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Public sources of financing your startup

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Learn about the lesser known & seldom tapped Public sources of financing for your Start-up/growth companies.

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Public sources of financing your startup

  1. 1. Public sources of financing your Start-Up in India 20th April 2018Seemant Shrivastav www.attentiocs.com
  2. 2. Agenda • P2P Lending • Crowd Funding • SME IPO Platform www.attentiocs.com
  3. 3. P2P LENDING An innovative way of financing start-ups in India www.attentiocs.com
  4. 4. “Peer-to-peer (P2P)” lending is a method of debt financing that enables individuals to borrow and lend money without the use of an official financial institution as an intermediary. www.attentiocs.com WHAT IS P2P LENDING? *Investopedia
  5. 5. PEERS BUSINESS PEOPLE SMALL INVESTORS LENDERS WORKING CAPITAL HOME IMPROVEMENT PERSONAL LOANS BORROWERS P2P LENDING www.attentiocs.com
  6. 6. WHEN TO GO FOR P2P LENDING?? Too small for Angel Investors Not worth Bank’s time Too large for Credit Card P2P www.attentiocs.com WHEN YOUR FUNDING NEEDS ARE..
  7. 7. RBI GUIDELINES FOR BORROWERS Can borrow Maximum Rs.10 Lacs Identity & Income proof Loan Amount Source: Rbi.org Detail KYC Disclosure Maximum Rs.50,000 (from same lender) Have to maintain Escrow A/C www.attentiocs.com
  8. 8. MAJOR P2P OPERATORS www.attentiocs.com
  9. 9. 29.2% 10.6% 8.1% 7.9% 6.6% 6.1% 5.6% 5.3% 20.6% Business Funding Family Event Home Improvement Debt Consolidation Appliance Purchase Land Purchase Wedding Business Working Capital Others LOAN BOOK OF FAIRCENT As on 7 April 2018 Tenure 12 to 36 months Rate 12-28% Delay Penalty Rs 50 per lender Non Payment Rs 500 per legal notice Source: Faircent www.attentiocs.com
  10. 10. REGISTER KYC VERIFY LISTING DISBURSE PROCESS IN P2P AGREEMENT www.attentiocs.com
  11. 11. No Stake DilutionTransparent System No collateral needed Faster loan process Multi purpose loans PROS OF P2P Easy application process www.attentiocs.com
  12. 12. High Interest Rates No Guarantee of Funding High Loan Processing Fees Small Loan Amount CONS OF P2P Default can affect future borrowing prospect www.attentiocs.com
  13. 13. www.attentiocs.com
  14. 14. What is Crowdfunding? “Crowdfunding” is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet. www.attentiocs.com * www.merriam-webster.com.
  15. 15. TYPES OF CROWDFUNDING DONATION CROWDFUNDING REWARDS CROWDFUNDING EQUITY CROWDFUNDING www.attentiocs.com
  16. 16. e.g. www.milaap.org Raised Rs 317.54 cr www.attentiocs.com
  17. 17. DONATION CROWDFUNDING REWARDS CROWDFUNDING EQUITY CROWDFUNDING www.attentiocs.com TYPES OF CROWDFUNDING
  18. 18. MAJOR REWARDS CROWDFUNDING OPERATORS www.attentiocs.com
  19. 19. Accept projects in Film, Music, Dance, Theatre, Art, Design, Photography, Comics and Publishing. Should have a prototype or Work in Progress to show Rs 3,500/- Registration Rs 10,000/- Social Media 10% Commission on Funding 60 Days to Raise Funds e.g. WISHBERRY 100% Funding Required Investor get rewarded with credits and exclusive access to the projects www.attentiocs.com
  20. 20. A FEW CAMPAIGNS www.attentiocs.com
  21. 21. DONATION CROWDFUNDING REWARDS CROWDFUNDING EQUITY CROWDFUNDING www.attentiocs.com TYPES OF CROWDFUNDING
  22. 22. Company Cannot Publicly Advertise for Private Placement No more than 200 investors a year THE LEGAL FRAMEWORK (PRIVATE PLACEMENTS) www.attentiocs.com *Section 42 of The Companies Act, 2013
