Looking for Funds? Here's What You Need to do Investing in a startup at an early stage has always been deemed risky by the funding community
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India's startup ecosystem is thriving with a new player entering the field every day and exploring the endless opportunities of innovation in their own unique way. Starting a business takes a greater effort than just conceptualizing and innovating, most of all, raising the funds from appropriate sources is what makes or breaks the business.
Investing in a startup at an early stage has always been deemed risky by the funding community as there is hardly any record to specify the direction a startup would go in along with audience's reaction to the product. Having no certainty of success whatsoever, a majority of new startups are bootstrapped for initial years before raising funds from the external sources.
However, not all startup founders have enough purchasing power to support a full-fledged business on their own and that is when the search for a right investor comes into play. Always remember, no investor ever invests in you or your business, they invest in the business idea and the way you pitch is taking the entire credit if the deal is sealed by the end.
Hiding important aspects of a business plan can land an entrepreneur along with his entire dream of building a successful business into trouble. I have hopes of winning an investment for the bright future of their startup, every dreamer must complete his research and homework thoroughly. Other important aspects are as follows:
Not all investors are the same, so are their ways of investment. While some look into a startup's customer network and growth trajectory, others can be more interested in the sector that is a part of. "Numerous VC's prefer to fund a startup in a sector they are familiar with, while others like to explore new sectors with every investment," opined Mr C S Murali, the Chairman of STEM, Society of Innovation and Development.
Knowing the exact nature of your investor helps in accurately orienting the pitch but knowing your market, product and the team helps in the overall course. Focus on what is the problem which you are solving with your startup because no one would buy your product or service if it's neither a luxury nor a necessity. PS: Luxury comes with money, one thing startups lack.
Players to Approach
There are hundreds of angel networks, early-stage investors and fund ventures, large and small, waiting to invest their hard-earned money into innovative businesses with a bright future. Once in the vicinity of a right investor, founders have the power to either go out with currency flowing out of their pockets or ruining the chance completely.
Nonetheless, they fail to understand that it is right guidance they require. "For young entrepreneurs, it's very important to have a mentor to guide them along the right path so they know what platforms to present themselves, how to pitch their startup and take it to the next level," asked Salma Moosa, the Founder and Managing Director of Startups Club.
Trick up the Sleeves
A plethora of funding options including crowdfunding and bootstrapping are available for startups with initiate a business but getting funded by renowned or modestly named angel investors and venture capitalist firms have opened gates for aspiring entrepreneurs to win major investments. Government schemes like Atal Innovation Mission can also be utilized for the purpose.
"Fundraising requires the art of storytelling and a grand vision. If these two are there, then it is all about reaching out to the right people," suggested Prasoon Gupta, the co-founder and director of Sattviko. Confidence beats all the other tricks up an entrepreneur's sleeves. If pitched with poise, even a crappy idea gain the potential to impress the investors.
Why would a customer buy a product he has doubts about? Unless he/she is into adventure, the possibility seems unlikely. Startups need to understand that they will go through several stages of pitching and giving demos of their product before affixing prospective investors but unless they have gained enough trust, nothing can be considered certain.
Indian Startup Ecosystem comprises over 40,000 startups with an alarmingly high rate of failures. The reason – they jump right into the business without testing the waters first. "Before reaching out to Investors, it is absolutely imperative, that startups float a pilot Program, conduct market surveys, through focus groups and Test Market Exercises. Highlighting these results during a pitch helps startups generate goodwill amongst their potential Investors," added Murali.
Competition & Growth
New players are exploring every opportunity they get to enter the market with a unique idea and grow bigger than the others. To accomplish the goal, the startup needs to have a clear vision about his mission with a business plan prepared to clearly differentiate the offering, customer benefits and growth plans from that of the competitors.
"Having a concrete business plan that addresses the business goals like where they see themselves few years down the line, what are their expansion plans, show that they're serious about their long-term goals, which is key to attracting investors, collaborators and venture capitalists," added Moosa.