Getting angel/VC funding for your venture________________________________________________

Prajakt Raut - founder

Prajakt Raut – founder Applyifi.com

• Previously the Asia Director of TiE (2004 – 2007) – helped overseaas investors connect with startups in India

• Was head of operations of the Indian Angel Network, one of the largest angel investor groups in the world

• Deep experience and connects in the Indian entrepreneurial eco-system

• Personal goal is to encourage and assist a 100,000 people to become entrepreneurs

• Founder of The Hub for Startups – a well-respected blog for startups

• Started a printing business at when he was 17, and later was founding member of a CRM solutions company

• Prajakt has spent over 10 years in the advertising industry with agencies like Grey, Capital and DMB&B 

• Co-founded Orange Cross, a healthcare services company

About Applyifi______________________________________________________

Applyifi helps startups create an elegant, comprehensive online pitch deck.

Investors can filter deals using our 36 point scorecard that evaluates applicants on key criteria to assess the opportunity

www.applyifi.com

3 key messages_________________________________________________________________________1. Multiple funding options exist 2. Different types of investors invest

at different stages of a venture3. Building a great business is not the

same as having a great idea or a great product or a great service

Several options to fund your 1. Crowd-funding 2. Small-ticket

co-investments3. Donors 4. Strategic

stakeholders5. Foundations 6. Industry

associations

Hobby/Passion Business1. Debt2. Bootstrapping3. Strategic investors4. Customers5. Risk capital – angel

investors, VCs

Make a business plan irrespective of what option you choose

Today we are focusing on business plans that

are relevant for investors

A Business Plan is a useless productBut it is a priceless process

Working on a Business Plan is like planning a journey

Developing a business plano Start with a ‘story’ - ‘See the film in your mind’

o Work out rough milestones and goals

o Think deeply of how you will implement it

o Work out the different kinds of costs… and revenues

o Start working in the excel sheet – assumptions are critical

o Work on multiple ‘scenarios’

o Finally, articulate it into the ‘presentations’

What should a business plan cover?1. Concept overview - problem - solution2. Team3. What is the size of the opportunity4. What is the value proposition/positioning5. Business model & Business Case6. Competitive landscape7. Operations plan overview8. Risk factors9. Funding needs and use of funds10. Exit potential

Angel Investors & VCs ‘buy’ shares in your ‘company’.

1

But no one makes money by buying shares.

You make money only if you sell the shares at a higher price than you bought it at.

Angel investors and VCs seek 10x + return on their investments_____________________________________________________________________________________

Concept of valuation

2

Different stages of entrepreneurship carry different kinds of risks.

And different investors invest at different stages.

3

Stage

Scale

Different stages of the venture carry different risks

Risks at early stage• Concept risk

• Execution risk

• Scale-up risk

Risks at early stage• Concept risk

• Execution risk

• Scale-up risk

Risks at growth stage• Execution risk

• Scale-up risk

Risks at early stage• Concept risk

• Execution risk

• Scale-up risk

Risks at growth stage• Execution risk

• Scale-up risk

Risks at mature stage• Scale-up risk

Risks at early stage• Concept risk

• Execution risk

• Scale-up risk

Risks at growth stage• Execution risk

• Scale-up risk

Risks at mature stage• Scale-up risk

• Proving concept

• Jugaad

• Flexibility

• Fine-tuning offering

• Processes

• Focus

• Operational efficiencies

• Increasing profitability

• New markets/new capabilities/new concepts

Angel Investors/Seed Stage

Funds

Venture Capitalists

Private Equity Funds

Accelerators/Angel Investors/

Seed StageEarly- stage VCs VCs / PEsInvestor

types

Stage of investment

Concept Risk Stage

Early, Early-Growth Stage

Growth Stage

• Rs.25 lacs to Rs. 5 cr

• Sweet spot – INR 1cr – 3cr. For investors

• Rs.20 – 50 lacs for accelerators

• Rs.2 cr - Rs.50 cr

• Typically between Rs.10 cr – Rs.25 cr

• Rs.50 cr +Typical investment size

Discovering what works

Replicating at scale what worked in a pilot. 

What VCs look for is evidence that something worked AND knowledge of what worked AND that it is replicable.

4

What angel investors look for is a set of practical assumptions and a plan to test those assumptions.

What do investors look for in ventures they invest in?

Key criteria for investors1. Is the market large?

2. Does the venture have a reasonably strong chance of being a dominant player?

3. Is the business case strong and will investors get an exit?

4. Is this the team that I can bet on?

Your focus should be to convince investors that your startup is a good investment opportunity

Investors look for competent and committed teams

- Passion and deep interest in the domain

- Deep understanding of the dynamics of the business around the concept

- Willingness and competence to implement the concept (not just ideate) – experience is hugely valued, if not mandated

Investors look for plans with practical milestones

But large aspirations

Investors look for teams with focus in the initial phase

Even when entrepreneurs have identified multiple opportunities with the concept

Investors look for a strong implementation plan“According to Gartner, the market will be USD 20 bn in

2020” is not a reason to investHow you will get the first 1000 users or first 2-3 partnerships / enterprise customers is.

Investors seek teams that have a clearly identified immediate goals and tasksWhat do you need to do to launch?What are you going to test?

Investors seek a plan that clearly outlines how much funding is required, where it will be used and what it can achieveYou should seek from angel/early investors only as much as you require, to go till you can attract VCs

In rare cases, the initial funding is sufficient enough to take the startup to sustainability

Finally, investors look for teams they can trustBe honest about risks & challenges, be open about limitations and weaknesses

When you tell them where you need help, they will be able to provide inputs

In Summary• Investors invest in a solid business

that addresses a large market• Investors invest in high-quality

teams with large aspirations • Investors invest in clearly defined

plans with practical milestones Make the investor go back feeling “What a great concept. I think the market is large and the team will deliver.”

If you liked what you heard, tell others. If you did not like it, tell me.

About me • Prajakt Raut – entrepreneur and

entrepreneurship evangelist • Founder of The Hub for Startups and

Applyifi.com• I blog on www.thehubforstartups.com• Twitter: @prajaktraut• Mail: prajakt.raut@applyifi.com