These #3 Mentors Will Help You Plan Your Fund Raising Exercise
Market size from the macro to the micro level of the target market needs to be assessed before embarking on any fundraising exercise
Indian start-ups are under the illusion that just about any idea will get them funded. This is setting a wrong precedent. Ideas are funded when a genuine gap in the market is identified and a product is built around that to solve the problem. It is prudent for start-ups to deeply research their idea and not try to get funded by creating a “me too” product. The focus should be on building genuine and relevant USPs.
Focus on Pre Fund-Raising Exercises
Even when you have an innovative model and are hopeful of getting funded, there are certain pre-fundraising exercises which will put you in good stead. Experts feel meeting as many clients as possible or taking feedback from users of your product or service as much as you can, will be of great help. The users will have the same questions which your potential investors will ask. It is also sensible to prepare a strategy for the worst times. Preparing for questions like what if the sales do not happen for a couple of quarters or your best-paying clients abandon you suddenly or your most dependable resource quits – will make your position stronger with the investors.
Clarity Is the Key
Skannd Tyagi, Chief Technology Mentor at Neotec Hub - the technology incubator of Ambuja Neotia Group - is currently advising and mentoring 15 start-ups on technology stack, marketing, go to market strategy, product strategy and sustainable growth. Tyagi feels if the business is in ideation phase, and is capital intensive, then the start-up should deep dive into the projections and create detailed financial models to show investors.
“If the start-up has created a minimum viable product, then it is focused on the progress of product development and getting a critical mass of users. Once there is a good chunk of users fund seeking exercise gets simpler, as then there is a proof of the concept,” he opined.
Clarity in the product /service, transparency about the Total Addressable Market (TAM), realistic projections and financial models, background research and deep research about any competition or similar products in the same space and alignment of team and transparency of each team member’s KRA – are what he feels should be kept in mind while going for fundraising.
According to Tyagi, the main idea is to have a plan which has sufficient USP that attracts a heavy user base or buyers. “Having a well-made pitch deck and robust financial projections are key to be able to communicate to the investors effectively. Also, founders should have enough clarity to communicate the business idea in one sentence,” he reiterated.
Business Models Needs Validation to Be Funded
Kaushik Bhattacharya an IT Business Strategy and Management Consultant with over 23 years global experience feels nine out of ten start-ups shut because they don’t have a right business model backed by robust revenue, sales and marketing models.
Bhattacharya strongly believes that one should go for fundraising only when one is done with a Proof of Concept or a few clients ready to give testimonies which validate the business. Pitch deck, business plan, a key differentiator, revenue plan, risk and mitigation, competition, and core team - are for him the nuts and bolts of fundraising.
More than ideas execution matters
It is time start-ups understand that more than ideas, it is the execution capabilities that matter. In order to make someone invest in your business, you have to ensure your ability to make money out of it.
Rohit Jain, co-founder of Ritsworld, a consulting company for SME’s and mentoring start-up’s in Bangalore also advised to look for funds only when you have on board a minimum number of users (B2C) or clients (B2B) from target market segments to prove to investors that the product is working and users or clients have confidence in your product.
“Your start-up’s people, operations and strategy should be in place to convince the investors that every dollar spent out of their investment will be utilized for expansion and growth,” warned Jain.
Market size including demographics and Geography from the macro to the micro level of the target market has to be assessed before embarking on any fundraising exercise. Competition analytics – size, pricing, product-differentiation, the uniqueness of the service or product - is considered to be yet another vital precondition for fundraising.
Jain also vouched for the growth strategy in the form of a business plan of at least 3 years, which details out the people, operations and strategy of the business. “Economic challenges like change in Govt and economic policies and how your start up is equipped to handle that and exit strategy for the investors are also extremely critical to consider before initiating any fundraising program,” he opined.