Category: Fundraising

Fundraising: Get the latest news and updates on Fundraising, along with relevant information and material on Fundraising. Explaining bits and bytes of business, startups and entrepreneurship.

Meeting with Investors – Before, During and After

Meeting with investors is important and shouldn’t be taken lightly. However, if you prep right and show your passion for what you do, the rest can be worked on later.

It is important to be consistent throughout meetings with investors. As you meet with investors more and more, you will begin to develop your own way of working. To begin, here are some pointers we suggest when meeting with investors through the whole process.

Preparing for your meeting:

Carry out research on the person that you’re meeting with. What makes the person you’re meeting with excited? What grabs their attention? In doing this, you are getting a feel of your investor before you’re on the spot with them.

With your research in place, you can then fully prepare your pitch with your investor in mind. A tailored pitch makes for an interested investor – and an interested investor is one that actually invests in you. By personalising your pitch, you’re doing something many overlook and actually targeting the correct audience.

It’s also important to prepare yourself mentally. For a successful pitch, you need knowledge, passion and the ability to target your audience specifically.

Related Post: 4 Qualities angel investors want to see in startups



During your meeting:

It is important to be confident during your meeting. Your investor is listening to every word you are saying and the way your portray yourself. Believe in yourself and your visions and an investor can spot that in your meetings.

While you may think that your memory is impeccable, don’t underestimate the value of taking notes on anything you find to be important. If you feel that it is important during your meeting – the chances are it will definitely be important afterwards. Even if your memory is that good, it shows your investor that you understand the importance of things being said in your meeting.

Another thing to do while you and your investor are face to face is to ask questions. You should ask questions about anything you would like further clarification on, that you’re interested in or that you don’t understand (if that is the case). Your investor will appreciate your receptiveness more than someone who doesn’t show interest in them.

Related Post: How to get investors for your startup?



After your meeting:

Back to the memory point, write any of your initial thoughts down. Not only are they fresh in your mind, you can go back to the exact thought you had and expand it, act on it or even bin it.

Anything agreed during the meeting that should happen after, should be actioned. It seems like an obvious point, but by writing them down during the meeting and having notes to act upon, you have an accurate base to work from.

Quite possibly the most important act is to maintain relationships with all investors – whether they invest in you and your business or not. If someone is giving you money for your business, you should keep them sweet at least and let them know their money is in safe hands. In the event that they don’t invest in you, there’s nothing to stop them from watching you grow your business and want to invest later.

Meeting with investors is important and shouldn’t be taken lightly. However, if you prep right and show your passion for what you do, the rest can be worked on later.

Related Post: 10 Questions you won’t expect to be asked by Investors

Image credit: vator.tv



4 Qualities angel investors want to see in startups

In order to make the going a little easier for all those entrepreneurs seeking Angel investment, we have a few tips up our sleeve which we would like to share.

The Startup industry is blooming like never before. This bloom in the industry means both good and bad things for the early starters. While the good thing is, there’s enough acceptance and space in the industry, It also means that these new comers have to face a hard time distinguishing themselves from others and establishing a unique identity of their own.

One of the hiccups that these first time entrepreneurs have to face is getting funding for their young ventures. Angel Investment is one of the most famous form of funding in startups all over the world. So, in order to make the going a little easier for all those entrepreneurs seeking Angel investment, we have a few tips up our sleeve which we would like to share.

Here we go!

1) Angel Investors seek to know the real you –

Having invested in a lot of startups and met a lot of entrepreneurs, they’re well aware of the kind of people and ideas they’re looking to invest into. Hence, the one thing that they’re actually looking forward to when meeting probable entrepreneurs for investment, is to connect with them personally. So, the next time you go to meet a probable investor make sure that they get to know and connect with the real product that you’re selling i.e. ‘you’.

2) They want to see a strong foundation –

While most Angel investors might be perceived as big time risk takers who have landed the role through solid personal net worth and annual income. But most angel investors aren’t the wild risk takers, ready to invest truckloads of money at an out-of-the-box idea kind of people. All they want to see is real money — a legitimate and strong valuation of the startup that isn’t skewed by flimsy funding managed from friends and family.

You’re most likely to land the investment if in some way or the other, your startup has already proved or manages to prove that it is on a path to success in the future.



3) Angel Investors want to taste the action –

While this might not be the case with all of them, but many of the angel investors don’t just want to invest in your startup and then sit back and enjoy. Many of them want to taste the ground excitement and get involved in the day to day working of the startup and use their experience in smoothing the daily working of the startup. They just don’t want to remain an outsider, they aspire to become an integral part of the startup and its working. After-all, they want to see good returns on their investment.

4) Angel Investors want to know about the startup’s exit strategy in place –

While investing, the investors are predominantly looking to see something in the business’s future that makes it a fruitful investment. Most of the times, all they’re looking for is a good carved out solid strategy, that ultimately converts into big money.
However, a solid plan doesn’t always guarantee huge success. Hence, according to the Wall Street Journal, “In general, the only way one can make a profit on an angel investment–or get at least some of your money back–is if the company you’ve funded has an exit event, such as an initial public offering or acquisition. And that can take years to happen, if ever.”

Hence, if you’re an entrepreneur or a startup seeking the attention of an Angel investor, make sure that you have a futuristic exit plan in place so that the investor exactly knows what is he getting into.
With these 4 things in place, you’re surely going to win over your Angel investor. All the very best!

This article was originally published in www.indianweb2.com

Image Credit: Entrepreneur.com



7 Ways you can finance your new startup

You might have an exceptional idea in mind but that idea is of no use if you’re not able to fund your idea and make it a reality. Here are 7 ways through which you can finance your startup.

Money is the centre of the Universe. When we say this, we are sure there will be a percentage of people who wouldn’t agree with this. But, just hear us out. we surely believe that a person’s brain is his biggest asset, but this biggest asset of a human being when combined with the biggest necessity of human being, money, makes for a blockbuster combination. This combo is what a startup requires. While you might have an exceptional idea in place but, that idea is of no use if you’re unable to fund your idea and make it a reality.

Here are 7 ways through which you can finance your startup.

1) Loans –

One can consider raising money through the 1953, Congress created Small Business Administration (SAB) Loans. It offers a variety of guaranty programs. One can get money from their own bank, and be guaranteed by one of these programs. One of the best features about these loans is their interests rates. These are often given at interest rates lower than the traditional bank loans.

2) Crowdfunding –

The World wide web or the Internet can act as your saviour in times of distress. Once an make use of some of the most popular and trustworthy crowdfunding websites like the kickstarter etc to raise the desired amount.

3) Self financing –

The greatest of all. Don’t ask anyone for loans and money, when you yourself have the capacity to fund your dream. Use your credit card, sell your old gadgets, cut down on unnecessary spendings and voilà, you have the money required to make your dream a reality. Further, the best part is, you don’t have to repay anyone or shell out huge interest rates.



4) Family and Friends –

This is one of the most famous methods being used by entrepreneurs. First of all, there isn’t a set deadline to repay the loan and the interest rate is often not there or is very less compared to the one levied by the banks.

5) Angel Investors –

They are the people who agree to invest in exchange for equity in the business. Most of the times Angel investors are people who are already massively successful in their own industries and want to encourage others in succeeding in the same industries.

6) Peer-to-Peer Loans –

One needs to P2P websites such as Prosper and Lending Club etc. in order to land himself or herself this kind of funding. One is required to post the amount one needs and why they need it. After this, the potential investors have a thorough look over your request and decide whether or not you’re eligible for the loan amount required. Once the loan is approved, you will receive the money. The money will have to be repaid the same way as a loan is repaid in a traditional bank loan.

7) Venture Capital –

Venture capital firms invest in your business in exchange for equity in it. The biggest disadvantage of this method is that these companies often only invest their money in businesses that are already established or have a huge profit potential.

Now that you know seven of the easiest way to fund your startups, when are you starting your entrepreneurial journey?





Idea-stage startups: How to value enterprises that are yet to take shape

From the founding team to competition to how quickly a startup can turn profitable, all these factors play an important role in the valuation game.

For idea-stage startups, valuation is more of a creative drill than intricate calculations because they are often pre-revenue in nature and lack historical data. It’s hard to put a value on something that doesn’t exist. However, an investor would want to have a fair idea about potential returns.

“The only way to value a startup at an idea level is to see how much money it requires to survive for the next 12-18 months until the startup becomes ready to raise the next round,” says Harshad Lahoti, founding partner and CEO of ah! Ventures. “You will have to give the founder enough money to generate good traction. If not, he will not have that sort of traction to convince the next investor.”

