Fundraising

Four ways to earn extra money during the holidays

Here are some suggestions.

The holidays are a time for giving, but they’re also a time for spending. Holiday sales are aplenty in every shop and mall. You probably have to buy your loved ones, especially the kids, presents. You’ll need to buy outfits and food for the many parties you’ll be attending this season.

With so much spending to do and the cash flow only going toward that direction, you’ll eventually be forced to dip into your savings. That’s why you’ll need to earn some extra cash too. Here are some suggestions.

Have A Garage Sale

Sell your clothes online or at a garage sale. You can make an inventory of things you still need and items you can sell. The ones you will sell should be in properly labeled boxes.

Do a lot of research so you know how much your items are valued originally and you can price them correctly. Be ready for some haggling, though. Your potential customers will want to get the best deals.

Garage sales help you earn some extra cash, but at the same time, they help keep your home clean because you can get rid of unwanted clutter. During the holidays, you may get new stuff in the form of gifts, so it’s also important to free up some space at home.

Cook Food

The holidays are a perfect season for experimenting in the kitchen and whipping up wicked treats for the guests and the family. Cooking enthusiasts can sell their own creations or the usual holiday food fare. Fans of baking can sell cookies, cakes, and pastries for those with the sweet tooth.

You have the cost of ingredients and labor, the use of equipment, and the electricity bills to consider, so make sure you calculate those during pricing. You don’t want to end up spending more than what you’re getting as a return of investment.

Write Hand-Lettered Cards And Ornaments

Take out your nibs, pens, and ink sets. The artsy types can let their imagination and creativity go loose with various hand-lettering styles to write greeting cards and add a twist to the holiday decorations.

These days, hand-lettered items are becoming more popular, and you can see the attention that artists devote to creating a detailed work of art. You can go for a note that’s short and sweet or a framed ornament that’s sentimental and ornate. Add colors for more visual impact.

Related Post: 6 ways to become a mentally strong person

Create Your Own Decorations

Spend a minimal amount of money by looking around your house for items you can re-purpose as ornaments. There are a lot of blogs out there that can give you ideas for the perfect DIY holiday decor, so you shouldn’t have a hard time coming up with products to sell.

Wrapping Up

The holidays are a season of giving and spending, but they are also a good time for saving money. If you’re resourceful enough to find alternative sources of income, you can get back some of your savings.

Oyo gets a USD 250 mn infusion from Softbank to fight MakeMyTrip, others

This is Softbank Vision Fund’s second big investment in India after a massive USD 2.5 billion round in Flipkart, last month.

Gurgaon based online hotel aggregation firm Oyo has raised a massive round of about USD 250 million led Softbank’s Vision Fund making it amply stashed with fresh cash to fight rivals MakeMyTrip, Yatra, ClearTrip, FabHotels and others.

Investment arm of automobile company Hero Enterprises and existing investors Sequoia India, Lightspeed Venture Partners and Greenoaks Capital also participated in the round.

The startup has so far raised about USD 442 million including this round.

Launched in 2013 by its 24-year old founder Ritesh Agarwal, OYO claims to be operating in more than 230 cities across India, Malaysia and Nepal.

It last raised around USD 62 million from existing investor Softbank in August 2016. Across India and Malaysia, Oyo claims to be operating over 70,000 rooms.

This is Softbank Vision Fund’s second big investment in India after a massive USD 2.5 billion round in Flipkart, last month.

“OYO has solidified its position in India as the leading accommodation brand for consumer affordability and high quality standards. We’re excited to continue to support OYO as they further expand their position in India…and other markets around the world,” Justin Wilson, SoftBank’s Board representative on OYO said.

Also read: Ibibo Group founder and MakeMyTrip President Ashish Kashyap resigns

“As a business family, we have always set new paradigms; so OYO’s unique business model excites us. The differentiated thinking and ingenuity that Ritesh and his team bring to this industry gives us confidence that OYO can scale, innovate and set new benchmarks,” said Sunil Kant Munjal, Chairman of Hero Enterprises.

Speaking on the development Ritesh Agarwal, CEO of Oyo said that the company will deploy fresh capital to take its made-in-India business model to international markets. “These markets are characterized by a similar supply-demand imbalance in real-estate and hospitality,” Agarwal said.

The budget hotel accommodation market has heated up with activity in the last couple of years.

The online travel agency space last year witnessed the merger of the two big firms, MakeMyTrip and GoIbibo.

Previously, the companies had also delisted Oyo from their platform citing conflict of interest. Earlier this month, another start-up in the budget hotel space, Treebo too delisted itself citing issues high commissions.

Oyo’s rival MakeMyTrip is trying to strengthen its own budget hotel segment and had launched ValuePlus in 2015. On the other hand, GoIbibo had also launched GoStays.

Also read: Man behind OYO Rooms : Ritesh Agarwal

In an interaction with Moneycontrol recently, MMT chief executive Rajesh Magow said that the company is targeting the hotels and packages segment to contribute at least 70-75 percent of its revenue in the next 3-4 years, expressing its aggressiveness on the accommodation market.

MMT currently gets 54 percent of the business from hotel and packages and 46 percent from flights.

Besides MakeMyTrip, Oyo has smaller rivals such as Treebo Hotels that raised USD 34 million in Series C round led by Hong Kong-based investment firms Ward Ferry Management and Karst Peak Capital, just last month.

Also read: Online hotel aggregator Treebo Hotels secures Series C funding

Five things every investor looks for in a startup

Here are a few things investors seek in start-ups while taking the decision of investing.

For an investor, it is important to know what he’s getting into while taking a decision of investing in a company. No one wants to invest in a business which isn’t profitable and viable in the future.

Here are a few things investors seek in start-ups while taking the decision of investing:

A strong team

An investor looks at a start-up as a team which works together and not as a one-man show. The management team’s capabilities and history is very crucial for an investor because it helps him assess what the team is capable of doing in the future.

You might portray a very colourful image of your team but if an investor can break through the rosy portrayal and see the rifts and lack of unity in the team, he might not invest in your start-up even though he liked the idea.

Hence, it is crucial to have a strong founding team in which everyone is sure about their roles and responsibilities.

Related Post: How to form the right startup team

The business plan

The investor doesn’t know everything about your business so you need to let him know about the most important things like the break-even point, financial plan and the marketing and sales plan through your business plan. Because your business plan is a major factor the investor judges you upon, make sure it is made properly and consists of all relevant and required details.

Also, try charting milestones so that an investor has a better idea of your business.

Company’s uniqueness

If your idea is the same as the one being offered in the market, an investor will not be interested in investing in your business. He is looking for a unique idea which will appeal to the customers and give him enough profits. VCs often look for competitive advantage and propriety features over the financial structure.

For instance, the most unique ideas are often sponsored in Shark Tank over ideas which are done and dusted with already.

Effective long-term Business Model

A start-up might be doing extremely well in the initial stages and making profits but what is important to judge is whether the business will survive in the future as well. A number of companies are closing down due to mismanagement of finances, low sales, no profits etc.

Amidst cut-throat competition, all an investor wants to know is if your business is likely to withstand the test of time and continue doing well in the future.

Growth potential

It isn’t enough to be a sustainable business; the company must also have growth potential because no one wants to invest in a company which is standard and stagnant in terms of profits. Your company should be able to growth at a fast pace and introduce new products and services to the mix and attract more markets in a short time. A potential market size is a great way of determining the potential growth rate in the future.

Internal and external funding for your business

Internal and external funding schemes can help your idea prosper. Here are a few ways to get funding.

You might have a brilliant business idea which you’re planning to develop upon, but, if you don’t have enough funding, your idea might never really take off. Internal and external funding schemes can help your idea prosper.

