startups. These startups are usually in the product-development phase and need an established business model. They usually ask for equity in exchange for the resources they are providing to the startups. Unlike Accelerators, Incubators develop businesses in slower timelines.


Bank loans are considered one of the conventional funding options for Startups. Banks are known for offering a variety of loans like equipment loans, working capital loans, etc. Whatever the stage of the startups, banks can provide loans for them. However, for early-stage startups, banks require higher collateral.

On the other hand, NBFCs offer hybrid investments like Venture Debt funds. These funds are provided only to Venture Capitalists backed startups.

Private Equity

Private equity funding is usually done in a successful startup that has yet to be publicly traded. These investments are either made by high-net-worth individuals or private equity firms.

The private equity firms raise funds from endowments, pension funds, institutional investors, etc. These firms invest these funds in potentially successful startups and try to return the capital and handsome profits to the investors within ten years.


Crowdfunding is a less considered option when it comes to funding for a startup. In crowdfunding, different investors come together on a platform, go through the business ideas, and then invest a fixed amount in the startup. Moreover, the legality of equity crowdfunding in India has yet to be discovered. Unregistered crowdfunding platforms have done multiple scams.


Now that you know various kinds of startup funding, choose the one that best fits your business needs and helps you scale up the process.

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