Another step is to assess the viability and future potential of the idea. “The uniqueness of an idea and its competitive intensity, besides the potential of idea for speedy rollout and rapid scalability are select parameters to assign a basic ballpark estimated value to the intellectual property (IP) of the idea and its defendability,” says Bharat Banka, founder and former CEO of Aditya Birla Private Equity.

Also read: Lessons from my 2 years of startup life!

Lahoti says that at a seed level, the ballpark figure of stake dilution is 15-30 per cent. So once an entrepreneur says he is willing to dilute 30 per cent for Rs 50 lakh or whatever the amount required until the next round, there emerges a valuation.

“Now, people would argue on how one can decide that, since 15-30 per cent would mean that the valuation will double – if I am investing Rs 5 crore for 15 per cent, it will be Rs 10 crore for 30 per cent,” points out Lahoti. “However, we have a bottom range and top range here. After that, how we pinpoint a particular number in that range rests solely on how well one negotiates.” The better negotiator gets a better deal, he says, adding, “I believe it’s more of an art than a science.”

Valuations also depend on a company’s road to profitability. A startup that is projected to be profitable in two years will be valued way more than the one with a five-year profitability plan. Entrepreneurs need to avoid valuation on unrealistic financial assumptions, because they will eventually have to deliver their expectations to investors.



“It’s hard to come to a logical number,” says Sushanto Mitra, founder and CEO of Lead Angels, an alumni focused angel network. Mitra outlines three parameters for valuation of an idea-stage startup. “Investors think of the possible valuation in the next round and the probability of getting funding. The higher the next-round valuation and possibility of getting funding, the better would be the valuation at the idea level,” he says. Second, they look closely at the track record, domain knowledge and opportunity cost of the founders. “Finally, it would depend largely on the target stake in the company based on the asked amount,” he adds.

One way entrepreneurs can put a value on their idea is to look at companies that operate in a similar space. They need to talk to their peers in the ecosystem and also to startups that have received funding from the same investor.

Also read: 23 funding lessons for budding entrepreneurs and startups from Shark Tank

Although not an absolute requirement, many angel investors prefer startups in their locality. It helps them to interact more frequently and directly with the entrepreneurs to get real-time update on their progress. Also, a company in the heart of a startup hub such as Bangalore will be valued higher than a startup in Mysore or Visakhapatnam, just for the fact that competition drives up startup valuation. In a city such as Bangalore, there’s a higher degree of competition among investors. Investors agree that negotiating a lower valuation is easy with startups in remote locations.

Ashish Taneja, managing director at growX Ventures says that the key factor is the team. “A lot of average guys come up with brilliant ideas, but we don’t back them because it’s not just the idea, the real power lies in execution and that’s where you create value,” he says. “Average people won’t be able to foresee the future, they often quit early.”

Investors look for entrepreneurs who possess a strong will to survive the hardest times. “Ideas are dime a dozen. It is all about execution. An idea platform such as Quirky.com backed by GE, which gave 2 per cent equity to the ideators, shut shop. The only chance of getting valued for an idea is when the founding team has a strong patent or experience of building a successful startup,” says Avinash Kaushik, investor and founder at hardware startup accelerator RevvX. Kaushik also heads US-based Innoventure Partners in India.

Lahoti agrees. “In all the 22 startups that I have funded, there’s only one at the idea stage. The reason why I funded them is because the entrepreneur in his previous venture has exhibited that he’s capable of running a company right from conception, execution to exit,” he says.

Angel investors also prefer entrepreneurs to put in their money at the idea stage. There are very few people who back startups at the idea stage because the risk is high, says Lahoti. “Having an idea is just one per cent; 99 per cent is the execution of the idea. It’s all about whether the team has the ability to execute,” he adds.

Out of 2000 startups, 100 get funded and of this 100, only one will get funded on paper plans; the other 99 startups will have only good traction, points out Lahoti.

Startup founders should also consider convertible notes, which avoid the valuation dilemma at the initial phase and keep valuations open. A convertible note is like a soft loan with the difference that it does not need to be repaid as such and is converted into equity when the startup goes for the next level of funding.

Also read: How to get investors for your startup?

This article was originally published in Kotak Business Boosters

Image credit: raineugene.org



23 funding lessons for budding entrepreneurs and startups from Shark Tank

The show Shark Tank has some great business lessons for budding entrepreneurs and startups looking for funding and talking to investors for the same.

The show Shark Tank, where aspiring entrepreneurs from around the world pitch their business models to a panel of investors and persuade them to invest money in their idea. The show Shark Tank has some great business lessons for budding entrepreneurs and startups looking for funding and talking to investors for the same.

1. If you get what you ask for, take it.

Mark Cuban offered one entrepreneur exactly what he requested. The entrepreneur then asked for more and lost the deal. No one likes to do business with someone who gets what he requests and then asks for more; it’s a sign of what’s to come in the relationship.

2. Networks matter.

The Shark Tank investors bring huge value in their networks. Daymond John got the sticker guys distribution in Best Buy as well as retail distribution for Nubrella. Lori Greiner is able to help the businesses she invests in get on QVC. When you’re looking for investors understand their networks and more importantly if they’re willing to leverage them for you. Ask about this before you sign a deal. Sometimes a deal with less lucrative financial terms is better if it brings the right network to the table.

3. Do your homework.

When Mark Cuban negotiates and tells you a deal is final, he means it. You won’t have the benefit of seeing most people you’ll negotiate with on TV in advance, but you can still do plenty of due diligence — like researching their past deals and talking to their business partners.

The most successful entrepreneurs also know enough about the Sharks to customize their pitch. They tell each one why he or she should personally be interested in the business.

4. Get an advisory board.

Getting a Shark to invest in your company is one way to get partners with experience and a network, but not everyone can be on Shark Tank. Creating a strong advisory board can also increase your opportunities; for a small amount of equity you can build a great board. Retired executives with extensive networks are often eager to get back in the game and make tremendous advisory board members.

5. Know your absolute bottom going into a negotiation.

One entrepreneur was offered a deal and needed to think about it. By the time she decided to move forward, the Sharks had talked among themselves and reduced their offer. If she knew her absolute bottom going into the show, she could have made a decision on the spot and had a better deal.

Too many entrepreneurs are unsure of what they’d accept and their hesitancy gets them worse deals. Also, if you don’t know the lowest offer you’d accept, you could commit to something you’d regret later. Of course, there may be exceptions if unexpected elements come into play, which sometimes happens on Shark Tank.

6. Solve your own problems.

The most successful founders built companies to solve problems they faced. They’re building for a market they understand and are passionate about. A couple examples are Travis Perry who developed ChordBuddy to help his daughter learn to play the guitar and Eric Corti who invented the Wine Balloon to better preserve wine after he and his wife opened a bottle.

Of course, the problem you’re solving has to address a sizable market. No Sharks wanted to invest in Ledge Pillow because they didn’t think the market was big enough. (A great example of solving a problem comes from these teenage entrepreneurs who developed a life changing device for wheelchair users).



7. Investors buy into people as much as ideas.

The Sharks get most excited about a passionate, likeable entrepreneur. Be honest. If that’s not you, and you need investors, consider finding a partner who fills this role.

8. Do a deal that works for everyone.

The Sharks often say they won’t invest in something because they don’t have the right background or connections to help the business. If you’re looking for investors, try to find those that can help you by serving as more than just a bank. In any deal, whether it’s related to VC or not, make sure both sides provide value. You’re probably going to do more deals in the future, and a one sided deal won’t be good for your reputation.

9. Listen.

The Shark Tank investors offer great advice when they turn people down. If you’re told “no” don’t be so displeased that you can’t listen to the rationale. And, if they don’t tell you why, ask so you can leverage that advice moving forward. This is a chance for insight from experts.

10. Don’t respond to people you’re pitching with disdain or sarcasm – even if they say something nasty.

The people who do, tend not to get deals. How you act in a pitch will shape what potential partners think it would be like to work with you. In fact, maybe they’re pushing you just to see how you’ll react under pressure.

11. If you can’t sell, learn to.

This lesson is for everyone. Even if you’re in a large company, you need to sell your ideas and yourself to get ahead. In the case of investors, Sharks are looking for people who can sell. And, business valuations are significantly higher when someone has revenue. Do whatever you can to get sales prior to approaching investors. Mark Cuban stresses that selling is one of the most important skills for entrepreneurs in his great book, How to Win at the Sport of Business.

12. Prepare.

Many entrepreneurs on the show who don’t know their financials or seem to freeze up in the middle of their pitch. When you’re going to a meeting or pitch, practice enough that you can talk about your business even in stressful circumstances and please know your financials. The most successful people are usually over prepared.