Here are a few ways to get funding:

How to get Internal funding

1. Acquire accrual internally

Just because you want to follow your passion and build around your idea doesn’t mean that you have to give up on your existing job. You wouldn’t want to be completely broke when you venture into the entrepreneurial scene which is why working on an alternate job and funding your idea simultaneously is a good idea.

2. Take loans

If you have a good track record and a gurantor, getting a loan from a bank shouldn’t be difficult. Loans are easy and suffice the requirements. Also, some loans are offered at low interest rates as well.

3. Charity/crowd funding

This is a very rare method of collecting funds but sometimes it actually proves to be very useful. In this scenario, you get funded by a lot of people who contribute a minimum amount.

Example, the movie Manthan which was based on the real life story of the dairy brand, Amul, was crowd funded.

Ways to get external funding

1. Get social

Don’t be shy especially when you’re in dire need of money. Join business networking groups which are available both online and offline. Network and connect with people from the same industry. This will help you understand the industry better and also learn where you’re going wrong. In various business events, start pitching your business ideas to people. If you don’t have faith in your idea, you can’t expect other people to believe in it. Once, the potential investors feel like you’re a good bet, brimming with confidence, they are likely to give you the deal.

2. Presentation platforms

Pitch your ideas on platforms like Shark Tank for potential investors to be interested in them. these platforms will not only enhance your art of pitching but also give you an exposure about the world of entrepreneurship.

Make sure that your pitch stands out because that is what most investors invest in.

3. Small investors

Instead of starting big and looking out for investing giants in the market, start out small and pitch your ideas to small and localised investors. The minimal amount of funding you receive you get from them might turn out to be enough to suffice you in the initial stages.

4. Start-up accelerators to the rescue

Join one of the various start-up accelerators available in the market to increase the opportunities available in the market. Just because you’re a part of start-up incubator doesn’t mean that you are bound to get funding immediately. Instead, they groom you in terms of mentorship and development to help you reach your goals.

In event organised by these accelerators, a series of pitch decks are presented by start-ups to investors. It is easy for investors to select an idea that wins their heart and mind.

OYO Rooms grabs another $90mn from SoftBank to take on competition, strengthen new offering

Budget hotel aggregator OYO Rooms is closing a $90-million financing round. The funding is led by its largest shareholder, SoftBank.

Budget hotel aggregator OYO Rooms is closing a $90-million financing round, according to a report by Times of India. The funding is led by its largest shareholder, SoftBank. The report claims that OYO has already received $61 million, and the rest would be pumped in soon.

In a RoC (Registrar of Companies) filing by OYO in June, the company had claimed to be raising Rs 413 crore through a proposed rights issue of shares and was also looking to buy back shares worth Rs 60 crore from certain undisclosed investors. OYO declined to comment for this story.

The report suggests that the fresh capital is going to be used to strengthen OYO’s new offering – Flagship, which leases properties and services them for better experience. Flagship has over 70 operational properties currently.

Related Post: Man behind OYO Rooms : Ritesh Agarwal

It is believed that of the $90 million, the remaining $29 million will be a mix of debt and equity. The TOI report also suggests that OYO is picking up $5-million debt financing from InnoVen Capital. Apart from SoftBank, the other key investors of OYO are Sequoia Capital and Lightspeed Venture Capital.

This $90 million is SoftBank’s second round of investment in the company. OYO Rooms had raised $100 million from SoftBank last year. Mumbai-based VentureNursery, one of its first investors, which had held a two-percent stake in OYO, exited netting Rs 60 crore in a secondary sale of shares. The accelerator had put in Rs 25-30 lakh in the company during 2012-13.

This raising of funds is to take on the other players who are entering aggressively into the space, most importantly Treebo Hotels, which raised Rs 112 crore from a round led by Bertelsmann India Investments and existing investors. Also, after facing flak from customers on the service at OYO Rooms, Flagship is expected to redeem the company’s image.

OYO Rooms had shared a report in May that claimed that the company had reached unit-level profitability, meaning, on an average, OYO makes a profit on every room sold. As of May this year, the average booking rates of the rooms range from Rs 1,400 to 1,800. Ritesh Agarwal, Founder and CEO of OYO, says that their team has delivered a 15x year-on-year growth, with 2.3 million booked room-night transactions in the first quarter of 2016.

However, rumours of SoftBank looking to invest again in OYO had been making the rounds for several months now. There also were reports of a rift between VentureNursery and other investors at the end of last year, coinciding with the news of OYO buying Zo Rooms, its closest rival in an all-stock deal. Reports suggest that Zo went out of business and could not raise funds, and when Tiger Global, its investor pulled back from India, it left Zo with few options.

SoftBank, over the course of last year as well as 2016, has pumped more than $1 billion across its Indian bets – OYO, Snapdeal, Ola, Housing and Grofers. This funding in OYO comes at a time when higher rounds seem to be slowing down and bigger ticket sizes are no longer seen. Also, SoftBank seems to be taking it easy on the investment front, after the Housing debacle.

Hike Messenger joins unicorn club; bags $175 mn investment led by Tencent, Foxconn

Messaging platform Hike Messenger on Tuesday said it has raised $175 million in a new round of funding led by Tencent Holdings and Foxconn Technology Group, valuing the company at about $1.4 billion.

Existing investors – Tiger Global, Bharti and Softbank Group – also participated in this round.

This is the fourth venture capital round and the biggest to date for Hike, a company founded by Kavin Bharti Mittal, son of Bharti Enterprises Chairman Sunil Mittal.

The company said it is looking at acquisitions in technology and people, but ruled out an IPO in near future.

The latest round of funding takes the total investment to over $250 million so far.

Kavin Mittal, founder and CEO Hike Messenger

“We will be investing this amount in services, people, office space and some long term bets in areas of machine learning, computer vision,” Kavin Mittal said at a conference.

“Tencent and Foxconn both have pedigrees that speak for themselves and such an investment especially in today’s market just goes to show the strong foundation on which Hike is being built,’’ he added.

When asked if the company plans to go for an IPO, he said “it’s too soon in our journey. We are only three-and-a-half years into the business. It typically takes 6-8 years for business to reach maturity”.

In January 2016, Hike had announced it has a base of 100 million users. As much as 95 per cent of Hike users are based in India and 90 per cent of them are young and below the age of 30 year.

Hike users on an average exchange 40 billion messages per month, he added.

Women-focused jobs portal Sheroes gets $1.8 mn from Lumis Partners, others

Sheroes, a career platform for women, has raised Rs 12 crore in a Series A round of funding led by Gurgaon-based investment firm Lumis Partners.

The HR Fund, angel investor Rajul Garg and existing investor Raghav Bahl-led Quintillion Media also participated in the round, according to a press statement.

The transaction is part of a larger commitment, it said, without elaborating.

Sairee Chahal, founder of Sheroes, said the startup will use the funds to invest in technology, resources and growing its business.

Utkarsh Joshi, CEO of The HR Fund, said Sheroes is the fund’s fifth investment and is a “perfect fit” for its portfolio.

As part of the investment, Sandeep Sinha, co-founder and managing partner of Lumis Partners, and Pankaj Bansal, a promoter and director at The HR Fund, will join the board of Sheroes.

The startup, operated by Applied Life Pvt. Ltd, had last year raised angel funding from Quintillion Media, 500 Startups and a clutch of investors including Paytm’s Vijay Shekhar Sharma, Google’s Rajan Anandan and Flipkart’s Binny Bansal.

Related Post: Why Big Bazaar tied up with Paytm

Launched in January 2014, the startup works with companies to provide support for their workforce needs and helps them build women-centric channels. It claims that about 12,000 companies actively use the platform. It also runs a career support helpline via phone and app.