  23. 23. 149 Deals 3400 Angels US$56 mn Raised angel funding from Anupam Mittal, CEO of People Group, Varsha Rao (Airbnb, LivingSocial), Surojit Chatterjee (Google), Nirav Choksi (HHC Holdings) May 2017 Source : Inc42 raised an undisclosed amount of funding in an angel round led by Social Alpha – Aug 2017 raised an undisclosed amount in funding led by Utsav Somani Oct 2014 secured upto $1 Mn in its angel round of funding led by Ajay Relan May 2017 wwwattentiocs..com e.g. Let’s Venture
  24. 24. e.g.1crowd 1-2 years of existence Value Proposition is established Capital to expand customer base Revenue Generating Total Applications 500 Selected 50 Funded 10 50 Mentors & Advisors 400 angel investors 1.5-2 cr investment per transaction Co-invest in every transaction www.attentiocs.com
  25. 25. PROBABLE SEBI NORMS Exempting crowdfunding activities from the Companies Act’s private placement norms that require a company to make a public offer if the number of investors is 200 or more in a year. Set minimum threshold of stake purchases and at the same time ensure no single investor (through these platforms) owns more than 25% of the investee firm Information regarding the companies and the investors will be available only to participants who get a Sebi approval to participate in crowdfunding Relax disclosure norms so that information is shared only with investors and not the public at large. Source : Inc42 www.attentiocs.com
  26. 26. Get Visiblity& Publicity Easy Information Management No contacts required On Demand Capital Right Valuation & Discovery PROS OF CROWDFUNDING www.attentiocs.com
  27. 27. Max 200 offers No Guarantee of Funding Rejection may hamper Future Funding prospects High Brokerage CONS OF CROWDFUNDING www.attentiocs.com
  28. 28. SME-IPO Take your Venture Public www.attentiocs.com
  29. 29. REGULATORY BODY The ICDR Regulations, Chapter XB PLATFORMS BSE BSE-SME NSE EMERGE SEBI www.attentiocs.com
  30. 30. FIRMS Money Raised (Cr) Average Amt Raised (Cr) 46 303 6.59 80 810 10.13 148 2155 14.56 2015-16 2016-17 2017-18 www.attentiocs.com SME IPO Performance Source : ET
  31. 31. Max post issue capital Rs. 25 Crores Minimum number of members for issue of IPO is 50 and after listing, no minimum members required to be continued Market making is mandatory for 3 years Issue must be fully underwritten (merchant bankers to underwrite 15% in their own account Minimum application and lot sizes must be of Rs.1,00,000 and in multiple thereof SEBI REGULATIONS www.attentiocs.com * CHAPTER XB of SEBI ICDR Regulations
  32. 32. KEY REQUIREMENTS AND ELIGIBILITY NORMS www.attentiocs.com Criteria ➢Post Issue Paid up Capital ➢Net worth ➢Net Tangible Assets ➢Track Record BSE-SME • At least Rs. 3 Cr • At least Rs. 3 Cr • At least Rs. 3 Cr • Dist. Profit in 2 of 3 PY or NW > Rs. 5 Cr NSE-Emerge • Not more than Rs. 25 cr • Has to be positive • No Provision • Track record of 3 years of either Co/Promoter/Firm & EBITDA positive in 2 of 3 PY. NW should be positive
  33. 33. KEY REQUIREMENTS AND ELIGIBILITY NORMS www.attentiocs.com Criteria ➢Insolvency & Court proceedings ➢Disciplinary action BSE-SME • Co should not have been ref to IBC and no court proceedings for winding up • No Disciplinary action in last 3 yrs NSE-Emerge • Co should not have been ref to IBC and no court proceedings for winding up • No Disciplinary action in last 3 yrs
  34. 34. Particulars Requirements Website Mandatory to have one Dematerialization of securities Mandatory to facilitate trading in DEMAT securities and enter into an agreement with both the depositories Registration on SCORES SCORES (Sebi Complaints Register) registration is mandatory for Co Site Verification and promotes’ interview Promoters to attend to interview with Listing Advisory Committee Trading lot size • Minimum depth shall be Rs 1,00,000/- • Investors holding with < Rs 1,00,000/- shall be allowed to offer their holding to Market Maker in one lot. OTHER REQUIREMENTS: www.attentiocs.com
