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Mentor Minute : ‘Art of Fund Utilization’

There are many ways a startup may raise money, but once funded it also becomes important to utilize the fund raised efficiently. Start-ups in the early stage or Series A stage rarely have a separate dedicated finance function—either for investment or for adherence to the investment guidelines set by VC (venture capital) investors. Also, Investors don’t want promoters to spend too much time managing funds and would rather have them focus on building the business.

Hence, it becomes imperative to look for Investment options with low Risk & with NO long lock-in periods.

  1. Fixed Deposit: Provide you greater earnings with the flexibility of maintaining funds in accessible units.

  2. Liquid/ Money Market Funds: An open-ended mutual fund that invests in short-term debt securities.

  3. Ultra Short Term Funds: Bond funds that invests only in fixed-income instruments with very short-term maturities, typically one year. This investing strategy tends to offer higher yields than money market instruments, with less price fluctuations than a typical short-term fund

  4. Short Term Funds: Investment funds which invests in money market investments of high quality and low risk. They are commonly used by investors to temporarily store funds while arranging for their transfer to another investment vehicle that will provide higher returns

  5. GILTS: Mutual funds which plants all its money in the government-affiliated securities. So Gilt funds are purely under the shadow of government bonds which makes it virtually risk-free

Fund Category

1 Day –

3 Months

3 – 6 Months

6 – 12 Months

1 year & above

 

**Average Return %

(for 1 year)

*Average Exit Load (%)

Fixed Deposits

  •  

  •  

  •  

  •  

7.0

Nil

Liquid Funds

  •  

  •  

  •  

  •  

6.7

Nil

Ultra Short Term Funds

-

  •  

  •  

-

7.0

Nil

Short Term Funds

-

-

-

  •  

6.6

1

GILTS

-

-

-

  •  

9.3

Nil

*The exit load changes basis the time of redemption

** The average returns changes basis the investment duration

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