Approaching a VC? Here is a checklist

By   Sikta Samantaray

Bangalore: Seeing the growth of Indian software market, Ravi Varma started its own software venture in 2005, but could not go long and had to shut company's door in 2007, as he failed to raise fund from venture capitalists (VCs).

Currently working as a Vice President - Strategy in an IT firm, Varma graduated from IIM, Bangalore in 2004. After running the business for two years without any financial support, Ravi thought that his company had all the right credentials needed by venture capitalists, but when he pitched his ideas to around 10 VCs, he realized that his idea is premature and cannot be funded by any venture firm. 

Not only Varma, there are several such start-up entrepreneurs, who are in a race to raise VC funding. So, to help these emerging entrepreneurs, SiliconIndia talked to some of the VCs to know the important factors that can help these entrepreneurs to improve their chances of getting funded. Here are some important thoughts being given by VCs:

Do you have a Team to lead?

A company may have a big business idea, but working individually may not help it to achieve the objective. It is the team which may help one's idea to convert into a profitable product or service. Anurakt Jain, Analyst, Draper Fisher Jurvetson India said, "VCs invest in a team, so sell the team. A start-up should know well about their team members before pitching to VCs."

Pitch

The process of raising fund can be one of the more physically and emotionally draining parts of starting a business. It can go on for weeks or months, taking away focus from business. As an entrepreneur seeking funding, one need to demonstrate that he/she is very clear about his/her idea and how he/she would build an economically viable business around it. Rajesh Vakil, Head, Siemens Venture Capital, India said, "Put together a good investor presentation that covers all aspects of the business plan. A weak presentation can put off VCs easily." Speaking on the similar lines, Jain said, "The first 5-10 minutes of pitch to VCs are very crucial - get VCs on the hook. Describe the company in one-two lines - that would be helpful in running the business as well."

What is your USP?

While explaining about the product or service, a company need to avoid using jargon and adjectives. VCs say that startups should explain the product or service in simple language and emphasize its competitive edge or USP. Manav Sethi, COO BigMaps said, "The basic objective of a start-up should be to show that there is a need of this product or service in the market."

Business Plan

For any start-up, the purpose of presenting a business plan should be to show the potential to investors that if they invest in its business. Vakil said that a business plan must have a very effective executive summary, and in that summary a company should highlight the market, the product or service, management team, stage of the startup, location, market, market size, business, business model, capital structure, capital required and exit options. He also asked these startups to critically evaluate the business plan and do a market opportunity analysis to determine scalability of business. "Ask honestly "Will you fund this if it was someone else's business plan," added he.

Customer Base

Before presenting to VCs, a company needs to evaluate the customer business case, benefits and payback. Also, it needs to know in details about its existing customers as well as its potential customers. Any company can’t have any better evidence than customers to prove its claims about the marketability of its product/service.

A company needs to understand that it is in the market to sell a product, its business idea, which can't be sold unless its customers are satisfied with the product, which they plan to buy. Raghu Batta, Partner, Ojas Ventures said that startups should always make something or sell a service that people want.

 Revenue Model

To make it easier for VCs to understand the financial plan, a company need to do a proper thought out strategy that may also help in company's growth plans. Vakil says that preparing a sound financial plan is very necessary for long run, and also a company needs to keep an eye on the total funding requirement over subsequent rounds till scale up and its impact on investor's ROI.

He also advices companies to analyze its present and future margins in detail, bearing in mind the potential impact of competition. The monetary projection should also include the sale prices or fee charging structures of your product or service.

Marketing Plan

Having everything, but no marketing plan can force any start-up to taste the failure soon. The objective of marketing plan should be to convince the VCs that the market for its product/service can be developed and penetrated. Also, the marketing plan should have all the details including pricing, distribution and promotion strategy for the product or service. All these details must be supported by verifiable data. 

Apart from these few thoughts, VCs feel that in India first time entrepreneurs are unclear in their own heads about what their idea is about. In fact, many are even not able to articulate it in an easily understood manner either. Adding to this, these VCs also think that startups should raise the fund at right time. Vakil said, "VC funding taken prematurely can be very expensive capital, and company may end up giving up its ownership to the VC." He also thinks that startups should never think of raising fund if the business is not scalable. It will probably waste time unsuccessfully trying to raise finance. The real danger however is that, incase it succeeds; it does not only lose an opportunity to run a lifestyle business that is personally lucrative but is stuck with an unhappy investor. 

