Cajournal Jan2023 12
Cajournal Jan2023 12
Cajournal Jan2023 12
Startup
L
ooking back to 2021, or Investible Businesses with a proven scalable business model
Indian venture capital having achieved a traction, a clear path to profitability, and the
deal flow reached an potential to reach the public markets within a few years.
exceptional high of $38.5B in In this article, we’ll discuss some of the most common challenges
capital deployed achieving and mistakes founders and advisors make when seeking equity
a 3.8x growth over 2020 and funding.
a 2x growth in deal volume
of making it to 1500+ deals A. “Too Early” At any point in time one can find thousands of
compared to 809 in 2020. Entrepreneurs & Start-up Founders looking to raise Funds
Further India minted 44 new for their venture which are either at an idea stage or at a stage
unicorns in 2021 passing China where minimal viable product (MVP) is yet to be established
with 42 for the first time in and even if MVP has been established, the traction is terribly
terms of unicorn addition. As missing. We see many entrepreneurs dropping cold emails
the Indian start-up ecosystem to almost every possible investor they come across in the
continues to grow, we now hope that someone will invest. The big question which we
have more than 100 unicorns. are all missing here to ask is; Is it the “right time & stage” of
Looking at these numbers, the Business to raise Funds and Will Investors consider such
one can draw reference that Ventures at such an early stage.
Indian start-up ecosystem
has unquestionably reached a Traction & Scale in the Business is key in today’s market. It
maturity point in 2021, hence is the level of progression a start-up makes during its initial
Startup
Startup
will not have a presence Investors would or budget for the time or
or team in India but have have strict “NO”; exp professional fees for doing
partnered with a local fund Alcohol, Gambling etc this job. Do remember,
on selected investment if you try to achieve
(9) Do they have specific
opportunities. In case you everything at your own,
Investment theme
chase them, chances are there is a high likelihood
like; B2B or Impact
you’ll never hear back from that you will not succeed.
Investment etc
them (let alone rejection) It’s always advisable to
simply because they are C. Professional Help is leverage the experience of
keen to evaluate deals Key: Fundraising is an someone who knows the
independently instead they extreme sport. Don’t try job better than you do. As
have a strategic tie up with it yourself. An average part of the Fund-raising
a local fund. funding campaign lasts journey, founders would
anywhere between three require expert help at
Investment thesis of the to six months and is nearly every step of the process
Investors usually comprise the equivalent of a full- and more specifically the
of following elements and time job. It is common for following.
the least one can do is to entrepreneurs to display
educate themself before confidence & optimism • Is it the right time &
proceeding for their Fund- and they are always rolling stage for us to raise
raising journey. up their sleeves willing to Funds
get their hands dirty with • Should we attempt to
(1) Preference for Sectors: almost everything they raise debt and avoid
Sector focus Fund or come across. However, equity at this stage
Sector Agnostic. some areas of their business
(2) Deal Size: What is the may be too challenging for • How do we prepare a
usual minimum & founders to close unless robust Financial Model
maximum amount of they have the requisite with built in scenario
Investment the Investor experience, time and analysis
is willing to make resources. One such task • Preparing the Pitch
that requires expertise is Deck and a Teaser
(3) Are you a Lead raising funds as founders
Investor vs. Co-Investor should spend their time • Assessing the realistic
running their business Valuation of your
(4) What stage of the
rather than raising funds. Company
Business Investor
The process of raising
would invest in i.e. • Reading through the
capital can be time-
Early Stage or Growth profile of the Investors
Stage (Private Equity). consuming and unhealthy and their Investment
which is why it is best thesis
(5) Business Stage Can outsourced to professionals.
be further categorised It is unfortunate that most • How do we contact the
into Idea Stage, Pre- founders do not set aside Investors
Seed Stage, Seed Stage, • Subsequent Interaction
Bridge Round, Pre- with the Investors till
Series A, Series A, B, C you get funded.
D etc. It is imperative for
every Founder & D. Teaser: Investors’ offices
(6) Do they also Invest in are bustling with activity
Secondary Transactions Investment Advisor
to understand & as all kinds of proposals
(Buying out the existing are received through all
Investor in the Cap read through the communication channels
Table) investor profile and each day from all over. It’s
their investment common to see Founders
(7) Is this a Buyout Fund?
thesis before and Advisors complaining
(8) What is the negative proceeding. that they have not heard
list of Sectors where back from Investors.
Startup