Pitching to China-based Investors? Never Ever do This
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
The Indian start-up ecosystem has been raising a lot of capital from foreign markets, especially China, the US and Japan. Pitching to investors, whether domestic or foreign, continues to remain an unnerving act for entrepreneurs. However, it is important for founders and investors to be on the same page and work together to build a successful business.
The Chinese start-up ecosystem has grown exponentially over the years and investors have been pumping in huge amounts of capital in India. According to reports, China-based venture capitalists (VCs) invested over $5 billion in 2018 in India, much more compared with the US and Japan.
Most recently, it was reported that China’s Tencent Holdings acquired a 10 per cent stake in Indian insurance aggregator Policybazaar for $150 million. Last month, Tencent also invested $110 million in Times Internet-backed MX Player, a video player-cum-streaming platform. Apart from this, 2019 also saw Alibaba Group invest in Bigbasket, Fosun in Delhivery and Shunwei Capital in foodtech giant Zomato.
Let’s take a look at some do’s and don’ts while pitching to China-based investors:
Failing To Reach Out
According to Damien Zhang, vice-president at China-based CDH Capital, founders need not hesitate and should reach out to investors and build personal bonds.
Speaking at TiE Global Summit 2019, Zhang explained that investors and founders share a personal relationship in China and raising funds is not a big deal. He added that this is a “relationship-driven business” and thus founders should reach out to them for informal meetings and dinners to build a personal relationship with the investors. This helps both the parties understand each other well.
Don't Be Passive, Be Proactive
Zhang along with Jeffrey Yam, executive director at Integrated Capital, believe founders need to be proactive and interact with investors even if they do not fit investors’ mandates. While speaking at the event, Zhang said once they build a strong connection with them, founders can receive advice from such investors which will help them develop their businesses.
Don’t Exaggerate Numbers
Investors speaking at the summit clarified that founders should not exaggerate numbers while pitching to investors. They explained that the China-based investors perform a thorough investigation about the start-up pitching to them. Thus, the true statistics will eventually reach them.
The notion was concurred by other domestic and foreign stakeholders as well. While speaking at an online event redBus co-founder Phanindra Sama had also advised against exaggerating numbers. Investors will always do their research before taking any decision and investors may choose to pass on the company once they realise that the pitch was not true.
Don’t Understate your competition
Continuing their previous point, investors also added that founders should also not understate the numbers of their competitors while pitching to investors. “Every Chinese investor does a very thorough cross-checking and if you understate your competition or there is something amiss with your numbers, investors will go past you,” said Zhang.
Yam concurred to the point and added building trust is important to convince an investor to join the start-up and work with full dedication.