13. Demonstrate your commitment.

Investors want to see that you’ve taken a risk – investing your money and time — showing that you believe in your business. Don’t ask for their money if you haven’t invested yours.

Failures are ok — they can even be a benefit if you show how you learned and moved forward. If you could use some inspiration, here are 23 famous failures who used failure to get to success.

14. Patents are extremely valuable.

A worthwhile investment if you have something unique.

15. Have options.

You can almost always tell when someone believes they have no other options. Those entrepreneurs get a worse deal than they’d otherwise receive. Whether you’re selling a stake in your company or buying a car, you need alternatives to get the best deal. One alternative is knowing at what point you’ll say “no.”



16. Ask, “Are there any other offers on the table?”

Some people have gotten much better offers when they ask this rather than responding to the offer that was given. Like anything, the more competition you can create for your business, the better deal you’ll get.

17. Don’t quibble over small numbers.

Some deals get lost because someone is dickering over 1%. Don’t do it.

18. Ask for something valuable . . . besides money.

Steve Gadlin and Mark Cuban were negotiating an investment in Steve’s business, I Want to Draw a Cat for You. When the financial terms were on the table, Steve asked Mark if he’d draw and sign every 1000th cat drawing. Mark said “yes.” It was easy for Mark to say “yes,” and it will add value to Steve’s business. Look for opportunities where the other side can provide additional value without any out of pocket expense.

19. The right partner offers more than financial terms.

There are some great businesses that are giving up huge chunks of equity for a seemingly small amount of money. Kevin O’Leary bought into Talbott Tea at what seemed like a great valuation for him, but within a short period of time he had the business packaged up and sold to Jamba Juice. When you do a deal with a Shark you’re giving up more than you’d offer someone else, because they can exponentially grow your business faster.

20. Don’t tell potential investors they’re wrong.

When you tell Sharks they’re wrong – especially in front of other people (like the national TV audience of Shark Tank. they will naturally stop listening to you. No one wants to be told they’re wrong in front of other people. Instead, say, “I think that . . .” or “What do you think about looking at it like. . . .” How you defend your position makes a difference.

21. If someone asks you to sell him something, ask, “Why do you want it?”

Daymond John challenged an entrepreneur to sell him a pen. The guy did a good job, but could have done better. Instead of jumping right into selling the pen, he could have asked Daymond what he was looking for in a pen and customized the pitch.

22. Find investors who are passionate about your business.

The Sharks gravitate not only to the businesses they like but the ones that they’re passionate about. Kevin O’Leary invested in the tea company (loves tea); Daymond John in the trash can cover company (he said he had just lost his own garbage can cover); and Robert Herjavec in the guitar learning company (he has a lifelong dream to learn guitar). Those entrepreneurs were solving problems that the VCs personally experienced. Do research to find partners passionate about what you do. You’ll have a higher likelihood of making a deal.

23. More Sharks are better than one.

Every investor will bring a different network and expertise to the table. Jewelry company M3 Girl Designs, founded by Maddie Bradshaw when she was 10, was offered $300K from Lori Greiner and Mark Cuban. Maddie said she’d take the deal if they’d let Robert Herjavec in as well. She got the same financial deal with one additional investor. See if you can increase the parties who have a stake in your business. (Update: although M3 Girl Designs was offered the deal during the show, the deal didn’t wind up going through.)





How to get investors for your startup?

These tips can help you not only locate investors for your startup but will explain methods on how to encourage those who are interested to invest money in your startup.

Starting a new business is an exciting time, yet too often new business ventures are unable to succeed because of lack of capital in the first two years of operations. Rarely does a new business owner have the personal assets or funding sources to start, grow, and maintain operations when starting up a new company. It may be critical for you to find investors for the capital necessary to keep the business operating the first few years. Unfortunately, few people know how to get those investors. These tips can help you not only locate investors for your startup but will explain methods on how to encourage those who are interested to invest money in your startup.

Develop a Business Plan

The first step in getting investors for your startup is to create a good business plan. A business plan should clearly explain what your business does, who your target market is, projected sales for at least the next five years and any industry reports that may indicate how your idea may meet an unfulfilled need. There are many online templates available that make it easy for you to create a business plan but keep in mind that it needs to appear professional. It should (of course) not be handwritten, but typed and put together in a folder or binder when you present it to a potential investor. You should also know the plan thoroughly and be able to answer any questions the investor may ask when you present the plan to them.

Start with Friends and Family

The best place to start presenting your business plan is to your friends and family. However, it is important that when you present your plan, you treat your friends and family as you would a business professional. Dress in business attire and present the plan as you would to a business person you do not know. Answer any questions they may have and keep the conversation focused on the business plan, not on the big game, your cousin’s latest job, or any other personal matters that might come up. Many times, friends and family are reluctant to mix money and personal relationships, but by discussing the matter with them with a business-like attitude, they may be more willing to keep an open mind. Be sure that your friends and family will receive the same benefits as an outside investor, such as stock options or repayment of their investment with interest.



Consider Working with an Expert

If you have never successfully started a company, you may need to add someone to your startup team that has experience in order to attract investors. Most investors want to put their money into companies that they know have a chance of giving them a big return on that investment. Therefore, if you can afford to hire a consultant who has had success with startup companies, you may have a better chance at convincing an investor that you will succeed. Understand that an investor is not happy until they begin to see money coming back to them, so anything you can do to better position yourself to succeed is beneficial.

Demonstrate Why Your Startup is Different

Investors want to know why your startup is different than that of your competitors. If what you plan to produce is a trade secret or a patent, you will have much more success finding investors as this would indicate a new invention or innovative idea. However, for many startup companies, they are not necessarily developing a new invention, but are creating a business that is similar to others. In those cases, it is critical to explain to an investor why the product or service you offer is better, different, or meeting an unfulfilled need in your community. By demonstrating to an investor that your business plan is unique from the competition, you will have a better chance of convincing them that your company is worth their investment.

Every successful company began with someone’s idea and the majority of those companies succeeded because they were able to present a business plan to investors that convinced them that the project or idea would meet a need that was not currently being met. By keeping a professional attitude and developing a business plan that completely and competently describes your company, you will be able to begin taking the steps to making your dream become a reality.





The art of crafting successful elevator pitch

Don’t get stumped by the phrase “elevator pitch”; although the two words don’t seem to be made for each other, in the startup business an elevator pitch is what makes or breaks an investor.

Don’t get stumped by the phrase “elevator pitch”; although the two words don’t seem to be made for each other, in the startup business an elevator pitch is what makes or breaks an investor. An elevator pitch is mainly the ice breaker between the investor and the startup team.

The elevator pitch can be considered a manner of selling a startup, because in the elevator pitch one is required to give a brief synopsis of what the company actually does. An elevator pitch is quite important as it bridges the investor and business.

Now the reason why it is called an elevator pitch is because it is like a casual conversation which one may have when riding the elevator and the ride itself lasts for a minimum 20 to almost 30 second and during that span of time, you are required to make a memorable and lasting conversation with regards to the business. It has been seen that the time span during which an investor can be swayed is 20 to 30 seconds.

Hence an elevator pitch should be precise, interesting and retainable. You cannot use heavy jargon which will confuse the investor. The trick is to keep it simple. Understanding the USP or the unique selling proposition of the business is the key to crafting the elevator pitch. If you don’t know what the company does then how can you expect others to understand it in less than a minute?

While simplicity is important you must understand what sets you apart from the many other similar startups in the niche. Always do your homework about similar businesses – you never know what kind of question one may be asked. Being prepared at all times is what makes a good elevator pitch and practice only renders its perfection.

Image credit: www.spinyard.com.au



10 Questions you won’t expect to be asked by Investors

If you’re raising money for your startup and you want to pitch to investors then there are a few important things to know.

If you’re raising money for your company and you want to pitch to angel investors or venture capitalists, then there are a few important things to know that savvy investors care about.

You may never get asked these questions, or maybe not as directly as they are asked below, but you should be prepared and have answers to these questions as well as questions like these:

#1: Who believes in you and how can I (investor) get in touch with them?

What the investor are looking for here is who are your mentors and advisers. They like to know that there are people who believe in you, your ideas, your potential, and abilities.

#2: What entrepreneurs do you admire and why?

This is a fun question. Even if you’re not asked this question, work it into your pitch because you can tell a lot about people by who they admire.

#3: How do you track trends in your market?

Investors want to know that you are aware of your industry, as well as where you go to find data to stay on top of industry trends. Things change very quickly today, particularly if you’re in the technology business, so be prepared to share how you find data about your customers and industry, as well as how you apply those findings to your business.



#4: Can you tell me(investor) a story about a customer using your product?

