Why, When & Who Should Raise Money - A Presentation By Sanjay Mehta

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CEO and Founder of MAIA Intelligence, Sanjay Mehta recently gave a presentation at one of 10,000 Start-ups' pitch sessions to talk about funding and how entrepreneurs should go about getting it and when would be the right time for them.

There's a lot of interesting insight in this presentation that tells you everything you need to know about raising funds.

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Why, When & Who Should Raise Money - A Presentation By Sanjay Mehta

  1. 1. BAG FUNDING OR BEG FUNDING • How can I get funding from investors ? • It is the first question any entrepreneur will focus on, assumes that every successful business was funded by an investor. Try & build an asset which is visibly valuable to the market • Question should be • Is my venture fundable ? Does my business require growth capital? How can I bootstrap my company? • Entrepreneur typical steps for funding • Build a business plan, Do market estimates, Go out to investor to raise money without realising that always money comes in with strings attached • Not all investments or business created are equal. The reality is that most ventures do not qualify for venture capital and never will. Referencing is fine but do not benchmark on funding. Direct comparison done by entrepreneur only misleads. • Funding for founders salary at seed stage is a big red flag. (Professionals) • Growth capital need has to be justified with right use of investors money 2
  2. 2. FINDING MR. RIGHT – INVESTOR DATING • The entrepreneurs characteristics have always been a hard-charging, always optimistic, and full of emotions personalities. • Understand that investor sits above your market due to his investments, involvement in his portfolio companies & connections. Investor pushes you with new thinking & ideas. Apply the incremental learning in your fund raising pitch • Do not show your desperation for funding. Do not crib & be negative on fund raising process & time taken by investors. Entrepreneur is always busy thinking if the investor will select him rather than they thinking about is this investor right for his business. There scenarios where investors are competing to invest. • Getting financing for your start-up is rarely easy, but if you approach the wrong investor, you can make it even harder than it has to be. It is a jungle out there – might is right • Investor is the biggest threat to the start-up, managing their expectations & relationship will be utmost important besides the business. Competitors punch you in the jaw, but investors can have you by the balls. 3
  3. 3. DECODING ANGEL INVESTOR • Angel Investor is supposedly a rich person. He is a high net worth individual, with enough fortunes to live his life of leisure without doing any work if he chooses not to. • Angel investor provides capital for small entrepreneurs but are not in money lending or financing business. • Angels risk their money in people, team & idea which are fragile in nature. Hence it is called as riskiest asset class. • They treat this form of investment as speculative but find process of investment intellectually stimulating. • Angels are individuals who are with good successful background, their names evokes trust in minds of customer or future investors. • Angel invests money for several reasons but the first & foremost reason is that they believe in that idea, project or team passion that will deliver ROI. • Most angel investors typically like to invest in a group form through a network. They feel that cumulative assessment on the deal makes a prudent investment with reduced risks. 4
  4. 4. RIGHT PRICE TO WRITE PAYOUT • Price is what a seller asks & buyer agrees to pay. This simple definition is complex to arrive at. • Majority of Start-up deals fails on Valuation issues. Psychologically seed stages entrepreneurs tend ask for very high valuations. • Start-up valuations are difficult as there is no specific rationale behind it. It is like measuring the intangible probable. What is the worth of Start-up? Valuations at seed stage is an educated guess. • Entrepreneurs go on a self ego ride which stops them to lower their expectations on valuations & work with investors. • Valuations are important for investors as it forms the basis of ROI • The seed investment cardinal rule for start-up is based on its capital needs for the idea to reach its first milestone to ensure next round of funding. • There is a genuine concern on valuation for angel investors where start-ups have a high burn rate models. 5
  5. 5. SPEED OR BLEED • “Slow & Steady wins the race” • Aligning to momentum keeps an investor alive & kicking. In other words, being slow means being useless. The new saying is “Fast & Furious wins the race”. • Raising funds is expensive both in time & money. Both resource are scarce with entrepreneur and abundant with investors • Frequency of investor communication engagement is more important in early stage than the duration of communication. • Start-ups which offer prospects quick trial, pilot & testing will seize the opportunity to grab Investor attention. We are in a speed era where if you can visualize it, you can execute it. • Fundraising is a two-way street so speed of engagement from investor side indicates the interest levels in the deal. It’s a mutual exchange in which, if things go well, it’s a win-win for both parties. Make sure to demonstrate right sense of urgency and selectivity. 6
  6. 6. PAINT FUNDING PITCH AS CONVERSATIONS • What is your story – It is not just about your great technology product built but everything that makes the Start-up valuable. • Pitch, when painted with clarity, is crisp, it gets the deserving attention. Articulating vision about the possible future is essential for raising funds • Investors are humans, not machines, so emotions overshadow rationality with right storytelling. Pitching is all about planning to win the fight of now. • Many times, the biggest mistake entrepreneur makes is take his own capacity for granted, as infinite. Your greatest asset can be expressing, exposing your own vulnerabilities while doing the storytelling. Do not overpromise • What is the use of money? Don’t let a lack of preparation and practice keep you from getting the growth capital. • Funding Pitch is like a big blank canvas to paint 7
  7. 7. NETWORKING NOTWORKING • Mindless networking is done by entrepreneurs by merely collecting a bunch of visiting cards. Most entrepreneurs do not have any defined networking goals when connecting with investors. • There is big myth that entrepreneurs think the more they will network, the more investor attention they will gain. • If selection of event is wrong then it’s a waste of time. Connecting to everyone and anyone is useless. Mere connecting and engaging your social connection without any productive goal is mindless networking at work. • Networking is about listening too. Blowing your own trumpet will shoo away possible connect instantly. • Entrepreneurs ignore the asset value of the event host. They do not even bother to acknowledge the host. • One-on-one meeting is only the beginning of relationship. Invest in people relationships for long-term basis. Remember, people remember people. 8
  8. 8. PITCH RIGHT, BRIGHT WITH SPOTLIGHT • Funding pitch is a strategic decision which needs to have a well laid out planning with right goals in mind. • Every funding meet underlying purpose is to build a investment velocity in the market for your Start-up. • To get to that reputation of a maverick, entrepreneurs need to learn how to go beyond product & talk about benefits & impact; experience product has on the customers. • A confused investor will always defer its investment. • Investor will invest in venture where pitch articulates its value proposition appropriately. In the pitch investor sees, understands & then takes decision to engage for investing. • Give enough exciting ammunition to investors while pitching for funds, that word of mouth spreads in their network. • You may be treated to a rough quizzing, forced to tell your story over and over. And often getting rejected. Keep calm & smile. • Finally tell a great story 9
  9. 9. “ IT’S ALL ABOUT MONEY HONEY” 10
  10. 10. Apply to NASSCOM 10,000 Start-ups on www.10000startups.com and connect with Investors, Mentors and Enterprises. BUILDING A TECH STARTUP IN INDIA? Principal Sponsor: Industry Sponsors: Microsoft Ventures ///nasscomforstartups ///10000startups///nasscomstartups ///nasscomstartups ///10000startups
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