  35. 35. Particulars Requirements Underwriting The issues shall be 100% underwritten and Merchant Bankers shall underwrite 15% in their own account. Change in promoters’ holding Should not be any change in the promoters holding in the company in preceding 1 year from date of filing the application & upto 3 years post IPO Market making Mandatory for min 3 years Public Shareholding Min. 25% Min. 50 investors (No post-listing continuous requirement) www.attentiocs.com OTHER REQUIREMENTS:
  36. 36. ROAD TO AN IPO Start planning at least 1-2 years in advance Set Corporate Governance in place Raise Bridge rounds if required Find a Merchant Banker, Get all documents ready show profitability and revenues before IPO www.attentiocs.com
  37. 37. PROCEDURE FOR IPO MB Files Documents with RoC Intimate SME Exchanges with IPO Date IPO OpensClose IPO & List on SME Exchange SEBI & SME Exchanges Verify & Approve MB Prepares Offer Document & Due Diligence Report Appoint Merchant Banker(MB) Board Approval on the Documents MB Files Documents with SEBI and SME Exchanges www.attentiocs.com
  38. 38. • 4 year old digital entertainment start-up • Silly Monks aggregates, buys and distributes content, apart from also having a role in digital promotions for brands, event management and music with the focus currently on South India. IPO Issue Price = Rs 120. Listed at a 20% premium of Rs 144. The IPO raised Rs 15.12 cr and was oversubscribed 17 times Source: The News Minute www.attentiocs.com Case Study: Silly monks Rs. Mn Silly Monks FY 17 FY 16 Total Sales 29.99 20.13 EBITDA 6.12 2.92 EBITDA % 20% 15%
  39. 39. Silly Monks : Share price movement since listing Source: Moneycontrol www.attentiocs.com Case Study: Silly monks
  40. 40. • Vertoz Advertising is a pragmatic advertising company • Vertoz currently has direct and associate presence in over 200 countries, 15,000 publishers on the platform and over 6,000 active campaigns have been done for customers with 500 million active audiences. Source : TheHinduBusinessLine IPO Issue Price = Rs 108. Listed at a 20% premium of Rs 129.6 The IPO raised Rs 17.11 cr and was oversubscribed 4.24 times www.attentiocs.com Case Study: Vertoz Advertising Rs. Mn Vertoz FY 17 FY 16 Total Sales 106.18 57.68 EBITDA 30.05 4.38 EBITDA % 28% 8%
  41. 41. Source : Moneycontrol www.attentiocs.com Case Study: Vertoz Advertising Vertoz Advertising: Share price movement since listing
  42. 42. Get Visiblity & Publicity Incentive for employees & VC Expanded investor base Low Debt Burden Right Valuation & Discovery PROS OF SME-IPO www.attentiocs.com
  43. 43. Continuous scrutiny by investor/analysts Defaults/non compliance can finish off promoter prospects Heavy Compliance requirements High Cost of capital CONS OF SME-IPO www.attentiocs.com
  44. 44. P2P Crowdfunding SME IPO Purpose Short term loan Angel Funding Raise Public investments, exit for current investors When Short term requirement and have no collateral 1st round for angel investors When the company is in the high growth phase and positive EBITDA Type of Funding Debt Debt/Equity Equity Amount Max 10 Lakh Upto Rs 14 cr ($2 mn) Upto 25 cr Fees Rs 500 to Rs 1000 to register 1-5% processing Fees Not disclosed for Equity Crowdfunding (approx. 3-5% estimated) Rs 50,000 to register Annual Fees of Max Rs 45,000 Speed Within 30 days Depending on interest from Angels. Generally 3-5 months Preparation starts from 1-2 years in advance www.attentiocs.com TO SUM UP
  45. 45. THANK YOU! QUESTIONS? www.attentiocs.com Reach me at: seemant@attentiocs.com

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