This should automatically be included in your pitch presentation anyway. The best pitches are the ones that open with a story about how your product or service is helping your customer. Use real names and be as specific as possible about the “pain” that customer had before they used your product and how you’ve alleviated or addressed that pain. At the end of your presentation, it’s the stories they will remember, so be sure to craft an excellent customer story.

#5: How do you know how much money you need and could you scale your business with less?

All investors, of course, want to know how much money you need to scale your business, but you had better know: (a) what you’re going to spend it on (also called “use of funds”) and (b) whether you could scale your business with less money. If you could scale, how much less funding and what would you be sacrificing as a result? It’s actually a very good idea to have multiple budgets and financial forecasts developed in your business plan so that you can address three different growth models for scaling your business.

#6: How can I(investor) connect with 5 customers who have used your product or service?

If investors find your pitch interesting, they will want to begin what’s called the due diligence process. During due diligence they will ask a lot about your customers: who they are, how you know who they are, how you find them, what they think of your product, how they are using it, whether that matches your usage intentions, how you interact with them, etc.

#7: What will your market look like in five years as a result of using your product or service?

This is another opportunity to tell the growth of your company through sharing a compelling story. Paint the picture of your customers’ future as a result of using your product or service for five years. This helps show the investors that you’re able to envision and think critically about how your product and your customer will evolve over time.



#8: What mistakes have you made thus far in this business and what have you learned?

You might be asked, “tell me about your biggest failure and what did you learn from it.” Either way, the investors expect business leaders to experience failure. Failure is part of the equation of growth and it’s where all of the great learnings come from.

Investors also ask, “I look forward to talking with you again in three months after you’ve secured those “beach head” customers, because I know you’re going to make mistakes and learn from them. So call me again when you’ve experienced those mistakes.” That is such a powerful statement to hear from a highly respected investor. It’s not just that they are giving you permission to fail, but they are giving you the confidence to get out there and call the CEOs of the companies you wanted to do business with. You know that if they said no, you could move on to the next CEO and keep going until you find one to bite.

#9: What if three or five years down the road we think you’re not the right person to continue running this company—how will you address that?

Often times—particularly with high-growth startups—the founding CEO does not remain the CEO who scales the company beyond the startup phase and investors ask this question to make sure you don’t have “founderitis.” Founderitis is when a founder’s ego gets in the way of the company’s growth and the founder refuses to (or makes it hard to) step down/step out of the position they hold. It’s really good to know what type of entrepreneur you are, as this will make it that much easier to know what you don’t know (another thing investors want to know you know). Knowing these categories gives you a vocabulary to discuss your strengths and your limitations.

It’s important to have people on your team with a combination of the following strengths and abilities. It’s also equally important for you to know where you fit into the mix, know what you don’t know, and be prepared to exit gracefully when the time comes—because it inevitably will.

  • The Idea Generator (You are the visionary, you come up with the great next big idea, your thoughts are not limited by what you hear from your peers, the media, the market, etc.)
  • The Innovator (You can write code, build things, sew things, invent things, and create something for others to sell. Innovators are typically not the same people who sell what they create.)
  • The Starter (You are great at creating a team from nothing and launching a new product or service. You know what it takes to write a solid business plan, implement and track that plan, research and respond to market trends, and surround yourself with people who are smarter than you.)
  • The Changer (You are not only great at being a change agent, but you thrive from doing it. These people make the best “turn-around CEOs” – those who enter an existing company, access the situation, recruit change ambassadors, create a new bold plan, make tough decisions [close a business, fire people, hire people, discontinue a product, etc.], and re-position a company for optimal growth – and even sometimes dissolution.)
  • The Grower (You are someone who loves “a diamond in the rough.” You see the potential in people, products and markets, and know whether they are worth investing time, money, and energy into improving. You typically don’t like starting new things; you prefer to take something good that someone else has started and turn it into something great. A talent desperately needed in most companies. This person can take a company from surviving to thriving.)
  • The Exiter (You are someone who knows what it takes to position a company or person for exit. That exit  is usually merging with another company, acquiring other companies, or taking a company public. This is a rare skill-set and these people are typically not the starters.)

#10: Have you ever been fired from a job? Tell us about it.

It’s one of those questions that makes people feel uncomfortable, but that’s not the intention of asking it. Rather, it’s to see how you respond to a challenging question, as well as learn more about some challenges you’ve experienced in previous jobs and how you communicate those challenges.

At the end of the day, investors want to invest in leaders who are movers, shakers, creators, and have the ability to inspire others.

We’d love to hear the atypical questions you’ve been asked by investors—please post them in the comments!

This article was originally published in bplans.com

Image credit: www.proyectoayuda.com.ar



8 Common business plan mistakes

What are the most common mistakes when writing a business plan? Here is a list of the ones to make sure you avoid.

What are the most common mistakes when writing a business plan? Here is a list of the ones to make sure you avoid. While including the necessary items in a business plan is important, you also want to make sure you don’t commit any of the following common business plan mistakes:

1. Putting it off

Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan.

Don’t wait to write your plan until you think you’ll have enough time. “I can’t plan. I’m too busy getting things done,” business people say. The busier you are, the more you need to plan. If you are always putting out fires, you should build firebreaks or a sprinkler system. You can lose the whole forest for paying too much attention to the individual burning trees.

2. Cash flow casualness

Most people think in terms of profits instead of cash. When you imagine a new business, you think of what it would cost to make the product, what you could sell it for, and what the profits per unit might be. We are trained to think of business as sales minus costs and expenses, which equal profits. Unfortunately, we don’t spend the profits in a business. We spend cash. So understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow table.

3. Idea inflation

Don’t overestimate the importance of the idea. You don’t need a great idea to start a business; you need time, money, perseverance, and common sense. Few successful businesses are based entirely on new ideas. A new idea is harder to sell than an existing one, because people don’t understand a new idea and they are often unsure if it will work.
You don’t need a great idea to start a business; you need time, money, perseverance, and common sense.

Plans don’t sell new business ideas to investors. People do. Investors invest in people, not ideas. The plan, though necessary, is only a way to present information. So make sure you’re ready to wow your prospective investors with your knowledge and leadership skills, and don’t expect your business idea—or the business plan you explain it in—to do the work for you.



4. Fear and dread

Doing a business plan isn’t as hard as you might think. You don’t have to write a doctoral thesis or a novel. There are good books to help, many advisors among the Small Business Development Centers (SBDCs), business schools, and there is software available to help you (such as LivePlan, and others).

5. Spongy, vague goals

Leave out the vague and the meaningless babble of business phrases (such as “being the best”) because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up. You need specific dates, management responsibilities, budgets, and milestones. Then you can follow up. No matter how well thought out or brilliantly presented, it means nothing unless it produces results.

6. One size fits all

Tailor your plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can also be detailed action plans, financial plans, marketing plans, and even personnel plans. They can be used to start a business, or just run a business better.

7. Diluted priorities

Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each.

8. “Hockey stick” shaped growth projections

Sales grow slowly at first, but then shoot up boldly with huge growth rates, as soon as “something” happens. Have projections that are conservative so you can defend them. When in doubt, be less optimistic.

Which business planning mistakes have you made while writing your business plan?

This article was originally published in bplans.com

Image credit: innerconfidence.com



Smarter funding: How to get the backing that best fits your startup

Here are some of the trends in the tech world that have impacted how startups raise money.

When going from $0-10 million in sales, most tech entrepreneurs think there’s only one path to raise growth capital for their startups: selling equity in their business. It’s a model that has been reinforced by several decades of tech companies feeding on a steady diet of equity money. This equity model creates a cycle for entrepreneurs: found, build, raise, grow, raise, grow, and then exit, hopefully at a top valuation (and without too much dilution or a down round, since that would wipe out your founder holdings).

Then after you exit, if you’re really successful, you either spend lots of time on your sailboat, dabble as an angel investor and startup guru, or you repeat the process by starting another company and going at it all over again.

But things have changed over the past decade, and entrepreneurs should adjust their mental framework about startup financing accordingly. Here are some of the trends in the tech world that have impacted how startups raise money:

  • Launching a product takes less capital than it used to. Especially if you have a SaaS offering, your cost of development, delivery, support, and updates cost so much less than the days of packaged software. Development is faster, and platforms like Salesforce and AWS don’t require on premises severs and tons of tools, etc.
  • Recurring revenue models take time to build, but over time the power of compounding is intense.
  • Niche markets are easily served, meaning you can build great businesses and dominate a niche market without much competition.
  • More financing options are available for tech companies than ever before – if you’re creative.

