The do-it-yourself way to fund your start-up

6th December 2017

Ever find yourself brimming with a great business proposition but no means to fund it? Or maybe it’s your spouse or son/daughter who want to go head long in business but lack the finances. Here’s how a ULIP can help you fund your start-up!

Age of the off-beat

Something needs to be said in favour of the off-beat.

For some time now India has turned into a hotbed for off-beat ideas and business propositions. A nation with a traditional streak of employee-oriented behaviour seems to be bitten hard by the entrepreneurial bug. Indians seem to have abandoned the formulaic jobs / employment opportunities and are venturing into relatively untapped segments on a whim or perhaps in pursuit of passion. And this is evident not only in business, but in other areas like entertainment or cricket.

So while formulaic movies with big bucks backing big stars like Tubelight & Jab Harry Met Sejal failed to strike a chord, off-beat films like Hindi Medium resonated far better with the audience. Even in 2017 IPL, we saw Rising Pune Supergiants, a lightweight that just got drafted in IPL for two seasons, come within one run of lifting the IPL trophy.

Clearly, an off-beat idea or business proposition for a start-up that truly connects with its target audience is worth pursuing. But a great idea could die just as easily. Mere chutzpah is not enough, you need money to back the idea, to turn into something bigger. Money is the lubricant that makes it happen.

Someday it could be your son / daughter or even your spouse who is waiting on the side-lines with a rare talent or start-up idea with aspirations of making it big. She / he would turn to you for money. And then you would wish you had saved enough money earlier on to help finance her / his dreams.

Money for your start-up

On a positive note, money isn’t really hard to come by, if you know where to look.There are the usual sources:

Friends and family

Sourcing funds for a start-up from external investors who barely know you is always a challenge. So, it’s quite natural to seek out your near ones – family and friends, who have a little more confidence in you and your capabilities.However, you would be putting the money of your near ones at risk and that is something a lot of people aren’t comfortable with.

Business Loans

Another option for start-up fundraisers is the business loan route. For this you must approach a bank, preferably one with whom you have a deep relationship. Having said that, a start-up is likely to find it difficult to raise money from a bank given its track record, or lack thereof. In the least they are likely to ask for collateral, which could be a problem for many individuals.

Venture Capital

Venture capitalists (VC) need a really enterprising idea that can translate into a big investment before they even come to the table. And they meet scores of entrepreneurs every day with their well-laid out business plans.Getting a VC attracted to your idea is not impossible, but given that there are so many entrepreneurs competing for the VC’s attention, your idea must be one in a thousand, quite literally.

Your own savings (bootstrapping)

Of course, you can always fund your own start-up, also called bootstrapping. You fund the start-up expenses with the revenue, month after month. It’s a bit like a hand to mouth business plan. A lot of businesses function this way. But they don’t grow much; they pursue a low risk business since they don’t have enough money to take large risks, like a big marketing or promotional campaign.

Investment in ULIPs

One option that is likely to appeal to a majority of start-up founders is a ULIP. Unit-linked insurance plans (ULIPs) are particularly useful in building long-term wealth to fund a start-up idea, back a budding entrepreneur or sportsman or produce an offbeat film. ULIPs offer investors the opportunity to benefit from long-term growth in equity markets. There is a minimum five-year lock-in for the purpose of availing tax benefits (under Section 80C) – the lock-in instills discipline and allows investors to reap the benefits of long-term equity investing. So long, as you have made a prudent choice in selecting the right ULIP, eventually the strong investment processes should see you achieve your investment Goal. And how do you select the best ULIP plan for yourself? Keep these factors in mind while choosing your ULIP provider :

  1. Track record of the life insurance company & their funds.
  2. Transparency in terms of disclosure of portfolios, expenses etc.
  3. Process-based approach to investing.
  4. Capable team of analysts and fund managers.

Individuals get great satisfaction from starting something on their own or from seeing their children hone their skills, nurture a talent, spring a brilliant idea with the makings of commercial success. However, a great idea is only half the deal. The other possibly more challenging part is tying in the funding for the start-up. Thankfully with ULIPs, help is always at hand.



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