6. Sources of Capital
Seed Funds
- Funds focused on early
stage (IDG, Sequioa,
SAIF)
- Smaller Funds (India
Internet, Snapdeal, India
Internet Fund, Wipro etc)
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Individual Angel
Investors
- Professional
Contacts
- Member of
Networks (IAN,
MA, HA etc)
- Members of
LetsVenture!
Friends and Family
Incubators and Accelerators
9. Ideation
If the world is cold,
make it your
business
to build fires
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10. POC / Beta Launched
Fast Market testing of a product or feature to get
qualitative or quantitate feedback
Find your early adopters / customers
Be Lean
Focus on providing value to your customer
Use validated Learnings / Pivots and iterations to
move towards PM fit
Borrow or Steal
Ideally boot strap!
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11. Revenue / Traction – Moving towards Product Market Fit
Product/Market fit means being in a good market with a product that can satisfy
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that market.
And you can always feel
product/market fit when it's happening
The customers are buying the product
just as fast as you can make it -- or
usage is growing just as fast as you can
add more servers. Revenues are
building, team is growing. Reporters
are calling because they've heard
about your hot new thing and they
want to talk to you about it. You start
getting awards and VC interest!
You can always feel when
product/market fit isn't happening.
The customers aren't quite getting
value out of the product, word of
mouth isn't spreading, usage isn't
growing that fast, press reviews are
kind of "blah", the sales cycle takes
too long, and lots of deals never
close.
12. Rachleff’s Corollary of Startup Success
The only thing that matters is
getting to product/market fit.
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13. Fund Raise Stages
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Ideation
POC / Beta
Launched
Revenues /
Traction
Scale / Growth
Finding Problem / Solution Fit
Finding Product
(Service) / Market Fit
Finding Business
Model Fit
Bootstrapped/ Friend
and Family
Angel, Seed Funds ->
VC Rounds (A,B,..)
Revenue / Traction
Time
15. Valuation
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Your business is worth what somebody is willing to pay for it..
Valuation at Early Stage
more of an
Art than Science
16. Definitions
Pre-Money = the value of your company now
Post-Money = the value of your company after the investor put the money in
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Ask – How much money should I raise?
17. Valuing an Early Stage Startup
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Supply and Demand
Your Industry / Sector
Other Factors specific to Your Business!
Finally, Understand ‘Equity Planning’
factors
18. Supply and Demand
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• Supply and Demand
Patented technology
Exclusive market partners
Improved Traction
How many more Angels / VC’s willing to invest?
• Before you start Fund raise, make sure your business is
perceived as ‘new’, ‘unique’, ‘exciting’
• Are you a ‘Me-to’, ‘commodity business’ ?
19. Industry / Sector Dynamics
• Each Industry / Sector has unique Valuation
Dynamics
Study valuations of similar startups in your
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space
Study exits that happened in this space
(acquihires, M&A)
• Study EBITDA (earnings before interest, tax,
depreciation, and amortization)
• Understand growth metrics in your industry
Understand growth metrics
20. Other factors Specific to Your Business!
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• Stage of the startup
• Will you survive the next 5 years?
• Cost to grow the business (Customer Acquisition cost,
Technology costs)
• Scalability of the business (global versus local play)
• Founding Team Profile
• Advisory Board / Mentors Involved
Equity is the most expensive instrument to finance your startup
Customer Money is Cheapest Money!
21. Finally …
• Try and get term sheets from multiple investors
How many investors are willing to invest?
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• How desperate is the Entrepreneur?
• Think a valuation that gives your Investors 10x!
• Founder Vesting
• Understand the details of a Term Sheet (some parameters
could impact the value of your startup!)
Liquidation Preference (could tilt outcomes on exit)
Dilution (and anti dilution)
Option Pool (on pre-money or post money?)
22. Term Sheets
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1. Liquidation Preference (could tilt outcomes on exit)
Participating or Non Participating:
Non Participating (as per LV) – Investor gets to take back his money or
participate pro-rata.
Participating: Takes his money out and then participates in the round
2. Anti dilution:
Taken money at x valuation. If there is a down round, additional shares will be
given to investors (full rachet) – broad based weighted average
compensation.
3. Option Pool (on pre-money or post money?)
4. Board Composition
Look for 1 director,
1 observer (not recognized by Indian law) but a backup if board director may
not be available
Understand the details
of a Term Sheet
(some parameters could impact
the value of your startup!)
23. WHAT DO ANGEL
INVESTORS LOOK FOR?
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24. Team
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1. Passion, Purpose and Integrity
People don’t buy what you do but Why you do
it!