This article was originally posted at SiliconIndia.

Weblink: http://www.siliconindia.com/shownews/Approaching_a_VC_Here_is_a_checklist-nid-66252.html/1

Reverse the chase game

This post might sound weird to some and 'General Gyaan' to others, but I guess some would like it and I am happy with that proportion. Like they say - it's all common sense once shared.

I have been through some very basic challenges of the start-up life and 'm waiting for many others. Infact, I have been associated with lots of start-ups and I noticed one thing in common with most of them. All of them were chasing some one - some were chasing investors, others were chasing customers /clients and some else were chasing money. I think focusing on the chase makes it a bit easier but there is still a better way to ensure the end result and that is don't chase et al. What would you do then? 

Try to focus on longer term perspective of the company. A catch here - most of the start-ups don't have a long term goal and that prevents them from gaining a focus for the company. So, what would you do if you stop chasing - 'Improve yourself till the point people start chasing you - invest in your brand, your people, your product and market it well.'

Here the question comes back to me on the very basic needs of mankind - roti, kapda, makaan .. we can't get these things with the general gyaan and I totally accept the logic, but so does some sensible people around. If you invest your time and money in creating a valuable product and if you have the right focus, then people start getting associated with you. Get investors as part of the team who share your vision, your approach and who stick with you for a longer term. Get people on board who trust you, who trust your approach towards work and your working style, than just the product or solution. Product changes with time, target market changes with time, infact entire ball game in the real world changes with time. For eg. - scooters market is wiped out and bikes are ruling the two-wheeler market now or Toyota is ruling the automobile industry and GM is history now. Did investors of Bajaj Scooter or Toyota plan all that while investing? May be, may be not.

The very basic point I want to share is to stop investing time and energy in the chase and start investing in people, solution and brand. In fact, if investors and customers are not coming for your product then there is something fundamentally wrong with your solution. Think over the same, improve and get them to chase you ... it's not a cake walk, but I guess we are not here for a cake walk.

One more point before I close - it's one out of the many ingredients to create a successful enterprise and not everything. Every successful enterprise today had good people to back them up, some share of luck and immense hard work. It's always company values that make it successful, so stop chasing the world.. Just improve 'n improve and wait for the day when they chase you..The game gets reversed

If this all is weird to you, then I am not writing this blog post for you.

Push It Back!

A lot of times we feel stuck at some point in the start-up and then it comes; it seems like we are being pushed by the entire world, but the point is that the world has always remained like that. Really! It has always been like that... It always pushes down the losers. It always had! Don't you remember pushing down the people that you considered losers? That's how it works. And to add to that, people keep pushing more people towards the losers' side who are at the boundary. It sounds like 'Not me story', but trust me we all go through this point of worthlessness someday or the other. When pushed down or aside by all over, the best chance to survive is when you push back, and when you push back hard. It's all in our brains and some people can play mind games really well.

So, how do we know when we are being pushed down or pushed aside? When we start noticing that the work is getting stuck at some point and no calls are being replied even when you try the most, or when negative thoughts are thrown at you when you need them least (though this is like challenging the idea of a critique, but who cares for a critique who pushes you towards the valley of death). Isn't life complex enough to add the words of a critique when it's least needed? When people start coming out with negative thoughts and stories to make you feel like a loser, or when they make you feel that you were so much better before – trust me, it's a mind game or a mental trap. So, when we know that we are being vulnerable for mental traps, how to push it back?

First of all, we all need the right mentors in life and most of us have them as someone, but not having that in life makes you vulnerable for a slicing, and that's the worst when you are at the low. So first thing is to identify a good mentor, a big brother, close friend someone who can hear you out, learn your perspective and then add to your ideas in a constructive way. Secondly, loosen the grip a little and sound positive to even the worst of critiques since it would take them by surprise too, like one of my friend says their life is too pathetic already; you just need to show them a mirror. Anyways, third is to sit with your team and set realistic time lines and identify key bottlenecks, and start keeping track of the bottlenecks. Last but not the least, get your finances right, since no start-up is successful unless people trust you.

Before I close this one I wish all of you happy hunting in the mad world before you get hunted,  but it's worth fighting back the world as you are... your attitude reflects it all – push it back!

It's not Rocket Science, Trust me!