If you’re trying to raise money for your business, there are now many alternatives to VC funding, particularly for smaller tech companies. Let’s look at some of the options:

Revenue or royalty-based financing

RBF is something of a blend between bank debt and venture capital. A relatively new type of financing structure, with RBF the company “sells” a set percent of its future revenues to the investor in exchange for a capital investment. The simplest way to think about it is as a revenue share between the company and the investor.

  • Pros: This method of financing is more accessible than bank loans or venture capital, and the loan payments align with the success of the business as they are based on company revenue. Additionally, the company retains full ownership and control, and there are no personal guarantees or covenants required.
  • Cons: RBF can cost more than other types of financing such as bank loans, SBA loans, or crowdfunding.
  • Good for: Companies that have been in business for at least 6-12 months and have a recurring revenue stream and steady growth. Also good for companies looking for growth funding to scale sales, marketing or development efforts.

Customer pre-pays for long periods

There are many pros and cons to this approach, but overall it’s cheaper than equity and it means your customers are committed to you.

  • Pros: In addition to providing cash flow and working capital to cover operating expenses, pre-payments may drive higher customer retention rates.
  • Cons: It can be hard to convince customers to prepay. This method also requires discipline to correctly manage cash flow. If you offer both monthly and annual payment options, you need to make sure pricing is appropriately discounted. Keep in mind that a prepayment discount is usually implied, i.e. 20% off if you pay for our tool/service annually vs. monthly.
  • Good for: Companies with large customer bases and businesses with seasonality (think landscaping in seasonal climates).

Charge customers for non-recurring engineering (NRE) expenses

Charging customers for non-recurring engineering costs will pay for your dev team! But before you go that route, you need to make sure whatever you plan to develop is something many of your customers want. You don’t want to allow one big customer’s requirements to derail your value proposition and focus. And you need to make sure you get the customer and don’t turn them off – you’ll do this by being the best overall solution for them, addressing their needs best and forming strong relationships with them.

  • Pros: Since you have to pay for development costs anyway, this route helps cover some of that cost. This capital boost allows you to build the features customers are requesting into your product.
  • Cons: You have to make sure these requested features are functional and map to customer requests/expectations. Furthermore, if you don’t estimate the project timeline correctly, it can end up costing you more time and money. Sometimes big customers can derail your product roadmap/vision.
  • Good for: Companies with large, complex enterprise offerings and integrations, and highly integrated tech startups that need to build products connected to other platforms (AWS, Salesforce, Marketo, etc.).



Donation-based crowdfunding

No equity is involved here, so we’re talking donation-based platforms like Kickstarter and Indiegogo. Crowdfunding only works for certain products, but some businesses have raised tons of money doing this. This financing method is simply booking customer sales in advance of having a product. It’s the best type of capital you can receive from your customers and the best thing for your cap table, since there’s zero dilution.

  • Pros: Crowdfunding allows you to have customer sales locked in and front-loaded before you start production. It can also serve as a good way to test demand and provide good intel on target customers and market.
  • Cons: You’ll have the added pressure of a large number of pre-paid customers anxiously expecting their reward or product. Plus, your offering may be perceived as a beta product and signal you’re not ready for prime time or in it for the long haul.
  • Good for: Companies producing material goods or who are in early stages of testing their product and market.

Equity crowdfunding

To gain financing through equity crowdfunding, a large group of investors (aka the “crowd”) gives you money in exchange for shares. If you go down this path, you may end up with dozens or even hundreds of investors, and there are more reporting requirements for investor protection, so it’s important to know how it all works. Here’s a good Equity Crowdfunding 101 article for reference.

  • Pros: With an online offering page, you are able to quickly share the details of your deal. This method also gives you easy access to investors and their capital.
  • Cons: There are many new and changing regulations around this model. While the JOBS Act is designed to open this type of investing to everyone, it has set limits. For example, if you raise more than $500K you’ll be audited, and you can only raise $1M in any 12-month period (via non-accredited investors). There will also be cap table issues and concerns about what type of investors you are bringing on. Choosing to pursue this source of capital might mean losing the ability for your investors to also be advisors. Venture investors sometimes view crowdfunding negatively — they don’t want to be one of dozens or hundreds.
  • Good for: B2C and early stage startups with a Minimum Viable Product showing traction (# of customers/users, MAU, DAU). Companies that have real numbers and metrics that demonstrate growth.

Line of credit

Once your company has over ~$5M in sales, technology-focused banks such as Square 1 or Silicon Valley Bank can provide Accounts Receivable (AR) and Monthly Recurring Revenue (MRR) lines of credit. Types of covenants you may see for lines of credit are minimum net income thresholds, restrictions on additional debt, and minimal revenue growth. Then there are liquidity ratios, which mean you must have a certain amount of cash in the bank vs. how much is pulled on the line.

  • Pros: In addition to low interest rates of 6-8 percent, you’ll also have access to the capital even if you don’t use it right away.
  • Cons: You must give a personal guarantee. Banks will usually require a financial covenant to secure the loan, so that means your house, or other equitable property, etc.
  • Good For: Companies with lots of accounts receivables and cyclical payment cycles, and companies with tangible assets.



As you review different financing options, it’s important to make sure that the options you consider map to your business goals. Here are three key questions to think through:

1. Are you sure you want to sell your company in next ~5 years? What if you really love what you’re doing and want to run the business for a long time? If that’s the case, equity probably isn’t the best funding option, since the first letter in “ROI” is “R”, and equity investors expect big returns – usually 10x or more. Successful businesses that never give a return to investors are a bad investment. It’s not fair to equity investors and can create a lot of tension. It’s hard to buy people out later, especially if you’re successful, and it means you’ll almost certainly be trading one equity investor for another equity investor.

2. Do you want to give up control? Once you take on equity investors, it’s no longer just you and your cofounder making decisions. You’ll have a whole new audience you need to please all the time, in addition to communicating with your employees and customers. Some investors will want to provide input on strategic direction and decisions. And you’ll likely get a new boss – a board of directors.

3. Are you really sure you want to “go big or go home”? What if you just want to build and run a great business? Receiving VC money is like having a rocket strapped on your back – either you’ll make it to the moon or you’ll blow up trying. While your chance of making $100M goes up when you receive VC money, so does your chance of making little to no money.

Just to be clear: I’m not against VCs or taking VC money. In fact, I’ve been a VC myself. There are many amazing companies that use VC money to grow and succeed. However, I do think if you’re looking at funding choices for your startup, you should go in armed with as much information as possible, because many times there may be a better option out there for your business.

This article was originally published in venturebeat.com



Forget unicorns – Investors are looking for ‘cockroach’ startups now

2015 was the year of the “unicorn” – private technology-driven startups that reached a valuation of $1 billion or more.
But tech and startup investment is going to be defined by a very different beast in 2016 – the cockroach.

2015 was the year of the “unicorn” – private technology-driven startups that reached a valuation of $1 billion or more.
But tech and startup investment is going to be defined by a very different beast in 2016 – the cockroach.

“Everything is about resiliency now to weather the storm,” says Tim McSweeney, a director at technology-focused merchant bank Restoration Partners. “Unicorn, it’s a mythical beast, whereas a cockroach, it can survive a nuclear war.”

A unicorn is characterised by superfast growth, fuelled by VC money. They’re not profitable but the idea is that the business will reach “scale” first, before concentrating on making a money once it’s won plenty of market share. Uber is a prime example.

Startups that joined the unicorn club last year include TransferWise, Lyft, Zenefits, SoFi, Hellofresh, Prosper, Oscar, and Farfetch, according to venture capital data tracker CB Insights. There were many more.

A cockroach, by contrast, is a business that builds slowly and steadily from the get go, keeping a close eye on revenues and profits. Spending is kept in check so that it can weather any funding storm.

McSweeney says: “For the investment side, it’s minimizing the risk. Let’s find a company that can survive a nuclear war and then come back to fight another day or pivot and do something different – it has the right team, the right customer base etc.”

McSweeney mentioned the concept of a cockroach company to me at the launch of the Virtual Technology Cluster (VTC) Group recently in London and jumped on the phone later on to discuss it.

Restoration Partners doesn’t invest itself but offers banking services to business-focused technology startups. As such, McSweeney and his colleagues have a good view of the investment space.

McSweeney didn’t coin the term cockroach and isn’t the first to highlight it. The investment theory is an old one and Flickr founder Caterina Fake penned a blogpost on the idea last September.

Unicorns are going out of fashion for many investors.



But the idea of the cockroach vs. unicorn captures a widespread mood in the investment community right now. At a recent conference in London on fintech – one of the hottest subsectors of technology that boasts plenty of unicorns – I found investors and bankers worried about “froth” in the market.
McSweeney says: “I think the unicorn element is coming to an end anyway and the bubble in the market is just sloping off.”