4 essential considerations one needs to think of before setting up a venture

For aspiring entrepreneurs, it is essential to weigh certain pros and cons before venturing into a particular market.

A lot of entrepreneurs are trapped in 9-5 jobs and need a change of job for professional satisfaction. Some may have the required expertise but lack in experience. For such aspiring entrepreneurs, it is essential to weigh certain pros and cons before venturing into a particular market.

Here are four points to consider before you decide to start your own venture:

1. Learn to distinguish between what you can do and what you think you can

This is a very important consideration that entrepreneurs need to take into account before starting off. One shouldn’t be too optimistic about the different work domains an entrepreneur has to work upon.

For instance, an entrepreneur might be very good at marketing but social media might not be his forte. For stuff, one is not very proficient at; an entrepreneur should consider delegating for maximum results. When you have a fair idea of what your business should be like, you need to also make a list of the domains that you or your company needs to work upon- marketing, sales, social media, content etc. The tasks you know you’ll be good at should be done by you where as the others should be given out to people better in a particular domain.

2. Be confident about your idea and skills

An entrepreneur needs to be confident and have belief in his idea because he wouldn’t be able to convince customers or VCs regarding the venture otherwise. Also, if you as an entrepreneur believe that you’re good with marketing and pitching, you should be absolutely confident about the same.

Self-confidence is the key to succeeding in the business line. Without self-confidence, it is very easy to become a prey to criticisms and feel disheartened.

While you believe in yourself, you are able to inspire others around as well which leads to high levels of motivation within an organisation.

3. Research as much as you can

Researching about your own venture not only makes you aware but also gives you the power to take decisions more accurately. This step is crucial for any new venture because without required information, a business is doomed to failure. An entrepreneur needs to research about the market he wants to venture into and the target audience as well. This will help him reach out to his target better and maximise sales in the long run.

An entrepreneur also needs to be very sure about the start-up costs he is bound to incur from the venture he is willing to set up and have a fair idea of the capital he is going to require.

For instance, if a guy wants to open a shop, he should be aware of the rent of a shop in a particular locality and also the costs he would have to invest in the inventory. This will help him get a clear perspective and deal with stuff better.

4. Enjoy the whole process of starting a venture

Instead of worrying about the profits you’ll be making and the sales, you should enjoy what you’re doing because you chose to do it. All the time you decide to dedicate to your business, should be fruitful and worth it. Some days will definitely be more hectic than others, but on those days you should remember the sole reason why you started a venture. Also, be honest and dedicated because you as an individual are expected to spend a lot of time and effort on it.

If these considerations are met and you want to go ahead with your venture, we wish you all the best!

Image credit: thehayesapproach.com

3 ways to make pitching more effective

These qualities help an entrepreneur to strike a chord with the VC at a higher level.

Pitching to investors in a correct manner is an essential for every start-up because that is where the major funding comes from. There is an extensive list of do’s and don’ts to follow while pitching to an investor. One needs to identify the market segment to enter, the kind of target audience they’ll be approaching, the problems the business is likely to face and key revenue streams. However, along with a basic business plan, a start-up also needs to make sure that they are able to convey the passion and confidence in them to the Venture capitalist. These qualities help an entrepreneur to strike a chord with the VC at a higher level.

Personalised data leaves an impression on the VC

Every start-up is ready with a pitch and a plan which consists of statics, market conditions, income channels etc. However, if you want to win the deal, you need to go out and do something different. Try and personalise the data for a particular VC you want. For that create personalised statistics for them such as how much the investor should invest and why? Also, include what they’re getting out of this investment.

This will help you in striking a personal chord with the investors who will be more likely to invest in your company. They’ll believe that since you’ve gone that extra mile to impress them, they are bound to get some benefits out of you. More than just benefits, it’s all about making the VC feel special.

Build narratives around your product

The data provided by every start-up is almost similar in terms of the business plan. As a budding entrepreneur who needs the funding, what you can do is narrate a real life story.
For instance, if your product is sanitary napkins, you can build a character and a story about a woman who is very career-oriented. Despite that, once a month she has to take a break from work for two days since she needs to deal with the heavy flow and hates using tampons. Hence, your sanitary napkin shields her on such days and provides her with comfort and continuity at work.
If there’s a woman in your investing team, she is more likely to relate to the story better than a normal pitch. If your story manages to strike a chord, you are more likely to get a deal.

Try and balance the genders

According to a study by Babson College, 34 per cent of firms with a woman partner are more than three times as likely to invest in companies with women CEOs, compared to just 13 percent without a woman partner.
Women are catching up on the entrepreneurship front and they deserve some recognition. If you’re a start-up with a team, try and get more women in your team as it not only balances out genders but her presence also acts as a great boost to your team.

Continuing with the example of the sanitary napkins, since it is a product developed for women, VCs are more likely to believe in your product if you have a woman who actually approves it.

Image credit: articles.bplans.com

Reasons why money isn’t chaining back entrepreneurs anymore

Here are a few reasons why entrepreneurs don’t consider money as a barrier anymore.

Today, there are more start-ups cropping up than ever. Entrepreneurs are innovating all kinds of stuff required to simplify existence because starting up a venture is not as difficult as it used to be. With modern developments on the technology and venture capitalism front, entrepreneurs receive a solid boost to own their idea and develop on it.

Flexibility in terms of money is another reason why entrepreneurs able to succeed. Here are a few reasons why entrepreneurs don’t consider money as a barrier anymore:

1. Smart investments

Sometimes getting a degree might be roadblock on the path to becoming an entrepreneur as one has to pay off debts and in order to do that, one needs to take up a job.

Another reason people don’t become entrepreneurs is because of lack of liquidity which is absence of capital. But today, it is relatively easier for a young budding entrepreneur to decide to liquidate his finances. One can structure his finances by investing it in the best way possible and reaping benefits when required. This way, while starting out, they don’t have to worry about finding a VC early on and can continue developing on their idea.

2. Affordable legal and marketing

Earlier the legal processes deterred entrepreneurs from starting up their own business because hiring a lawyer was expensive. However, a budding entrepreneur can currently manage all legalities by himself because of relaxed laws which has proved to be a game changer.

Also, marketing in older days was a pain because it had to be done in an interactive manner. But with the growth of social media and digital marketing, entrepreneurs can now market their ventures using completely organic methods. They can also shell out few bucks and employ inorganic methods to reach their target audience better.

3. Development of technology

Finding an area to start their business in with skyrocketing rents is not an issue anymore either. Entrepreneurs are embracing the smart phone and using the various applications to coordinate and run their business well. Physical presence for a business is almost unnecessary with Skype allowing you interact with clients, investors via video call in real time. Also, an entrepreneur can use various apps like MobileDay to schedule and conduct meetings without actually being present in a conference room.

Other than convenience, this has reduced start-up costs by a huge margin and the money can be used in marketing or developing the business further.

Image credit: billbaren.com

Ed-tech firm Transweb raises funding from 500 Startups

Delhi-based educational-technology firm Transweb Educational Services Pvt. Ltd has raised its Series A round of funding from 500 Startups, a Silicon Valley-based startup accelerator and early-stage VC fund house.

The transaction was routed through 500 Startups IV LP, a $200 million seed fund managed by 500 Startups Management Co. LLC.

Transweb, which provides online tutorial services, has raised over Rs 80 lakh ($120,000) from the US-based firm on a fully diluted basis through a preferential allotment., according to VCCEdge, the data research platform of VCCircle, based on filings with the Registrar of Companies (ROC).

500 Startups has picked up 6.48% as part of the deal. BMR legal acted as legal adviser to the investor in the transaction.