I wrote a blog post back in 2007 (blog post) where I discussed what's the right time to dive in for a start-up, and to tell you the truth very frankly - no one would have this answer. I didn't have the answer when I was happy with my job and I don't have the answer when I am working with my start-up. You can hear 1000 stories, feel motivated and jump for it - I won't call you stupid, in fact I would help you with whatever you lack and praise you for whatever you have good. On the other hand, you can take 30 years building the perfect ship to sail, and yet you can't board it - I won't call you stupid, I would help you find that courage.

You can look out for the best teammates in the world and yet you can fail - that's the fact of the world that you need to live with everyday, but it's the battle that matters and not the outcome, and yeah fighting with the best knights cuts down the odds of failure. On the other hand, you might have no idea at all when you start and yet you can be the role model of tomorrow. So what is it that differentiates one guy from another, or let's say one start-up from other. What is the golden rule that differentiates the two sides?

People name it as team, idea, market, investors etc., while these all are pillars of a successful enterprise, but are these all? Wait, we haven't yet mentioned passion, drive, intensity, enthusiasm and all other qualities, but are these all? Is this a must to have list or good to have list, since some people say passion comes with idea and market or let's say money, and some say idea and team are secondary, all you need is passion. I don't know the order and I don't want to discuss it, since this list is endless. Did I write leadership, focus, companionship, vision - oh my god! this list is actually endless. :)

Let me put my answer in my simple language for you. I don't claim that I am a genius or Mr. Right of this topic, but this is what I believe, and it works for me, than remembering the endless list (often used by successful entrepreneurs to put their success in words). I rarely write philosophical blogs these days, since it's hard to prove them or quantify them. If you don't find my answer helpful, I apologize in advance.

I believe that we are guided by a power, actually a belief, something that we don't have control over,something way too powerful to be put in a list . I think what differentiates a successful entrepreneur is the power of believing the power of trust. We just need to trust the higher cause ,of the organization, trust the leader, trust our instincts and that's trust, which actually brings in enthusiasm, focus, drive and intensity in the workforce. In fact, that's trust which pushes us to create the best products for our clients., a trust we don't want to break It's the trust and belief of the leaders of the company that drives the course of the company. The power of believing and trust helps in creating a bonding between people, ideas, problems and solutions. Investors, customers, employees are all humans and they all need to trust you to make you successful. For others to trust you, you need to trust yourself and your thoughts, your instincts. Rest all will fall in place.Trust me!

One more thought before I close this blog post, I think there is nothing to win or lose in the world, there is an awesome journey that goes on forever. If you love being part of the cruise, be part of it, love it, enjoy it, live it, else  simply jump off. There are thousand others awesome things worth doing than being an entrepreneur who doesn't love what he/she does.. Would love your comments on this one, really, because I trust that feedback works :)

A little later dude!

Funny it may sound, but I got inspired to write this blog post while talking to a friend about start-ups, and I realized that its perception seems to work as an oasis in people's life. Well lately, I started noticing that while discussing ideas and dreams, or say being philosophical, people share their dream of doing something on their own terms or having their own company where they can work on a problem as they choose and add to some thing as they please. There seems a different tone to the discussion (almost always) like a very different note in music, a talk coming right from the roots, a dream that comes right from the heart - thirst of an intellectual. It almost sounds like an assurance coming from within that I want to work on a problem as I please and I would work on it some day. Most of these talks end with the tag line - "Some day but not today... a little later dude!"

I used the word oasis in the last paragraph, since it does the same task of keeping the thirst of entrepreneurship alive amongst potential entrepreneurs and encourages them to keep moving towards it. Only difference being that it exists for real, but remains an oasis for >95% of us. All of us want to reach it but are stuck with lots of problems, questions and confusions. It's not important when we start or how we start, it's important that we know we want to start some day, even if it means we know - "A little later dude!"

We learn lot of lessons along the paths of our lives and become better prepared to fulfill our dreams in future. Well it might not be the right time for some of us to start the journey but it always help to ensure that we collect the right stones along the path.

• Remain in touch with start-ups and entrepreneurs to understand the problems they face every day and to appreciate the start-up life better
  
• Save money for the dependents and rainy days, as start-up life is full of surprises
  
• Start noticing market trends by tracking new ideas and businesses to understand the future market better
• Last but not the least - make good friends who would help you cruise the start-up life

But whatever happens, never ever give up on the thought of reaching oasis, even if it means to have a cup of coffee and say - "A little later dude"