Raising funds has become easier as compared to a couple of years ago across all sectors including technology, healthcare, and infrastructure etc. However, the key is to find the right set of investors who not only pump in funds but also give strategic advice to the startups as and when required- because despite an adequate supply of money, not all startups achieve success.
At the Techcircle Startup event 2014, eminent panellists discussed what are the common mistakes done by their portfolio companies when it comes to fundraising and other strategies, as well as what difference they can they make given a chance.
The panel was moderated by Pradeep Tagare, investment director, Intel Capital and saw participation from Vikram Gupta, founder & managing partner, IvyCap Ventures; Vikram Vaidyanathan, MD, Matrix Partners; and Karthik Reddy, managing partner, Blume Venture Advisors.
Here are some of the observations made by them:
Vikram Gupta - Founder & Managing Partner, IvyCap Ventures
Typically at an early stage, the challenge startups face is that they do not know whom to go to or how to present themselves. They are struggling to find an investor, and if they do not have a mentor or an experienced person guiding them, then the situation becomes all the more challenging. The second issue is that even if they find somebody, because of lack of experience, they are not able to decide whether they are talking to the right person. In addition, many a times, startups do not know how much funding to ask for. The startups can approach the right investors only when they know the exact amount they need to raise.
Karthik Reddy - Managing Partner, Blume Venture Advisors
Most of the startups get caught up in how to think about valuation. In a market like India, which has not given enough cash back to investors, startups are not going to get fancy things like convertible notes and discounts etc. A lot of people walk up and say, they want to do a convert note. If they have an international set of investors, they may have someone who would be willing to take that risk. While in India, nobody will, including the angels, seed funds or venture capitalists those do seed rounds. Also, startups worry a little too much about certain aspects- the first step is ‘can you even show that the business model can be built to the next level’.
Vikram Vaidyanathan - MD, Matrix Partners
One of the traps that startups get into is to get a large number of people who are very famous names to start investing in them very early. Instead, a startup should look for the right investor who really wants to invest in their idea. That investor can be anyone, it doesn't need to be an institutional investor, it can be someone who believes in the growth of the startup and is contributing to its personal growth as a founder and entrepreneur. If the startup finds that chemistry with someone, it is better to have that one person as the investor as opposed to having five people who are famous names.
Watch the video for more.