The company, which was launched in 2006 by IIT Delhi alumni Aditya Singhal and Nishant Sinha, provides online tutoring services through its five websites—askIITians, eMedicaPrep, transtutors, transwebtutors and mycollegesabroad.

Aditya Singhal And Nishant Sinha,
Co-founders, Transweb Educational Services

When contacted, Singhal confirmed the development and said that the funding will be used for marketing of transtutors and increase its team strength. Transtutors is a question-and-answer format website for homework help.

Singhal said transtutors is venturing into Chartered Financial Analyst (CFA) coaching this year.

While Singhal had earlier served global management consulting firm Kurt Salmon Associates, the other co-founder and his batch-mate Sinha was previously working with retail consultancy firm Technopak before launching this venture.

An email query sent to 500 startups, however, didn’t elicit any immediate response.

While askIITians caters primarily to students preparing for engineering entrance exams like the Indian Institute of Technology Joint Entrance Examination (IIT-JEE) or All India Engineering Entrance Examination (AIEEE), eMedicaPrep reaches out to medical students taking entrance exams such as All India Pre Medical Test (AIPMT) or All India Institute of Medical Sciences (AIIMS).

On the other hand, Transwebtutors offers paid online tutoring in technical subjects and mycollegesabroad provides consulting for students planning to study abroad.

The company posted net sales of Rs 13.2 crore in FY2014-15 compared with Rs 10.4 crore a year before, according to VCCEdge. The financials for FY2015-16 couldn’t be immediately ascertained.

500 Startups fund

500 Startups was founded by former PayPal executive Dave McClure in 2010. Its network includes about 750 startups, 200 mentors and 1,000 entrepreneurs globally. The fund typically invests up to $250,000 in a company during the first leg. Its preferred sectors include financial services, gaming, payments SaaS, and education on mobile and web.

It has recently launched a $25 million regional fund focused on India, Sri Lanka and Bangladesh. The 500 Kulfi fund, as it is christened, is sector-agnostic but will focus on fin-tech, ed-tech, health and wellness, data analytics, content and software-as-a-service segments.

500 Startups has invested in about 50 companies in India since 2011 including ZipDial (acquired by Twitter), SourceEasy, Instamojo, CultureAlley, SilverPush, KartRocket and Headout.

Other deals in space

Investors betting on companies such as Transweb are seeking to benefit from the opportunity arising from the gap in demand and supply of jobs that is prompting millions of jobseekers to enroll into test prep centres to prepare for competitive exams.

“Disproportionate demand and limited supply forces students to approach these coaching centres,” said Narayanan Ramaswamy, partner and head of educational skill development sector advisory at KPMG in India.

The past two months have seen considerable activity in the ed-tech segment. Ed-tech startup Byju’s has recently raised $75 million from Sequoia India and Belgian investment firm Sofina.

Mohandas Pai and Aarin Capital seed-funded ed-tech startup Oust Labs Inc, which helps students prepare for competitive exams using mobile gaming technology.

Earlier this year, financial services and analytics education startup Imarticus Learning raised $1 million (around Rs 6.7 crore) from a group of investors including VC fund Blinc Advisors.

In late February, Bangalore-based ed-tech firm Carveniche Technologies Pvt Ltd secured angel funding from Calcutta Angels, Lead Angels and a bunch of wealthy individuals.

This article was originally published in Techcircle.in

205 crores raised by start-up Lendingkart in a second tranche series

Lendingkart recently raised 205 crores; 128 crores was raised as equity and 77 crores as debt.

The Dollar Business Bureau

Bertelsmann India Investments (BII) led the whole money raising event where over $32 million was raised in series B funding from investors. Lendingkart is an Online loan platform.

“With BII onboard, we are looking forward to leverage its deep knowledge of global financial products and Internet businesses,” Harshvardhan Lunia, co-founder and CEO, Lendingkart Group, said in a statement.

The company after having raised a massive amount in the second tranche funding claimed that BII had led the new tranche of funding in which big investors like Darrin capital management had paricipated along with existing investors such as Saama Capital, Mayfield India and Indian Quotient. The company also stated that with Financial Service leaders like Arvato Financial Solutions as a part of the investing group, Bertelsmann has certainly brought forth a fresh angle to the mundane digital forum and data analysed risk assessment. It will also help Lendingkart to pose themselves as the leading lending platform in the country.

With the recent round of funding, Lendingkart has over 260 crores to its name. It has also helped to boost their tech platform and given them a sturdy infrastructure to enhance mobile capabilities.

The Managing director of BII said that they were proud to be associated with the LendingKart group to create a new generation of lending firm in the country. They believe that through lending money to the deserving, they will get to see a lot of new innovations in the country.

Lendingkart aims to expand its horizon, tap the lending market and emrge as a lending leader in the country by expanding its presence further across different regions of India. It has successfully organised loans to clients across 130 cities in 22 states and recorded a successful growth of 20% monthly in loan origination. In the future, Lendingkart also aims to facilitate loans to SMEs.

Related Post: Q&A with Samar Singla, founder of Jugnoo

Fundamentals of running a successful and profitable startup

There is never a shortage of people willing to give you the benefit of their wisdom, especially when it comes to running a successful business.

Life is about opinions. There is never a shortage of people willing to give you the benefit of their wisdom, especially when it comes to running a successful business. With this in mind, here are a few pointers that we hope you will find helpful.

Leadership

As Frank Carson used to say “it’s the way I tell ’em”. This famous punch line can apply to running a business. Statistics show that most successful businesses have a clear leadership. Whether this comprises one or a few determined individuals is a moot point, but focus and direction are key ingredients to success. Your goal is to try to make the business take on the unique personality of the decision makers, who should instill their ethos into the management, employees and product range it offers. The business should merely be an extension of the characters of the owner managers.

Product or customer led?

It is often quoted that every profitable, successful business needs to have a tried and tested world beating product; a magical good or service that is sought after by its current and potential customers. Obviously this is a simple basic requirement although is it really that important? A business that relies solely on its products to the detriment of what its customers want is a business that is destined to fail in the long run. The business must always recognise that it is the customer and not its management that knows best. “The customer is always right”. Ask your customers what they want and don’t go on wild goose chases developing what you regard as an award winning product, only to later find out that it’s not what your customers or the market desires. Changing your customers to suit your needs is usually a recipe for disaster. You have to adapt to them!

Little steps

Don’t be putting all of your eggs into one basket. Don’t be developing infrastructure, systems and products or spending loads of money on promotion before knowing that you can sell them. Little steps become big steps very quickly. Keep your eyes and ears wide open and always be receptive to new ideas. Times change quickly now days – to stay successful, always stay fresh and alert.

Over trading

A common mistake is to try to take on too much trade without adequate support and finance. It’s one thing to bring home an order, knowing that you can fulfill it with hard work and a friendly banker or family, but it’s another coming home with, what looks to be on paper, a phenomenal order, only to know, in your heart of hearts that it’s something above and beyond your capability, financial or otherwise. There are many companies that fail because they are underfunded. Management will find themselves spending valuable time doing all the wrong things, daily budgets, phone calls to bank managers, fending off creditors and losing out on valuable discounts for early settlement, and offering unnecessary inducements to customers to pay their bills early. The cumulative effects of these can destroy your company.

Emotional

By all means fall in love with your business, but be aware that love is sometimes blind. If falling in love still lets you see the wood from the trees, then it can be a love story that endures. If however, it means you going off on a wild goose chase, then it will be a love that destroys. Be emotional, but at the same time objective and “usually” let your mind rule your heart.