McSweeney’s boss, Restoration Partners’ founder Ken Olisa, told me much the same thing. At the VTC Group launch, he said: “There’s a unicorn industry and they can play around with each other but all it will do is end in tears, because it’s not about the customer and it’s not about adding value to anything.”

So why are investors looking for cockroaches rather than unicorns now? The answer is funding.

2015 was characterised by free and easy funding for startups, thanks to record low-interest rates driving more and more cash into venture capital and poor stock market performance encouraging the likes of Fidelity and BlackRock to try their hand at VC investing.

But 2016 got off to a very different start, with venture capital funding drying up amid wobbles for the global economy.

This has revealed problems in the business models of many unicorns and other fast-growing tech businesses, most of which rely on easy VC money to fund their growth. Businesses like Twitter and Birchbox have all been making layoffs and Fortune’s Dan Primack recently noted that both private equity and venture capital performance declined in the first quarter of 2016 for the first time in years. Zenefits, one of the 2015 inductees to the unicorn club, has imploded pretty spectacularly.

McSweeney says: “In terms of chasing growth and growth and growth – it’s not about sustainability. It’s just trying to grow as quickly as you can without looking at the fundamentals of the house. That’s what I feel a unicorn is – chase growth so investors give you money. It’s kind of a reinforcing cycle.

“Google didn’t growth hack, they just provided a service to the internet and build a business around it.”

He adds: “Look at Powa. It’s the bubble – I wouldn’t say it’s bursting, but it’s sloping downwards. There’s frothiness.”

London-based Powa Technologies raised at least $225 million in debt and equity over the last three years and at one point claimed to be worth $2.7 billion. But the payments business went bust in February, with debts of $16.4 million and just $250,000 in the bank.

McSweeney says: “I still think there’s capital out there but the application of it is more judicious. People are looking for smarter businesses to apply their capital to.”

This article was originally published in Business Insider

Image credit: Reuters/Andrew Kelly



How to raise money for your startup?

Raising money is simple but not easy. This guide illustrates one way how to raise money for a startup, especially for first-time entrepreneurs.

Raising money is simple but not easy. This guide illustrates one way how to raise money for a startup, especially for first-time entrepreneurs. We have seen quite a few entrepreneurs go from nothing to a funded company. This infographic is a generalization of their experience. Let us know if you have any questions about it in the comments.

Few More Tips How To Raise Money

When it comes to funding, there is one thing that can increase your chance of getting funded astronomically – traction. Yet, founders often struggle to get traction and hope that investor money will help them get it. This problem can be solved if you start lean, test your product and and gather meaningful feedback from your customers.

Use that feedback to modify your product. After you get traction, you are certain to get interest from investors. How much traction? Compare yourself to your competitors at the moment they got funding and use that as a benchmark.

Preventing people from raising money successfully, the other myth is that you can raise money before you build anything. Even if you are not an engineer, you can build a prototype of your product. You can do it in WordPress, another content management system (CMS), you can learn to code the basics. If you do not go out of your way to build your own product, why should other people risk in joining you?



Finally, when you are going to raise money, have the investors feel good about what you are going to spend their money on – not marketing, not development, not business development, but scaling.

This post was written by Anna Vital and originally published in Funders And Founders.

Image credit: www.naeyc.org

How to write a Business Plan: A step-by-step template

Writing a business plan doesn’t have to be an intimidating task, but it does require foresight, honesty, and plenty of research. Here is an outline and some smart tips to help get you started.

Writing a business plan doesn’t have to be an intimidating task, but it does require foresight, honesty, and plenty of research. Here is an outline and some smart tips to help get you started.

Creating a business plan is the first and most crucial step to building a successful company.

A business plan is important because it communicates to everyone involved in the organization what the goals are, and how management plans to get there.

The parts that make up a business plan are straightforward. Here’s a step-by-step breakdown to get you started with your business plan, along with a few expert tips on how to attract investors.

1. Describe your startup

The first step is to simply describe the business you want to build. During the process, it’s important to be honest about the obstacles you’re likely to face.

Starbird suggests including a breakdown of the target market and customers. You should also be clear about the factors offering a competitive edge.

Be careful not to have any blinders on when it comes to your product or service. People spend a lot of time focusing on the features that make them unique without taking the time to translate that into a value proposition.

Do diligent research on what your market is, and how to communicate with customers accordingly. The most successful investors are looking for an idea that is going to have a clear and understandable market potential.

2. Have a thorough plan: Document all aspects of your company

As the founder, you need to be concerned about all parts of the plan. That means including any licensing agreements, or your location strategy, for example.

It’s especially important to know and understand your numbers. The number one reason firms go under is inadequate cash flow. If you don’t know what’s going on in that area, you’re going to be in big trouble.



3. Make sure the plan is modifiable for different audiences

Different sections of your business plan will be more important depending on your audience. Investors, for instance, will want to see your financial projections, whereas employees might be more concerned with the organizational structure of your company.

The SBA recommends that you project that status of your company for between three and five years into the future, though it’s a good idea to outline your annual goals, too. Keep in mind that the further ahead you look, the less accurate your conclusions are going to be.

A five-year horizon is fine, but a thorough business plan looks beyond that [up to 10 years], with the recognition that some of the forecasts would be of decreasing accuracy.

4. Include details to put you over the edge

When writing the market analysis, it’s a good idea to include any information about external growth trends, and why one company might have the market share. Pricing power – meaning how consumer demand would be affected if your company shifted its prices – is one detail that often gets excluded from business plans, but which can help put you over the edge.

It’s also important to keep your expectations realistic and honest: The biggest mistake entrepreneurs can make when writing a business plan is to be overly optimistic with sales and future cost estimates.

5. Remember why you care

Your business plan should reflect not only your financial goals, but also your values, and those of the community you’re working to build.



Key checklist that Askme considers before investing in any startup

Piyush Pankaj, VP Corporate Finance and M&A at Askme Group, speaks about what are the key checklist that the company considers before investing in a company.

Piyush Pankaj, VP Corporate Finance and M&A at Askme Group, speaks about what are the key checklist that the company considers before investing in a company.

Askme, majorly owned by Malaysia’s Astro Holdings, invested a whooping $20 million in Indian online market place Mebelkart last year, in turn for a stake in the company. The company also acquired online grocery marketplace BestAtLowest.com for $10 million in 2015.

The key factors checked before a partnership or funding

Piyush said that the two main criteria that the group seeks are the synergy opportunities the startup has with the Askme Group and entrepreneurial skills of the team or the founder. Once these two main requisites are checked, then the Askme looks for other qualities like market opportunity and others.

When a startup begins operations, they have very limited resources. So the first thing we do is to keep the resources so that they can rapidly grow. We focus on how the company can further grow using the Askme ecosystem and how Askme’s gross users can generate revenue for the startup.

One of the challenges that we face is to integrate Askme’s philosophy and culture in the startup and at the same time create an environment where the startup continues to develop and innovate fresh ideas with complete freedom.

When a founder approaches us they should keep in mind whether they will be able to create any synergies with the Askme Group. We have the ability to incubate in our area — the online ecommerce, hyperlocal and penetration into the SMEs and bigger markets. So whoever comes with their idea, they should keep in mind if the idea matches our ecosystem and of possible synergies. The founders should have a clear idea as to how they can help grow our business or how they themselves could grow their startup using our platform.



What made Askme to invest in Mebelkart?

The idea of Mebelkart really appealed to us, as the concept of online furniture business has a lot of growth opportunities in India. The online business mostly caters to the metro cities. What Askme can provide to them is penetration into tier 2 and 3 cities.

Our main idea was to help Mebelkart rapidly grow using the Askme ecosystem. We also looked at the promoters, who come from a good IIT background, and have successfully created a sound technology platform which is very scalable. We have also seen a great amount of hunger in their team for success which made this decision come easy.

When Mebelkart approached us they had done their research on how we can help them and what are the opportunities that we could provide.

Ecommerce space can benefit from Chinese investments

The whole ecommerce industry is still at a nascent stage and penetration into the smaller cities is not up to the mark. The ecommerce industry still requires a lot of investment to help it penetrate into smaller cities. So with the Chinese investments coming and the new FDI norms, it is going to help the ecommerce industry, especially the startups.

Currently the whole ecommerce space is led by mobile and apparel categories, all other categories continue to remain at a very nascent stage. So wherever there are more hyperlocal businesses coming to the play, those startups are going to get benefitted because the market is moving towards these new distribution models.  Right now in the grocery domain, a lot of categories can penetrate into the hyperlocal model. The closer one gets to the consumer the better it is.

