- Structuring Business/Financial Plans relevant for VCs/Angel Investors
- Introductions with VCs or Angels
- Business Valuations Guidance
- Sector Insights
- Term Sheets or Transaction Structuring
- Setting-up Reporting Systems
The first $1 million raised is critical to cement a startup’s foundation and the basis on which future funding rounds will be built. Even as RedBus was being sold to Ibibo for Rs 600 crore in July 2013, visitors could see batteries for an inverter lying beside a shabby staircase that led to a very basic office. “We had learnt to conserve cash early, learning from the crisis of Lehman Brothers. At the time of exit we still had a lot of unused cash in the company’s account,” Phanindra Sama, founder of India’s largest bus-ticketing platform, told ET after the sale. The RedBus team had decided to work out of a basic office, take small salaries and conserve all cash in building a business that make for the largest exit in Financial Advisory Firms. “A lot of startups, when they receive large funding, start spending on unproductive areas such as office upgrades, unnecessary technology tools… These should be avoided,” said Sanjay Parthasarathy, CEO of data analytics firm Indix that recently raised $15 million. Parthasarathy said he did all he could to avoid having a workspace in the initial days. “I worked out of home, then at Starbucks and sometimes even Barnes and Noble,” he said. The first $1 million (about Rs 6.4 crore) raised is critical to cement a startup’s foundation and the basis on which future funding rounds will be built. If wasted, the company may not get a second chance. Sai Srinivas Kiran, CEO of media streaming device maker TeeWee, agrees. “The whole thing about starting up is that you don’t spend on workspace and unnecessary enhancements,” said Kiran, who raised Rs 11 crore in March. It is also important to pay more attention to customers. “Set aside money for taking care of your customer. Ensure there is a system in place to take calls and customer queries all the time,” said Sanjay Anandram, venture partner with Seedfund. While it is important to not splurge, startups could do well to spend some of the first million dollars on employees. Vijay Sharma, cofounder of recruitment firm Belong that recently raised $5 million, said he bought his employees the basic stuff: Ergonomic chairs, big monitors. Importantly, he employed a cook for the office. “The (first $1 million) should be used to find the sweet spot where an acute pain point meets a fantastic solution,” said Anshuman Bapna, founder of travel planner MyGola that MakeMyTrip recently acquired, “and you find your first set of users coming back to you over and over again”.
Source : http://retail.economictimes.indiatimes.com/news/industry/how-to-spend-first-million-in-your-startups/48353877
The Indian startup ecosystem is being propelled by a 123 per cent rise in the country’s active investor count, IT industry body NASSCOM and Zinnov Consulting said in a new report.
“Number of active investors grew from 220 in 2014 to 490, (reflecting a) growth of about 123 per cent over 2014,” the report titled ‘Start-up India – Momentous Rise of the Indian Start-up Ecosystem’, said.
The number of accelerators/incubators in India grew by 40 per cent to 110 this year as compared to 2014.
On the other hand, the country’s angel investor count grew by over 150 per cent to 292 from 115 last year, the study found.
Rajan Anandan (Google Asia Pacific chief) and Ratan Naval Tata (former chairman of Tata Sons) are two of India’s most active angel investor. As on September 3, Tata had made 16 personal investments in startups while Anandan had put money in 29 startups.
Source : http://techcircle.vccircle.com/2015/10/14/indian-startups-benefit-from-rapid-surge-in-investor-count/
Start-up Financing is not just about raising funds, it is a holistic process that involves proper business planning with thoughtful growth targets, deciding business valuation as per the current market standards, planning potential exit options for investors, calculating financial returns for investors, negotiations with investors, evaluating and deciding appropriate term-sheet clauses, and finalizing shareholder’s agreements.
Investors do not only invest in a particular business model based on a preferred sector theme, but they also judge various other critical aspects affiliated to the business, be it a team, revenue model, unit economics, promoters’ vision or competitiveness, growth plans, execution potential, exit options, or expected financial returns. Even minor areas like promoters clarity of thoughts, communication ethics, expressiveness, presentation, passion, and knowledge of the industry and competition, can set the investors off the process.
Knowing the complexity as well as the limited success possibility in start-up financing, financial advisory firms play a crucial role in managing the whole financing process efficiently.
The main role of financial advisor is to create a strategic roadmap for the start-up and help it in achieving its growth plans. Due to their regular nature of this work, financial advisors very well understand the expectations of investors. Financial advisors bring together a wide range of industry expertise and provide a hand-holding to start-up throughout the process. They help start-ups in summarizing their winning investor pitches for Venture Capital and Private Equity investors, and also guide them in various other financial matters such as developing financial model with right growth drivers, calculating the business value, effectively interacting with investors, soliciting term sheet from investors, support on finalizing shareholder’s agreement, support on transaction structuring, and finally a transaction closure.
At the inception stage of the financing process, financial advisors envision the whole process from the start to end in their mind and accordingly divide the whole process into multiple sets of actions. They start with basic steps and work up the flow, for e.g. they work on getting deal perspective from 6-7 funds, perform upfront analysis of the business, position the business rightly, and structure a business plan with a relevant pitch. Secondly, they work on connecting with investors beyond the usual suspects, also introduce domain specific reputed angels to add greater comfort to funds, bringing onboard strategic investors who can add value, and most importantly create a consortium of investors to mitigate rejection risk. Then, lastly financial advisors work on curating the funds, bringing the interested ones on board, create a bid process to achieve target valuation, create potential backups if lead investor backs out during due diligence, etc.
Financial advisors make sure that the whole process is executed within a reasonable time frame, as this is crucial, given the pace at which business environment changes and the limited cash runway promoters have for business.
The fundraising process is the real test for the start-up promoters and as well as for the financial advisors, as the amount of strategies, tactics, and psychological and factual work play they put in, can turn the whole dynamics of the deal into success.