Wild goose chase

Keep direction. If you start at point A and need to get to point Z, then you usually have to go through twenty four points before you reach your destination. If you decide at point E to deviate very slightly from your aformentioned plan, you could end up very far away from Z and probably not make it at all. That’s not to say that you cannot keep an open mind. Far from it, you must be fully aware what you are doing at all crucial times, but always pinch yourself – remind yourself of what you originally wanted to accomplish and ask yourself am I going in the right direction?

Over planning

Every business needs a general business plan. It needs to know where it is going. But spending time compiling inordinately complex financial forecasts with enormously complicated and fanciful assumptions is usually a waste of time. You will spend unnecessary time and probably take your eyes off the big picture. To be successful, keep it simple and don’t confuse yourself.

Be a company salesman

Everything in business, and life for that matter, involves an element of sales. Whether it be a product or service you offer, or simply selling yourself, every business interaction you are engaged in will constitute a sale. If you are a salesman, and demonstrate this mentality, then so will your staff.

Hiring too quickly

Quite often you may find that you can do the job quicker and better than others. Hire only when there is either a skillset you are lacking, or time elements and volume of work necessitate additional resource.

Don’t think you are perfect!

No one is and it will cost you! Listen and learn but don’t always act on advice. You know your baby better than anyone else. He’s yours and only yours!

Good luck and enjoy the journey!

Reasons budding entrepreneurs should stop looking for venture capital

Here are seven reasons for budding entrepreneurs to give up the hunt for venture capital and angel investors.

Every year, about millions of new businesses are started, and fewer than one percent successfully raise venture capital (VC).

Whether it’s the feeling of acceptance into this elite club, or the misconception that it’s impossible to start a new business without millions in capital, many startup founders find themselves hypnotized by the pursuit of VCs and angel investors.

Perhaps the adage is true: We want what we can’t have. And yet it can be argued that your chances of success are greater if you stop looking for VC money and focus your energy on bootstrapping your business and attracting customers.

Here are seven reasons for budding entrepreneurs to give up the hunt for venture capital and angel investors:

1. You haven’t proven your market need

Sure, you’ve put together a pitch deck, business plan and financial projections, but those are all just that — projections. You’re basing the future success of your company solely on hypotheticals.

Before looking for VCs, prove that there are customers out there who want what you’re selling. Spend time talking to your users, and focus on giving them what they want. Invest your time in finding a place in the market before trying to convince investors to give you their money.

2. You lose control

Once you secure VCs, you’re at their mercy. Even if you maintain a majority stake, you’re giving up a percentage of equity, profits and control to a board that may have a different vision for your company than you do.

In most cases, your VCs will ask for one or more board seats giving them the right to vote on or veto key decisions that will directly affect the future of your company. These same people also have the right to fire you or members of your team, which means you could be ejected from the company you started.

3. You’re focused on the investor – not on your customer

Giving up control means you have a new responsibility. Your first priority is no longer to your customer, because your investors expect to come first. Among other conditions that are negotiated in a deal, venture capitalists can ask for anti-dilution protection, dividends, liquidation preferences, mandatory redemption and other perks that the founding partners may not even get the rights to.

In some extreme cases, VCs have the right to sue you for everything you own in the case you forget to tell them “bad news,” according to Bloomberg Business.

4. Instead of trying to make money, you’re trying to raise it

The irony of trying to raise venture capital is how much time you waste chasing down investors – when you could be chasing down customers. There are only so many hours in a day and only so much work you and your team members can take on. Every minute you spend chasing down a flippant VC is a minute you’re not working on creating a great business.

That’s all to say you’re putting a lot of your eggs into a basket that the statistics say you’ll never obtain.

5. Your burn rate is higher than if you were to bootstrap

What’s a burn rate? It’s the amount at which a company spends money, especially venture capital, in excess of income.

You may know the now viral story of CEO Maren Kate and the downfall of her company, Zirtual. She abruptly shut down all operations due to a glitch in the books that was overlooked. Basically, the company did not have a handle on its burn rate – and it ran out of money. This also supports the next point that…

6. You lose the hustle required in running a lean business

When playing with someone else’s money, many startup founders admit that it becomes less real. It’s harder to stay lean and savvy with the false impression that you’re rolling in the dough.

Investor and entrepreneur Gary Vaynerchuk writes: “Twenty-five to 50 percent of all the businesses I have ever looked at were more than capable of being a little scrappier.”

7. Your end goal is focused on an exit rather than building a company that will last

If your end game is growth over profit, then you are forever stuck in a cycle of having to raise more money. As soon as you’re no longer able to secure more from VCs, then your company will likely implode.

You’re relying on other people’s belief in you – based on hypothetical projections – rather than relying on a solid business model that turns profits and creates happy customers.

Author: Shannon Whitehead

Shannon Whitehead is the founder of Factory45, an online accelerator program that takes sustainable apparel companies from idea to launch — without raising venture capital. Committed to improving the fashion industry, Whitehead launched what was at the time the most successful fashion project on Kickstarter and now helps other fashion entrepreneurs bring their ideas to market.

Image credit: www.fortunebuilders.com

This article was originally published in Entrepreneur.com

Bollywood celebs turning investors in digital startups

This is the age of online start-ups and crowd-funding, with youngsters all over the country coming up with innovative business ideas in tune with the times. It is also the age of celebrities – film as well as television actors – turning investors in, or even co-founding, some of these. From Gul Panag’s fitness app Mobiefit, Ajay Devgn and Sanjay Dutt’s ticket buying portal Ticketplease.com to The Label Corp fashion and interiors portal bringing in Sussanne Khan, Malaika Arora Khan and Bipasha Basu for three separate sections, and even Salman Khan hopping on to the online bandwagon with his shopping portal, KhanMarketonline.com, starry start-ups are on the rise and how.

“The start-up scene in India is currently booming with an equal number of innovators and investors chasing the market, and celebrities are no different,” says market analyst Sameer Rastogi, managing partner at India Juris. He adds, “Over the last few years, we have seen a boom in the number of celebrities dipping more than a toe in the vast pool of tech start-ups and investments in the West. Now, in India, too, the surge is happening.”

Prashant Puri, co-founder and CEO, AdLift, points out that the digital space, in particular, is finding a lot of takers. “Recently, former Indian cricketer Sachin Tendulkar invested in Bengaluru-based Internet of Things (IoT) company Smartron India and Yuvraj Singh has a $10 million seed fund called YouWeCan Ventures… and when it comes to celebrity angel investing in the West, Ashton Kutcher is the best in the game. He knows how to spread his seed far and wide, which has helped him reach an amazing amount of success by investing in start-ups such as Skype, Airbnb, Foursquare, Hipmunk and LikeALittle, to name just a few. It’s safe to say that this man is addicted to investing in good ideas,” he shares.

For start-ups, celebrity investments have multiple benefits — funding, global exposure through the celebrity’s personal brand and indirect VC advice, points out Prashant.

“In the West, one of the best examples would be actress Jessica Alba. She invested in an e-commerce site called The Honest Company, a consumer goods company that emphasises non-toxic household products. Her association helped the brand reach out to a mass audience base and today the brand is one of the leading e-commerce sites in the West. A similar parallel can be drawn with Karisma Kapoor’s investment in Babyoye. She brought in the credibility of a celebrity who is also a mother herself, showing trust in a new company. So, the market value of the company immediately shot up a little,” he explains.

The celebrities themselves, he says, get the most out of their investment when the targeted demographic matches their own followers and fans. “It is easy to tap the market if an audience has already been established. For example, The Label Corp that has brand endowments by Malaika Arora Khan, Sussanne Khan and Bipasha Basu for various branches like home décor, fashion and accessories — each face’s personal brand helped to bring the start-up to the next level,” he points out.

