Startup culture is booming in India, and Shark Tank India has become a major catalyst for this growth. In this popular show, startup founders pitch their ideas to the “sharks” (judges) in hopes of securing funding in exchange for equity in their companies.
The upcoming fourth season, beginning on January 6, 2025, will once again showcase startups asking for investment. But why do startups need funding in the first place? Here are 9 key reasons why funding is crucial for startups and how the money is utilized:
1. To Create a Prototype
The journey of any product begins with a prototype—a sample created to test and refine the idea before mass production. For instance, car manufacturers create and test prototypes before producing vehicles in bulk. Startups often require funding to develop these prototypes, ensuring that they don’t waste resources on a flawed product.
2. For Product Development
Once a prototype is successful, the next step is full-scale product development, which can be costly. Funding helps startups cover these expenses while offering investors equity in return.
3. To Build a Strong Team
A skilled team is the backbone of a successful business. However, hiring talented professionals can be expensive. Startups often raise funds to recruit and retain the right people to drive their business forward.
4. For Working Capital
Working capital is essential for day-to-day business operations. Unlike fixed capital (e.g., land or machinery), working capital covers recurring expenses such as raw materials, employee salaries, electricity bills, packaging, and marketing. Funding ensures these operational needs are met without cash flow interruptions.
5. For Legal and Consulting Services
Startups often require legal and consulting services to navigate regulatory challenges or specialized business requirements. These services can be costly, so startups sometimes rely on funding to cover these early-stage expenses without diverting money from product development.
6. For Raw Materials and Equipment
Producing a product requires raw materials and equipment, which can be expensive, especially when demand is high. Startups frequently raise funding to purchase these resources and meet production goals.
7. To Obtain Licenses and Certificates
Certain industries, such as pharma, require startups to acquire licenses or certificates, which may involve costly trials and approvals. Funding helps cover these expenses without straining the company’s operational budget.
8. For Marketing and Sales
Marketing and sales are critical for business growth, especially in the initial stages. Startups often allocate 30–50% of their budgets to marketing to create awareness and drive sales. Funding ensures they have sufficient resources to achieve their marketing objectives.
9. For Office Space and Administrative Expenses
Office space and administrative costs, including utilities and office management, are recurring expenses. Many startups raise funding to establish or maintain their office setup without compromising other critical investments.
Conclusion
Each startup on Shark Tank India has unique funding needs, but their goals are often aligned: to grow, innovate, and succeed. Understanding how these funds are utilized offers a glimpse into the challenges and opportunities faced by entrepreneurs in their pursuit of success.
