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Why startups need funding
Every founder of a startup needs funding this is absolutely correct thought process but the major component which is not looked at is that you need to grow the business to a point where in the business justifies yes I can be funded.
Just thinking of having funding for business or startup is not correct justification for funding. The founder need to have clarity that a business first has to survive 1000 days before coming to a point that funding is required.
Startups founders always do this mistake of calculating funding needs even before the startup is justifiable to have funds to grow. The thumb rule is to have business, which survives against all odds and still keeps it alive by generating revenue is the point where in the startup becomes eligible for getting funds.
If you look overall then every person will say I need funds for my business but what one forgets is that my business is eligible for funding or needs funding at a certain specific point of its existence
Funding for startup is essential for scalability factor after having proved that the startup is delivering some solution and it can generate revenues at X times provided funding is done to speed up the penetration of its product or service.
The major areas which needs funding for a startup is product technology to ensure that the technology plays vital role and has enough infrastructure to support the growth which is being looked at by infusing funds on advertising.
The other aspect being hiring good talent which comes at a price and which is not affordable with startup to ensure the network and experience of senior positions are filled with good salary, which ensures that every senior management person works to his optimum level of delivery.
These days funds are used for acquiring customers which has led to a war among segments of industry by burning in the form of discounts and freebies which is bit dangerous game to play as the burning will not happen for long and once the discount game is over it falls flat and customers start to move as there is no loyalty with customers who come in inorganic manner.
The other areas of funding for startup is to announce its arrival and gaining momentum and trying to be the brand these happen in both product which tech related and services industry.
Caution note funding should not be raised to meet expenses or clear old dues of promoters as the funding is only for specific reason and not to clear old dues.