Lower funding in 2016 should improve quality

Money is drying up because everyone today is looking for profitability. On an industry basis, I think it’s good for the overall space as people will now stop giving several of those discounts, which the government also has tried to control via FDI rules. This will make a semblance for every player as it will make it a levelled play for everyone rather than giving the upper hand to those who were funded previously. It will help clear off the euphoria and let real businesses to emerge. People will focus on quality rather than quantity.

This article was originally published in Entrepreneur.com



Investments in Indian startups are back and how!

Compared with just 114 deals during the three months ended December 2015, there were 344 investments during January-March 2016. As many as 388 startups raised funds in the first three months of 2016.

Here is some cheer for startups this year after funding slowed down significantly in the last quarter of 2015. According to a report by venture capital and startup research firm Xeler, Indian startups raised $1.73 billion during January-March 2016.

Compared with just 114 deals during the three months ended December 2015, there were 344 investments during January-March 2016. As many as 388 startups raised funds in the first three months of 2016.

The largest funding rounds during the first three months of 2016 were by online travel venture Ibibo ($250 million), e-commerce major Snapdeal ($200 million), online grocery retailer Big Basket ($150 million), online automobile classified portal Cartrade.com ($145 million) and online retailer Shopclues ($75 million).



“On an average, we have seen at least 4 startup fundings per day between January to march 2016,” Xeler said in a report. Read full report here.

eCommerce, SaaS and health tech have emerged as the top performing investment segements this quarter with a cumulative investment of over USD 810mn across 103 startups that accounts for 47% of the cumulative deal value.

Image credit: www.livemint.com



Entrepreneurship & Venture Capital to launch $50Mn early-stage investment fund for Indian startups

EVC is launching its maiden India focused $50 million fund that will look to back enterprise software, internet and mobile-focused startups.

US Based Investor Entrepreneurship & Venture Capital (EVC) to launch early-stage investment fund for Indian Startups. EVC is launching its maiden India focused $50 million fund that will look to back enterprise software, internet and mobile-focused startups.

Serial entrepreneur and investor Anjli Jain, will lead this venture firm & will primarily focus on startups operating in the education sector, and will also look at backing early-stage ventures in the internet of things, ad-tech, ecommerce, wearables and gaming segments.

“India has emerged as one of the most assuring entrepreneurial landscapes globally, and we have launched the fund looking at opportunities that the country’s ecosystem has to offer, and the gap that we can bridge by supporting new businesses,” said Anjli Jain, managing partner of EVC.



The fund will typically invest $100,000-$5 million in startups, while its accelerator could invest $5,000-$100,000 in exchange for equity in the ventures.

“We look forward to working with some passionate entrepreneurs and bring forth ground-breaking ideas alive,” Jain said, adding that the venture capital firm is considering registering the fund under markets regulator Securities and Exchange Board’s Alternative Investment Fund regulations.

The venture capital firm also operates an accelerator programme in Gurgaon that provides physical and virtual co-working space and operational mentorship to ventures. It operates a second accelerator in Cleveland, Ohio.

Prior to launching the fund, India-born, Columbia University educated Jain had founded and invested in Kryptos Mobile, a cloudbased, self-service mobile app development and publishing platform, LookingGlass Platform, a provider of an integrated, software-as-a-service enterprise apps, portal and content management systems, and BlackbeltHelp, an information technology helpdesk and student services provider, among others.

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When is the best time to raise money for your startup?

Before you read this, you should be aware that I am an entrepreneur who has never raised money from VCs. Two of my three companies were bought while we were still closely held. In the third, we were unable to raise money and eventually got acquired before we could raise institutional money. Therefore, if you are looking for advice on how and when to raise money from VCs, I am less qualified than hundreds, perhaps thousands of entrepreneurs who have raised funds from VCs in India.

That said, there were times in my entrepreneurial career when I asked my mentors when is the best time to raise money. Some said that the best time is when you do not need it, and that made a lot of sense at the time. On the other hand, some said I should not raise money unless I needed it, and that made sense as well. However, some of the people who gave me the first advice were the same as the ones who gave me the second advice. And both times, they made sense. There are times I have said the former to an entrepreneur seeking my advice and the latter to another entrepreneur, or to the same one at a different time.

How can two exactly opposite things make sense? Welcome to the world of entrepreneurship. Here’s how!
We are currently in a time when actively raising money is going to be perceived as a sign of weakness. Liquidity is low, markets are volatile, there is a backlash of the hyper-funding of 2014-15, the pendulum is swinging the other way and the momentum is in the opposite direction. It is taking longer to raise money and you have to part with a larger portion of your company for the same money as the same time last year. Trends suggest it might get worse. If you know money is not as cheap anymore, why would you expose yourself to that environment unless you absolutely need the money? And if it is true that you do, investors would obviously have leverage over you and are likely to dictate terms. Therefore, do not raise money unless you really need it. If you need it, force yourself to come up with a plan in which you don’t. And if you still need it, be prepared to dilute.



When markets were up, up and away in 2014-15, there was a lot of new money and liquidity floating around. Tech companies were getting listed, stocks were flying, and money from entrepreneurs and investors was flowing back into the ecosystem. Investments were chasing entrepreneurs. Money was chasing ideas. Lesser so now. It is more likely that investors over-allocated last year and are waiting to sell off some shares at the right price, than investors who are still chasing deals with a fear of missing out on the next big thing. If you are one of the rare startups that is on fire right now and you are being called upon by multiple investors competing to invest in you, it might be worth raising money at your own terms. Because if you do, it would be a bigger competitive advantage than the same time last year. Besides, today’s non-event of raising money quickly would mean you are over-achieving the target and saving time and effort of a planned event in the future. Therefore, raise money when you do not need it.

Hopefully, this context helps understand how two exactly opposite things can both make sense.

Most entrepreneurs reading this would fall into neither category above. Most startups will neither be desperate to raise money nor will they have a bidding war escalating in their parking lot. Then what should their fundraising strategy be? For what it’s worth, my answer is don’t raise money right now. Build your product, build your team, build your user base, build you revenue pipeline, build whatever it is that is most important to your startup right now.

Last year was about putting your mouth where the money was. This is the year of putting your money where your mouth is.

Author: Kashyap Deorah

Kashyap Deorah is the author of recently released book – The Golden Tap, the inside story of hyper-funded Indian startups. Kashyap is a serial entrepreneur who has spent the last 15 years in India and Silicon Valley. During this time he has started and sold three companies. He is an angel investor in over 20 companies in India and Silicon Valley. Deorah founded Chalo, a payments app which was acquired by OpenTable in 2013. Prior to that he founded Chaupaati, a phone commerce marketplace, sold to Future Group in 2010.





The 3 worst negotiation mistakes young entrepreneurs make, and how to avoid them

Here are the top three reasons you’re failing as a negotiator, and how to overcome them.

When you’re an entrepreneur, almost everything is a negotiation. You negotiate with everyone from clients to partners and even employees sometimes. Negotiation is a fundamental part of the entrepreneurial experience. Unfortunately, many entrepreneurs fall victim to mistakes that make them incredibly poor negotiators.

Fortunately, it’s never too late to identify these mistakes and change direction. Here are the top three reasons you’re failing as a negotiator, and how to overcome them.

You’re greedy

Nothing can derail a negotiation more quickly than greed. If one party pushes for too much or is too aggressive, the relationships between those involved grows sour, and the negotiation can go south. There’s no such thing as “not personal, strictly business.” All business is personal, and emotions run high. It’s only natural for people to overestimate the value of their product, position, or contribution in a negotiation. It takes a special skill to recognize greedy behavior and stop it before it gets out of control.

This style of negotiation can be difficult to master, because no matter how hard you try, emotions inevitably influence your actions. The temptation to squeeze a partner for a better deal, or emerge “victorious” in the negotiation can be strong, and it takes a solid sense of self-awareness and humility to resist.

You don’t understand the type of negotiation you’re conducting

There are two types of negotiations that leaders encounter on a frequent basis. The first is what described as the asset negotiation, which is generally a one-time event resulting in clear winners and losers. A good example of this type of negotiation is the sale of an asset like a piece of equipment. In this situation, the seller wants to maximize the price paid at all costs and doesn’t really care about the long-term implications of the deal. After all, once the deal is done you generally won’t have to work with the buyer again. The negotiators are incentivized to view the situation as a zero-sum game where someone wins and someone loses, which naturally leads to a more aggressive exchange.

The second type of negotiation – when both parties involved have to maintain a working relationship long after the negotiation ends — is more complex and thus, involves a more sophisticated approach. It’s important to remember that intangibles, such as trust, respect and admiration have tremendous value in business and must be factored into the negotiation strategy and defended at all costs.