Sameer points out, however, that in a lot of cases, the celebrity does not decide on the investment himself/herself. “Their wealth managers do the necessary basic ground check, which typically consists of evaluating whether a start-up is worth investing in and if so, how much funding they will get.”

I have been building a brand and name for so many years: Sunny Leone

Sunny Leone is no stranger to entrepreneurship, and affirms that time and experience along with everything she has learnt along the way has given her a wealth of entrepreneurial experience. “I started my own business when I was 18 and have been building a brand and name for myself for so many years that I thought it was time to capitalise on it and create something of my own,” she says. Talking about the space she has entered as an entrepreneur now — perfumes — she shares, “I’ve always believed in merchandising even before I got into movies, so the idea of creating a perfume line made the most sense to me and to my team. Being able to do things other than movies is a big deal for me too. I’m involved with every single aspect. It’s very important and very personal to me. I have picked everything from the scents to the colours and bottles… every tiny detail was chosen by me and my team, and my decision was the final one.”

Sharing her business philosophy, she says, “My personal business belief is the test-test-test theory. You just test and see if something works — if it does and you see results, you stick with it. Also, being able to know when it’s time to start micromanaging and letting other people do their jobs is extremely important!”

Anita Hassanandani Reddy – TheBagTalk and Liftiee

Anita Hassanandani Reddy, of Star Plus’ Yeh Hai Mohabbatein fame, has two start-ups on her entrepreneurial check-list: TheBagTalk, a platform founded by her husband Rohit Reddy that will go live in September and Liftiee, a ride-sharing app of which the actress is one of the investors.

She points out that we’re in an age that presents us with some of the best opportunities for investment because of the kind of ideas coming up, especially geared towards the youth. “People are coming up with such innovative ideas these days. I feel these kinds of concepts can really, really work in today’s day and age,” she says and shares that one of the things that drew her to investing in Liftiee was its innovative concept. “I liked the idea. There have been times when we’ve all taken a lift or been stuck in a jam and wondered how a bike could have gotten us wherever we need to be, on time. I thought it was a very cool idea and something that I would use myself too. Plus, it’s connected with social media so it’s also a way of connecting with people, besides reducing traffic,” she avers.

TheBagTalk appeals to her creative side. She says, “My husband understands that for an actor, it’s important to have something on the side because what we do is not going to last forever. He’s taken up TheBagTalk as a full-time business within which he’s gifted me a line of bags of my own called AHR, for Anita Hassanandani Reddy, which I will be creatively involved in.”

Manoj Bajpayee – Muvizz

Not all celebrities are hopping on to the start-up bandwagon for the monetary aspect of the move. Ace actor Manoj Bajpayee attributes his involvement in Video On Demand (VoD) platform Muvizz to his passion for independent films and documentaries. “This is the best way to actually save and archive the assets that they are, so often lost in the shelves of government and subsidiary institutions. That is where the thought behind the platform came from, along with a drive to make available films that are having a very hard time in getting a release. Distributors are not interested in anything other than mainstream or middle-of-the-road cinema and so, a lot of great content is not even reaching the audience. That’s why when my partner, Abhay (Abhayanand Singh) came up with this concept, I immediately said yes because it spoke to my passion for good films,” he tells us.

Launched by Abhayanand Singh and Piiyush Singh, Muvizz is an online Video On Demand (VoD) platform offering a curated list of titles including short films, documentaries and feature films in various languages.

Talking about his role in the start-up, Manoj says, “I am the brand ambassador, mentor and partner. I hate how corporate it sounds, to be honest, because this is not a start-up intended to create money. It is intended to create awareness about these films and to create a community that will share views on the cinema they will have access to on the portal. I am involved creatively in the content and also in creating strategies to generate awareness about the service. This venture is a passion for all of us who are working day in and day out on it. You should come and see our office — our means are very limited, we have not over-stretched our needs and we are not immediately looking for big investors either. We want, first, to satisfy ourselves.”

Gul Panag – MobieFit

The actress-turned-politician along with her friend Gourav Jaswal has co-founded MobieFit Technologies Pvt Ltd, an m-Fitness venture focused on all-round health and fitness. “Fitness is something that I have always been passionate about, so being seen as an advocate of fitness and its impact on life, for me, became apparent with the advent of social media. My dedicated community on social media would keep asking for advice on fitness issues. In this day and age, I thought a DVD or video couldn’t be the final solution to their fitness-related queries. Also, I fundamentally believe that we don’t need to outsource our health and fitness to a third party. It needs to be in our own control, in our own time and as per our individual capability. This is how MobieFit was born. It is good that people are going to nutritionists, health experts or dietitians but ultimately, you have to be sitting on top of it all. If an app can give you that solution, then why not?”

From walking to strength training to running, the start-up has three apps in the market. “The Running app is India’s highest downloaded fitness app. Then we have a new app called MobieFit body that deals with strength training and another app called Walk, which is meant for recuperative, post-operative purposes.”

Gul is involved in everything from ideation to scaling up the venture. She shares, “Our offices are in Goa. I try to be there at least once a quarter. I’m extremely involved in ideation as well as all plans that involve scaling up and reaching revenue targets that have been set by the investors. At present, we have a 22 member team and a full-time chief operating officer.”

Does being a celebrity add an advantage in pushing the venture in the right direction? “It helps us in reaching out to more people. I am definitely a marketing tool that the company can and should utilise and I am 24/7 available for the same,” she says.

Saumya Tandon – 1018 MB.com

One of the two coveted bhabhijis on &TV’s popular show Bhabi Ji Ghar Par Hai, Saumya Tandon is the co-founder of 1018 MB.com, an on-demand alternative screening platform for movies in India. “Being a passionate movie lover and a part of the industry, the concept of this venture is very close to my heart. I realised with time that our industry is obsessed with only big-ticket, star-studded films and its structure does not support a lot of good content and talent. Thus, those among the audience with an appetite for niche cinema are starved for choice. 1018 MB is therefore geared as a democratic platform of movie screening where the audience chooses the films they want to watch, in a theatre of their choice at a convenient date and time,” she shares, adding, “I believe that rising mobile internet usage and improving demographics will transform movie viewing in India. 1018 MB is founded on the belief that going to theatres will remain relevant in India since it is one of the most important social activities. I feel that through the use of technology, big data and our neural algorithms, we can lead to the next revolution in the Indian theatre industry too.”

About what she brings to the table besides her celebrity status, she says, “I am the industry insider — I understand the problems of the industry and know the talent that needs to be brought on the platform, so I remain central to the concept. I ask the questions and my team — which consists of engineers and MBAs — provides solutions. In fact, I frequently say that I am the only normal person in a team full of geeks, which makes me special!”

She has also invested in Jugnoo, an on-demand Auto rickshaw service.

Shaan – Happydemic

Singer Shaan’s wife, Radhika Mukherji, and Amar Pandit recently co-founded Happydemic — an online entertainment platform operated by Happy Gaana Entertainment Pvt. Ltd. “The platform aims to connect music lovers and musicians,” Shaan says, adding, “The aim is to bridge the gap between the customer and the artiste and also help users find the perfect act that they can book in an easy and systematic way. My role in the set-up is to provide creative input and support for the platform. I bring in my knowledge and understanding of the field, which helps as a performing artist.”

The singer points out that while there has been a marked rise in the number of digital start-ups in India recently, there is a dearth of platforms in this particular space. “There is huge demand for quality entertainment in our country but the existing aggregators are quantity-focussed and function more like a listing of service providers. Happydemic, on the other hand, will follow a B2C model to bridge the gap between a customer and an artiste,” he avers.

