Fundenture webinar series by FundTQ. It is a series to share learning from venture capitalists, angel networks and other investors. Our speakers were two different venture capitalist Amit Singal from Fluid Ventures and Sushil Sharma from Marwari Catalysts. Both shared their opinion on positive aspects of startup ecosystem. Aspects being discussed: 

1) Choose Investors wisely 

2) Right time to kickstart venture 

3) What investors look in a pitch 

4) Advice to aspiring founders 

5) Criteria and USP of investments by Fluid Venture and Marwari Catalysts 

Are you going wary thinking about how technology intervention could help in fund raising? What level of technology is expected to raise capital from Investors?  In the upcoming #masterclass, Gireendra Kasmalkar highlights how technology is changing the startup ecosystem. Gireendra heads #PenthalonVentures and is a founder of #Ideas to Impact, one of its

Deep Tech startups in blockchain, Artificial Intelligence and mobility are quickly changing the face of Indian economy. These startups are helping  in image makeover of Indian startup ecosystem. Ashwin Raguraman, founder of #BharatInnovationFund in conversation with Aanchal Malhotra at FundTQ talks about his journey with investing in deep tech companies in India, his experience and level of transformation in tech startups.  

Bharat Innovation fund is a $100mn fund backed by CIIE (Centre for Innovation, Incubation and Entrepreneurship) at Indian Institute of Management Ahmedabad. It looks  to invest in deep tech startups in India.

Are you as a consultant providing a right direction to startups?

The investment banking exercise is tedious and has long gestation life. The closest to the founders are their consultants and investment bankers. We have onus to deal with startups more responsibly and not waste time and efforts of investors and ourselves. Consultants need to be strategy partners for clients than merely try getting funds for the company. Most of the consultants take up an assignment and start deliberating on fancy pitchbooks and valuation models. This needs a transformation. Do a homework and lot of research on the business model, meet the management atleast 2-3 times before taking up an assignment, make them aware of their success ratio of getting funds, make the founders realize the business model lacks uniqueness (no client would like to listen to this, however trust me they would still be happy to get insights and push themselves to make it different). Do you challenge the founders? As consultants, try taking up this useful exercise. Below are relevant observations and justification.

Founder’s / Management’s full time role and involvement in the Company

In case it’s a part time business for the founders and there are no stakes involved for them to grow and flourish the business. 

Looking from Investor’s Eye: The owner has to be hungry; needs to eat, drink and sleep to take business to next level. Put your bet on the company or idea which is striving to make the business model profitable. In case the founders merely talk about “When can we get funds?” are the ones you need to filter out.

Monetization of business

Cash burn businesses used to be the focus of the investors couple of months ago. The investors today are more learned and cautious to invest merely based on cash burn ratio. 

Looking from Investor’s Eye: As Consultant, segregate and analyse the cash burn based on client acquisition (this is plus), extensive marketing (this is minus as startups do not need expensive marketing, rather word of mouth and social media marketing will be good to start with).

Background research about the business model

When management is deep inside the business models, it is assumed that they would have researched about the business in depth. 

Looking from Investor’s Eye: Investors are keen to compare businesses so to analyze the scalability and replicability. An in-depth research of business model, revenue streams, international best practices, domestic peer group is a must. Founders need to be aware of pin to plane about all these aspects apart from evaluating need and necessity of the business model.

Technology intervention

How manual is the idea. Would it bring a disruption. Does founder belong to same / similar line of business? 

Looking from Investor’s Eye: In case, the founders are not related, they might need a strategy partner or board of advisors from similar line of business. After which one might explore technology intervention which could possibly transform the process. 

Vision of the management

Spend 1-2 hours to understand the vision of the management. The shortcut is before meeting ask them the vision to be written in 5 sentences with maximum 6-7 words. 

Looking from Investor’s Eye: The clarity, scalability and reliability in the vision statement is must for investors.

International best practices and practical adoption of the business in the country where it is located

How international peer group is working, are their best practices which could be replicable in your current business.

Looking from Investor’s Eye: Investors are largely driven by precedence as they are able to compare and envision the future.

Uniqueness in the idea

What is the problem statement, how unique is the idea. 

Looking from Investor’s Eye: In case, investors feel there are ample such business models, they might uprightly reject the idea. There might be an instance where the business idea is unique however, the way it is positioned it does not appear TO LOOK UNIQUE. 

Collateral and stakes

Ask your clients what assets they or their family own? Would they like to mortgage those assets and get funding. 

Looking from Investor’s Eye: Investors want to see promoters’ skin in the game. In case they are reluctant to invest their own money, why would you expect a 3rd party equity investor to take a risk. Investors like to see the confidence of founder in the idea.

Last is would you as consultant invest in the business leaving your fee aside

This shall serve as a hypothetical and practical analysis – Would you as investment bankers and consultants pledge your money and advisory fee to make it successful? If the answer is yes, then strive hard to make it successful.

Most founders today start business out of lure of getting high valuations, to get name and fame, to be independent, to showcase the world and relatives that they are doing something different. However, the truth is far from reality. The valuation is merely an illusion, its just a number.

One suggestion to founders: Don’t start burning cash and make it big by thinking equity money is free money. There are no free lunches. Empathize with the money you borrow. Consultants need to provide genuine and straight forward advice to clients than providing them false hope of deal closure.