You gamble with things you can’t afford to lose

When you play hardball with another party, you must always recognize that they can simply walk away. This can be tricky when it comes to strategic relationships, because there’s often significant cost and pain associated with a potential dissolution. However, there is a point in most negotiations where the pain of dissolution is preferable to an inequitable outcome. If a relationship is truly central to your success as an organization, you must temper your desire to play hardball or risk losing everything.

When it comes to negotiation, entrepreneurs are often their own worst enemies. Ego-driven mistakes take their toll and make the process more painful than it has to be. Remember that successful negotiations require three things. First, there is simply no room for greedy behavior in successful negotiations. Second, both parties must recognize the nature of the the negotiation itself—if you have to work together going forward, the negotiation cannot be a zero-sum game. And finally, maintaining perspective on what you are and aren’t willing to part with in the negotiation is invaluable. All too often people get too comfortable in a relationship and overplay their hand in negotiations. When this happens, they run the risk of losing everything, and that is the worst outcome of all.

This article was originally published in Forbes

Image credit: www.kbic.com



7 ways to build a successful startup revenue model

A well thought out and credible revenue model connects the dots for potential investors.

Developing a revenue model for your business is perhaps the best step way to get and keep your startup financially healthy. A well thought out and credible revenue model connects the dots for potential investors.

How do you go about creating a solid revenue model? First, you need to figure out what revenues you can expect to generate. Even if you’re still at the pre-revenue stage, you should build a financial model that includes your revenue estimates. Financial forecasting can be done in one of two ways: projecting your numbers from the top-down or building your projections from the bottom-up.

Top-down forecasting definitely won’t generate realistic figures, but is still important to show investors when you are raising money. Top down forecasting starts with estimating total market size and then gauging the size of your target niche within that market. From there, you estimate the share you will capture at a ballpark figure for your revenue potential.

The better approach is to do a bottom-up projection. To do this, first decide which indicators will have the greatest impact on your revenue over the next year or so. Next, figure out how much you need to spend to reach your revenue and development targets and what your key revenue drivers are. This will give you a sense of how fast you can scale incorporating levels of staffing and upcoming milestones.

Here are the seven key considerations for creating an effective model:

1. Find the right fit for startup and expertise.

You may have a strong technology model with business-savvy engineers on staff. You may also know what research and development stage you are in and where you are heading. Use that knowledge to determine which revenue model works best for you.

Your revenue projections might need to be linear or exponential depending on your type of business. You might need to build to scale to prove your revenue model or first create a smaller model to reduce capital risk and then scale. The best model is the one that supports your development efforts.

2. Create a framework for expressing value

What differentiates your products and services from the competition? Your revenue model should communicate your unique value proposition. For instance, offering a distinctive service that people will sign up for is a unique a selling point.



3. Build a revenue model that helps you find the right investors.

You can strengthen your pitch by making development choices that show investors that you are worth investing in. Be strategic: focus your attention on finding investors who are a good cultural fit and will be in it for the long haul. Pick investors who have the patience to wait in order to realize long-term returns.

4. Limit projections to a reasonable timeframe.

Investors will ask you when they can expect their investment to start paying off. They will want to know what your short and long-term milestones are. They will also want to know when you expect to become cash flow positive.

It’s tempting to project revenues many years out, but much like the weather: go too far out and your predictions become unreliable. Keep your projections to a 12 to 24 month timeframe.

5. Your revenue model is not static.

Over time, your model is likely to change even if your general approach remains the same. And the choice of model is up to you. As a service-based company, for instance, you could offer subscriptions or on a one to one basis. Don’t paint yourself into a corner by sticking to just one setup. If the model no longer reflects your business realities, adjust it and update your forecast accordingly.

6. Determine the critical variables that drive your business.

The variables that matter most for your company will change along with the stage of your business. But regardless of stage, look for the variables that most impact your revenue. Make sure that you define discrete variables so you can address them individually. Assess the inputs and research baseline values for each variable so you can track performance over time. A great way to isolate variables and view how each affect revenue is to chart them out on a sensitivity graph. This will show how changes affect them and resulting impact on your revenue.

7. Mitigate for variables.

Risk management starts with identifying and understanding your key risk factors so you can address them. Don’t try to sweep things under the rug — investors will discover your secrets anyway. Mitigating for variables increases transparency, builds confidence, and enhances understanding — both for you and for your investors.

There are lots of options when it comes to revenue models. But not choosing isn’t one of them. It’s a precondition for startup success.

Image credit: www.bothsidesofthetable.com



Five keys that every investor looks for in a start-up

Here are a handful of the things that most investors look for in promising startups. Which do you find most valuable, and which do you believe are irrelevant?

As an entrepreneur who’s looking to attract funding, it’s imperative that you understand what investors are looking for in start-ups. By getting a clear idea of what investors want to see, you can better frame your pitches, and guide your conversations to encourage positive outcomes.

The Importance of a Formula

Ask any investor what they look for in start-ups with high growth potential, and they’ll begin to rattle off a list of trademarks that they search for and red flags that they avoid. While they may not refer to their process as a formula, that’s essentially what it is. If you want to be a successful start-up investor, you must follow a formula. That’s the only way to keep your emotions in check, and make sound decisions that are likely to deliver high returns.

There’s no such thing as a perfect formula–and most undergo frequent changes and tweaks–but having a process will help you to identify profitable opportunities that others might miss.

Investing in an unproven business is a lot like betting on a sports team to win. You can study the trends, and look at historical data points, but you’re always taking some kind of a risk. If you want to learn about investing analytics, study sports handicappers.

As an investor, the takeaway is simple: don’t listen to what everyone else tells you. Do your own research, develop your own formula, and put your money where you believe it’ll deliver the highest return. Your investing formula is the only thing that matters.



Five Keys That Investors Look For

With that said, you need to identify important keys, and give appropriate weight to the different factors that you deem valuable. In no particular order, here are a handful of the things that most investors look for in promising start-ups. Which do you find most valuable, and which do you believe are irrelevant?

Strength of the Founding Team

There are certain elements of a start-up that can be fixed and others that are unchangeable. The makeup of the founding team falls under the latter category. You can’t force change upon a startup’s founder. They either have what it takes to be successful, or they don’t. An entrepreneur may have all of the knowledge necessary to launch a venture, but do they have the passion to navigate through difficult seasons? A founding team may be capable of creating colorful presentations and well-worded briefs, but do they really understand what’s happening at a foundational level?

As an investor, one of the first things you need to consider is the founding team. Look at their history, ability to lead, incentive to succeed, and overall versatility. If you don’t feel good about the founding team, you can’t be confident in the future of the business.

Clear and Unsolved Pain Point

The next thing that investors turn their attention to is the pain point. Any time you’re studying a new start-up, ask yourself three questions in regards to the value offering:

  • Does the product solve a palpable pain point in the marketplace?
  • Is that pain point widespread and relevant?
  • Are there currently any other solutions?

If you can answer “yes” to the first two questions and “no” to the last one, then there’s a clear, unsolved pain point. This is promising, but it doesn’t mean that you’ve found a start-up worthy of an investment. You’ll now need to turn your attention to the actual product.

Sales Momentum and Sample Data

Investors want to be sure that a start-up will be successful before investing money in the venture. One of the best ways to do this is by studying past performance. While past performance isn’t always indicative of future success, it’s generally a good indicator.

You can look at any number of metrics to determine success, but analyzing sales momentum in the form of data is the most objective method of studying success. If the start-up has been in business for any amount of time, they should be able to supply you with this data.

Long Term Business Model

A start-up can have the right people, a palpable pain point, and some sales momentum, but you’re investing in its future growth. What happened in the past does very little to deliver a return on your end. That’s why you need to study the start-up’s business model, and consider its feasibility.

Does the business have the right structure? Is the business plan accounting for future competition? What are the three, five, and ten-year goals? If you want to feel confident in the long term growth of the business, you need answers to questions like these.

Fair Valuation

As angel investor Basil Peter points out, “Over-valuation is one of the most common structural problems angel investors encounter.” If you over-value a start-up when you present an investment, you’ll find yourself swimming upstream for years to come. The negative repercussions of over-valuing are hard to overcome.

While a founding team obviously wants to attract as much capital as possible without giving up more equity than they feel comfortable forking over, the reality is that the investor often does the entrepreneur a favor by correcting the valuation. They may not like the fact that they’re getting less capital on the front end, but it’ll save a lot of headaches down the road. With that being said, make sure that you only invest when the valuation is fair for all parties.

This article was originally published in Inc.com



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