How funding works – Splitting the equity pie with investors

The basic idea behind equity is the splitting of a pie. When you start something, your pie is really small. You have a 100% of a really small, bite-size pie. When you take outside investment and your company grows, your pie becomes bigger.

A hypothetical startup will get about $15,000 from family and friends, about $200,000 from an angel investor three months later, and about $2 Million from a VC another six months later. If all goes well. See how funding works in this infographic:

First, let’s figure out why we are talking about funding as something you need to do. This is not a given. The opposite of funding is “bootstrapping,” the process of funding a startup through your own savings. There are a few companies that bootstrapped for a while until taking investment, like MailChimp and AirBnB.

If you know the basics of how funding works, skim to the end. In this article I am giving the easiest to understand explanation of the process. Let’s start with the basics.

Every time you get funding, you give up a piece of your company. The more funding you get, the more company you give up. That ‘piece of company’ is ‘equity.’ Everyone you give it to becomes a co-owner of your company.

Splitting The Pie

When Google went public, Larry and Sergey had about 15% of the pie, each. But that 15% was a small slice of a really big pie.

Funding Stages

Let’s look at how a hypothetical startup would get funding.

Idea stage

At first it is just you. You are pretty brilliant, and out of the many ideas you have had, you finally decide that this is the one. You start working on it. The moment you started working, you started creating value. That value will translate into equity later, but since you own 100% of it now, and you are the only person in your still unregistered company, you are not even thinking about equity yet.

Co-Founder Stage

As you start to transform your idea into a physical prototype you realize that it is taking you longer (it almost always does.) You know you could really use another person’s skills. So you look for a co-founder. You find someone who is both enthusiastic and smart. You work together for a couple of days on your idea, and you see that she is adding a lot of value. So you offer them to become a co-founder. But you can’t pay her any money (and if you could, she would become an employee, not a co-founder), so you offer equity in exchange for work (sweat equity.) But how much should you give? 20% – too little? 40%? After all it is YOUR idea that even made this startup happen. But then you realize that your startup is worth practically nothing at this point, and your co-founder is taking a huge risk on it. You also realize that since she will do half of the work, she should get the same as you – 50%. Otherwise, she might be less motivated than you. A true partnership is based on respect. Respect is based on fairness. Anything less than fairness will fall apart eventually. And you want this thing to last. So you give your co-founder 50%.

Soon you realize that the two of you have been eating Ramen noodles three times a day. You need funding. You would prefer to go straight to a VC, but so far you don’t think you have enough of a working product to show, so you start looking at other options.

The Family and Friends Round: You think of putting an ad in the newspaper saying, “Startup investment opportunity.” But your lawyer friend tells you that would violate securities laws. Now you are a “private company,” and asking for money from “the public,” that is people you don’t know would be a “public solicitation,” which is illegal for private companies. So who can you take money from?

Accredited investors – People who either have $1 Million in the bank or make $200,000 annually. They are the “sophisticated investors” – that is people who the government thinks are smart enough to decide whether to invest in an ultra-risky company, like yours. What if you don’t know anyone with $1 Million? You are in luck, because there is an exception – friends and family.
Family and Friends – Even if your family and friends are not as rich as an investor, you can still accept their cash. That is what you decide to do, since your co-founder has a rich uncle. You give him 5% of the company in exchange for $15,000 cash. Now you can afford room and ramen for another 6 months while building your prototype.

Registering the Company

To give uncle the 5%, you registered the company, either though an online service like LegalZoom ($400), or through a lawyer friend (0$-$2,000). You issued some common stock, gave 5% to uncle and set aside 20% for your future employees – that is the ‘option pool.’ (You did this because 1. Future investors will want an option pool;, 2. That stock is safe from you and your co-founders doing anything with it.)

The Angel Round

With uncle’s cash in pocket and 6 months before it runs out, you realize that you need to start looking for your next funding source right now. If you run out of money, your startup dies. So you look at the options:

Incubators, accelerators, and “excubators” – these places often provide cash, working space, and advisors. The cash is tight – about $25,000 (for 5 to 10% of the company.) Some advisors are better than cash, like Paul Graham at Y Combinator.
Angels – in 2013 (Q1) the average angel round was $600,000 (from the HALO report). That’s the good news. The bad news is that angels were giving that money to companies that they valued at $2.5 million. So, now you have to ask if you are worth $2.5 million. How do you know? Make your best case. Let’s say it is still early days for you, and your working prototype is not that far along. You find an angel who looks at what you have and thinks that it is worth $1 million. He agrees to invest $200,000.

Now let’s count what percentage of the company you will give to the angel. Not 20%. We have to add the ‘pre-money valuation’ (how much the company is worth before new money comes in) and the investment

$1,000,000 + $200,000= $1,200,000 post-money valuation

(Think of it like this, first you take the money, then you give the shares. If you gave the shares before you added the angel’s investment, you would be dividing what was there before the angel joined. )

Now divide the investment by the post-money valuation $200,000/$1,200,000=1/6= 16.7%

The angel gets 16.7% of the company, or 1/6.

How Funding Works – Cutting the Pie

What about you, your co-founder and uncle? How much do you have left? All of your stakes will be diluted by 1/6. (See the infographic.)

Is dilution bad? No, because your pie is getting bigger with each investment. But, yes, dilution is bad, because you are losing control of your company. So what should you do? Take investment only when it is necessary. Only take money from people you respect. (There are other ways, like buying shares back from employees or the public, but that is further down the road.)

Venture Capital Round

Finally, you have built your first version and you have traction with users. You approach VCs. How much can VCs give you? They invest north of $500,000. Let’s say the VC values what you have now at $4 million. Again, that is your pre-money valuation. He says he wants to invest $2 Million. The math is the same as in the angel round. The VC gets 33.3% of your company. Now it’s his company, too, though.

Your first VC round is your series A. Now you can go on to have series B,C – at some point either of the three things will happen to you. Either you will run out of funding and no one will want to invest, so you die. Or, you get enough funding to build something a bigger company wants to buy, and they acquire you. Or, you do so well that, after many rounds of funding, you decide to go public.

Why Companies Go Public?

There are two basic reasons. Technically an IPO is just another way to raise money, but this time from millions of regular people. Through an IPO a company can sell stocks on the stock market and anyone can buy them. Since anyone can buy you can likely sell a lot of stock right away rather than go to individual investors and ask them to invest. So it sounds like an easier way to get money.

There is another reason to IPO. All those people who have invested in your company so far, including you, are holding the so-called ‘restricted stock’ – basically this is stock that you can’t simply go and sell for cash. Why? Because this is stock of a company that has not been so-to-say “verified by the government,” which is what the IPO process does. Unless the government sees your IPO paperwork, you might as well be selling snake oil, for all people know. So, the government thinks it is not safe to let regular people to invest in such companies. (Of course, that automatically precludes the poor from making high-return investments. But that is another story.) The people who have invested so far want to finally convert or sell their restricted stock and get cash or unrestricted stock, which is almost as good as cash. This is a liquidity event – when what you have becomes easily convertible into cash.

There is another group of people that really want you to IPO. The investment bankers, like Goldman Sachs and Morgan Stanley, to name the most famous ones. They will give you a call and ask to be your lead underwriter – the bank that prepares your IPO paperwork and calls up wealthy clients to sell them your stock. Why are the bankers so eager? Because they get 7% of all the money you raise in the IPO. In this infographic your startup raised $235,000,000 in the IPO – 7% of that is about $16.5 million (for two or three weeks of work for a team of 12 bankers). As you see, it is a win-win for all.

Being an Early Employee at a Startup

Last but not least, some of your “sweat equity” investors were the early employees who took stock in exchange for working at low salaries and living with the risk that your startup might fold. At the IPO it is their cash-out day.

