4 Ways to gain attention from VCs

An entrepreneur should build a strong case first by getting to know someone from the company and then approaching the VC in their area of interest.

Each day venture capitalists and investors receive over hundreds of cold emails and meeting requests from start-up founders and small time entrepreneurs. It is difficult for VCs to process and select the start-up they want to fund that way. Instead, an entrepreneur should build a strong case first by getting to know someone from the company and then approaching the VC in their area of interest.

In the following ways, you can look out to attract more VCs for funding:

1. Innovative solution to a problem

Focusing on the problem and devising a solution is the key to getting more investors for your venture. In this era of cut-throat competition, simply coming up with a new idea isn’t sufficient. The idea needs to be worked on and presented in a complete manner with business suggestions, marketing tactics and target group mentioned in a well-compiled presentation. VCs will choose the most differentiated and rounded appeal which they find will enhance their chances of making profits as well. A revamped version of a done and dusted idea will instantly be rejected by the VC.

For instance, OYO rooms was a completely different and innovative idea which is why they have huge investors like GreenOaks, Sequoia Capital etc.

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

2. Assumptions must be challenged on a continuous basis

Start-ups often stick to the original plan they have devised which is why they don’t grow with time. However, the basic thesis must be challenged from time to time as the markets are dynamic and constantly evolving. Assumptions must be proven or eliminated through basic research methods for a more rounded understanding of the business.
Once you are clear with all the factors related to your business, pitching to a VC becomes easier for you and the VC is also clear about what he investing in.



3. Think beyond the horizon and act

If you have a unique insight and are able to present it well in front of the VC, chances are that he will invest in your business. VCs don’t want to invest in an area beyond their zone or one that they think is not feasible. A VC doesn’t want to invest in an idea which is not innovative either. Hence, one needs to have a clear vision and come up with unconventional methods of making it work in the future. Strategic investors are more likely to invest in ventures that have an articulated vision of what they want to become in the future.

Related Post: How to raise money for your startup?

4. Build a strong team of dedicated individuals

Founders need to encourage significant contributions to the start-up from people from different backgrounds. You must have a mission that is big enough to source human resource for different fields. Finding an entrepreneurial crew that wishes to guide their wider team as well as customers, markets and investors to a better future with conviction and humility is a time-taking but rewarding process.

A VC’s research will tell him about your dedicated team and your strong leadership which will definitely be a huge contributory factor for him to invest because strong leadership skills and a set vision are the keys to a success.

If you follow these rules, you will definitely find a great VC to invest in your company. We wish you all the best on finding a VC and on your start-up.

Image Credit: americaschoicecredit.com



Fundraising 101: Checklist for Entrepreneurs

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

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

But don’t worry.

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

  • Do your homework.

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



  • Write your proposals for pitching to investors.

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

  • Build relationships.

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

  • Reap the benefits.

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

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



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



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