Money Talks: "Money Raised from Investors is Not Free, It Has a Premise," Siddarth Pai Siddarth Pai, Founder of 3one4 Capital, shares some important facts and tips about raising funds and understanding the mind of the investors in Entrepreneur's exclusive Investor Series, Money Talks
By Bhavya Kaushal •
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Sitting across an investor thinking what the outcome would be is one of the most nerve-wracking moments in the life of an entrepreneur. However, easier said than done, convincing an investor requires a series of well-thought steps that can bring the investor totally in rhythm with your vision.
Siddarth Pai, founder and CEO of 3one4 Capital, shares value points on both the agony of the entrepreneur when it comes to raising funds as well as value tips for them to ensure that their journey of fund-raising remains a smooth ride.
He says that raising capital is one of the biggest tasks for an Indian entrepreneur, particularly because India is a capital-starved economy. "Access to credit is a problem in our country and most people end up raising for operations." According to Pai, India currently absorbs close to US$12 bn to US$14 bn capital. "We are third behind U.S and China," he adds.
With Great Raises Comes Great Responsibility
Nothing in this world comes for free except for the air we breathe. Similarly, when we talk about raising funds, it comes with great responsibility. Pai highlights that the two ways of raising funds are either through investors or bootstrapping. He further adds that, "Money raised from investors is not for free, it has a premise" and therefore "bootstrapping is the most honourable way of growing your business." Both raising capital through investors or bootstrapping require irreplaceable features. Pai says, "Bootstrapping requires patience, venture requires performance."
Knocking Doors
Pai believes that there are several doors to knock on for raising funds but weighing the cost and benefit for each is also important. Pai suggests that knocking the doors of family and friends, entrepreneurship cells etc is very rewarding. He says that respect for money is paramount and that's why entrepreneurs should, "Raise funds as per their risk profile and stage."
Asking Yourself Why Everytime
In the life of an entrepreneur, there is more pain than glory and that is primarily why entrepreneurs should always ask themselves the question "Why?" before doing anything and everything. He also adds that having a business plan helps in translating your vision to that of investors and convincing them to invest. Moreover, according to Pai, entrepreneurs must be thorough with their pitch. "If they find any gap, that will become the talking point instead of the potential in the pitch."
What is Your Intention
In a capital-starved economy like ours, keeping some capital in the bank seems like an ideal thing to do. However, Pai feels that your intention behind raising funds from an investor are of great importance. He says, "Raise with the intention to pay it back."
What to Prove to the Investors?
As an entrepreneur, investors aren't very excited about investing in your model if you are just starting out. It easy to invest in Flipkarts, Zomatos but it is difficult to invest in a start-up that is taking baby steps into the start-up industry. Pai says that the investors see a lot of factors including how much money the entrepreneur has raised himself? The bottomline of start-up entrepreneurs pitching to investors, comes down to, Pai says, "Tailor your pitch to the investor, one size doesn't fit all."