This article was originally published in Funders and Founders

Image credit: saascribe.com

Startup Success: Pitch Your Business Idea Like a Pro

Everyone has ideas; it is the implementation which makes the difference. So when working upon making an idea a reality apart from working on the basic business plan, you need to pitch your idea to an investor.

We all have ideas. But how many of us actually do something with our ideas. So how do you end up making an idea a reality?

Not all of us our blessed with cash rich heritage and are dependent on external investments to get funds into our startups. What may look good on paper needs to be reflected in a summary form so that the investor gets the idea immediately instead of having to look into a cumbersome booklet, which states every morose detail.

There is no point having an elaborate slide or presentation unless you actually have something which is concrete and tangible. No investor wants to invest in an idea which has no base. You cannot simply talk about your business and why you need the money alone, you need to pitch in your idea, which showcases the actual concept which people will get.

If you cannot make the investor understand, then the investor will think the concept shall also be lost on the mass. You need to show your business viability. Why would anyone invest their money if the business which is not viable?

Have a prototype and a test launch of your product. This helps the investor understand the actual reality of your idea. Remember one thing, when you are going to investors, you are going to people who know their business.

So never beat around the bush and waste the investor’s time. Get to the point and be reasonable and sensible. If Rome was not built in a day, then remember neither will be your business.

Fundraising 101: Checklist for Entrepreneurs

When raising funds for your entrepreneurial ventures, just follow this easy checklist to ensure you never forget the important steps again.

It’s easy to get lost in the whirlwind of raising funds for your business ventures. There’s so much to learn and process in a short space of time.

But don’t worry.

When raising funds for your entrepreneurial ventures, just follow this easy checklist to ensure you never forget the important steps again.

Do your homework.

Learn about the people you want around your business – those you want as business associates, those that can help you in your field and those businesses that rival yours. What can you do that will draw them to your business and you as an entrepreneur before others? Can you size up your competition early on and get ahead of the game?

Write your proposals for pitching to investors.

Once you have done your research and you know which people are available to invest in you and your business, you should write your pitch to target them specifically. Know your audience and how to handle them.

Build relationships.

Potential investors should know that the business you propose to carry out is a winner – but also that the person carrying it out with their investment money is willing and fully able to do what is necessary to build the business.

Reap the benefits.

Now that you’ve done all the grafting, it’s time to actually bring in your hard earned funds from your fundraising!

Whether you’re raising your funds from family and friends, big business investors or even crowd funding, you never have to miss a step again.

Four important facts while evaluating an offer for funding

If you build something that’s promising, you’ll find lots of potential investors and many doors will be open for you. But before taking big actions, it’s best to keep the following considerations in mind.

Valuation of the Advices You Get is Key

It is really critical to work with experts in your specific industry. You have to be picky when it comes to taking advices. Knowing the right people has been invaluable every step of the way.

Your Story Is Important

Accepting an investment is a landmark event in the history of your organization. Your selections will show the world what kind of company you aspire to be. This selections are being watched and by, customers, competitors and even inside your organization. Stay aware of your own story and let it become your great strength.

You Must Know Your Partners

Consider each investor opportunity carefully. You must know what is important for you, what the key factors are for your company. Do you need a brand name, do you need control or do you need more cash reserves for example… Ask questions to your potential investor. Your relationship will need trust, so the questions and answers are important.

You Can Be Successful At Any Size

The goal of every company doesn’t have to be bigger and better. A spark can become an out-of-control wildfire without the right supervision. Commitment to responsibility and knowing the capabilities of your organization is maybe the most important, and frequently overlooked aspect of accepting investment. So be careful and don’t get ahead of yourself.

Image Credit: silverlaw.com

Bootstrapped and profitable, this Kota-based edtech startup is set to achieve 28cr turnover

Started with only four employees and 700 students, this Kota-based firm today has 220 employees and 6,465 students on board.

The online test preparation market has become a promising sector for startups in the last couple of years, given the growing use of smartphones and significant traction of students. But the concept of delivering educational services via mobile phones was not that lucrative in the 2007-08 era.

In 2007, Nitin Vijay (32), an alumnus of IIT BHU, dared to think ahead of his time to launch Motion Education, which offers courses for students from Classes VI to XII on Olympiads, NTSE, JEE-Main, JEE-Advanced and pre-medical exams. Started with only four employees and 700 students, this Kota-based firm today has 220 employees and 6,465 students on board.

Laying the foundation stone

Nitin started Motion IIT-JEE in December 2007 with a seed capital of Rs one lakh, just six months after he finished his B.Tech. Born and brought up in Varanasi, Nitin decided to set up his venture in Kota, Rajasthan, given its popularity and potential market for coaching institutes. His entrepreneurial journey took off with his first venture Kota Point in Varanasi, where he used to teach physics for IIT and PMT (Pre-Medical Test) aspirants. Later, he moved out of Kota Point to fuel his dream of establishing Motion Education.

Make learning more efficient

In 2012, Motion Education launched Motion Solution Lab to record lectures, simulations and quizzes. It makes e-learning accessible via DLP (Distance Learning Programme), which includes video lectures, video solutions, study material packages for all the courses. Last year, it launched Motion Edu Tab programme, where tablets are used in classrooms to track students’ performance and modify class lectures as per the requirements generated through various performance reports.

Nitin states the model of Motion Education is similar to that of a school where a student has to follow daily schedule for classes, homework, test, cultural activities.

Motion Education today boasts of 18 physical coaching centers across India, including States like Assam, Uttar Pradesh, Haryana, Rajasthan, Madhya Pradesh, Odisha and Gujarat.

With products like Motion Solution Lab and Motion Edu-tab, we are able to monitor performances of every student individually, which we share with the student and provide a compiled report to the faculty as well, so that they can see where the class is lacking or the topic in which the class is weak,” says Nitin.

Organic growth so far…

Without raising funds, Motion Education has been showing organic growth since inception. The company is growing at a rate of 17 per cent year on year for classroom coaching and 140 per cent for e-learning.

The startup generates revenue from fees received from students in classroom and sale of e-learning tool to individuals, schools or institutions. In the next three years, Motion Education plans to reach out to three lakh students and 700 learning institutes. The company is expecting to attain a turnover of Rs 28 crore for this fiscal year.

Even big coaching institutes like Career Launcher and TIME have gone online with their test preparation modules. Moreover, the likes of Coursera, Udemy, Udacity, Khan Academy have broken the conventional mode of learning. Toppr, Embibe, Online Tyaari, EntrancePrime, Cracku, and CrunchPrep GRE are few of the startups that are shaping the unorganised and traditional test preparation market in India.

Industry and competition

The online test prep industry is valued at $8 billion, and has witnessed a spate of investor activity in the past couple of years. Bengaluru-based Vedantu raised $5 million from Accel Partners and Tiger Global Management, Toppr raised Rs 65 crore in May 2015, OnlineTyaari raised Rs 5 crore from both angel and VC investors. Bengaluru-based Byju emerged as frontrunner by raising $75 million from Sequoia Capital and Sofina, the largest fund raised by an edtech startup in India.

Today, when edtech startups are making noise everywhere only by raising funds, Motion Education sets an example as a bootstrapped startup that can be profitable year on year. Having tied up with more than 600 institutions, including schools, coaching centres and individual teachers, it has achieved a turnover of Rs 16 crore in FY 2014-15.

MOTION IIT-JEE is the culmination of a desire to start an entrepreneurial venture in IIT-JEE coaching in Kota, the coaching hub for school test preparations in engineering streams. The idea is to create a system which will lead to overall academic improvement of the students at a bare minimum cost,” says Nitin.

Image Credit: yourstory

This article was originally published in yourstory.com