2. Chemistry (with Investors and among the
founders)
3. Ability to execute
4. Coachability
5. Complementary skills
6. Skin in the game
7. Think BIG!
25. Product and Market
• What problem are you trying to solve?
• Is the product / idea disruptive or innovative?
• Is there differentiation that is unique and difficult
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to replicate?
• Product Traction
• Is the market large enough and growing?
• Is the business scalable?
26. Heard from Angel Investors!
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- Startups with well rounded team to
execute innovative ideas, gain quick
customer traction, build defensible market
position, and ability to scale.
- Product companies with differentiation and ability
to go global
- World class - Early Stage companies with proven traction and technology centric internet products
new business models
28. Operationalize
Have a signed founders agreement
Clearly agree on equity structuring in the
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company among founders
Agree on Roles and Responsibilities
Operationally know the details
Register your company
India, US, Singapore
Accounting in place (no random expenses which
cannot be explained for)
Have employment agreements in place (if you
already have hired employees)
29. Internalize
Really internalize why you want to raise angel
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money
You are answerable to investors
Your startup is now now on a treadmill for growth
You have a new set of advocates and champions
whom you can reach out to for help/advice
Think professionally – if needed ask for help, talk
to people who can help
Don’t make funding a do or die situation
30. Closure
Don't raise money unless
you want it and it wants you
Be profitable if you can
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31. Startups who have raised Angel Funding
Social Impact Startup
1.5 years, with
paying customers
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Online Platform for
the creative
community
15 months in
existence, 25000
users (only traction, no
revenues)
Strong team,
who showed
entrepreneurial attitude
Mobile App for Credit
/ Debit Loyalty Card
Provider
1 year, with good
customer traction
Product
Validation, Good Lead
Investor
Intelligent Social
Curation
1 year, with good
customer traction
Knew Investors
well, Founders
showed persistence
All startup founders said that Fund raise is a long tiring process, so get started early!
Founders went
full time
33. What can you do on LetsVentureCreaWteha Itn cvaens ytoour dRoe oand Lye tPsVroenfitluerse
www.letsventure.com
CREATE
• Comprehensive Investment Ready Profiles
• List under Actively Fundraising to gain Attention of Global
Investors
DISCOVER & GET DISCOVERED
• Find & Connect with Global Investors
• Start a Featured Syndicate to close your
deal fast
COMMITMENT-TO-CLOSURE
• Program-Manage post verbal
commitment with complete legal and
financial due diligence
34. What can you Gdoe ot nD LiestcsVoevnetruered / CWohnante ccatn tyoo uG dloo boan lL IentvsVeesnttourrse
www.letsventure.com
CREATE
• Comprehensive Investment Ready
Profiles
• List under Actively Fundraising
DISCOVER & GET DISCOVERED
• Find & Connect with Global Investors
• Start a Featured Syndicate to close your deal fast
COMMITMENT-TO-CLOSURE
• Program-Manage post verbal
commitment with complete legal and
financial due diligence
35. www.letsventure.com
CREATE
• Comprehensive Investment Ready
Profiles
• List under Actively Fundraising
DISCOVER & GET DISCOVERED
• Find & Connect with Global Investors
• Start a Featured Syndicate to close your
deal fast
COMMITMENT-TO-CLOSURE
• Program-Manage post verbal commitment with complete
legal and financial due diligence
Get Featured, Get Funded!
37. Liquidation Preference
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Participating Preferred Equity
Example:
Startup sells for $10M, investors get $9.3M (3x their
investment (3 times $3M) and then 30% of the remaining
value (.3 time $1M)), and other shareholders get $700k
Startup sells for $20M, investors get $12.3M (3 times $3M
plus 30% of $11M), and other shareholders get $7.3M
Startup sells for $50M, investors get $21.3M (3 times $3M
plus 30% of $41M), and other shareholders get $28.7M
38. Actively Fundraising Startups
6
5
4
3
2
1
0
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35
30
25
20
15
10
5
0
Valuation vs Fundraise
Post Money
CR
Round Size
in Crs
39. Funded Startups
0 2 4 6 8 10 12 14
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
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25
20
15
10
5
0
Steady
Revenues
Early
Revenues
Early
Revenues
Steady
Revenues
Early
Revenues
Early
Revenues
Beta
Launched
Early
Revenues
Steady
Revenues
Beta
Launched
Beta
Launched
Early
Revenues
Beta
Launched
Post Money
CR
Round Size
in Crs
Editor's Notes
Lets Start with a simple question?
Solve a real pain point
Validate a real customer need
Articulate the value proposition
Talk to Potential customers
Ask for Feedback
Network, network and network
Eventually follow your vision / gut
Fast Market testing of a product or feature to get qualitative or quantitate feedback
Find your early adopters / customers
