“Hello, please let me know if the offer is still on the table?”, with trembling hands and lot of courage, I pressed SEND, put down the phone on the table and turned to my laptop.
Though I could sense the sudden change in interest, I wished the investor would never reply because it would be too painful. Somehow I was hoping for a miracle. I scrolled through my Facebook feed but my mind was still focussed on the phone. No reply. My news feed was filled with posts from YourStory and Inc42 with news like 2 IIT Mumbai Alumni raised X million $ funding from Y investor. 3 IIT Delhi students raised 2nd round of funding from another investor. Why didn’t anyone tell me to join IIT, I cursed myself.
**TINNGGG**, somehow everything around me became dead silent as I read the message.
“We think that the risk has increased and we decided not to pursue this further”, the investor replied.
We were screwed now. The discussions were happening for the past 2 months. Everything was decided. We got the commitment, marketing plan was ready, we hired new employees, pre-ordered a huge batch of t-shirts. Only thing needed was the funding amount and we would have exploded. The sudden withdrawal from investor at the last moment left us completely paralysed.
We messaged each other for the next 30 mins trying to know the reason for the sudden change but nothing good turned out. Almost in tears, I ended the discussion with a final message, “I don’t understand the sudden change, but we planned everything based on your promised commitment. I won’t force you to change your mind but I would say this. I am confident in my abilities and I would surely make the coolest t-shirts brand in India. With funding, I would have achieved it sooner. Without funding, it will take some time but it will happen for sure. Wish you all the best your in endeavours.”
We were so angry and disappointed. We planned so much based on the amount we were going to receive. Sitting at Paradise Restaurant, over a jumbo pack of Chicken Biryani, me and my partner discussed for hours what went wrong, how we could have avoided it and the future course of action (somehow eating your fav food when distressed makes the pain go numb).
Here are the lessons I learned after my first encounter while raising funds –
1. Do you really need an investor?
Think about what is your ultimate goal. Are you happy with having a decent sized company making good enough profits while maintaining full control? Then don’t raise funds just because everyone else is doing it. If the only thing affecting your ultimate goal is lack of funds and you cannot raise funds on your own, then finding an investor is a way to go.
2. Fund raising is not a separate activity
Once we achieved good traction, we focussed fully on raising funds and somewhat lost focus on the ongoing business. Raising funds takes a lot of time and energy which can be utilized in growing your business. If you have more than one co-founder, one person should focus on fund raising and other should continue growing the business. Funding may or may not materialise but a sustainable business will keep you in the race.
3. Omg.. He/she said YES? Don’t plan the wedding yet
We had got a commitment from the investor and stopped fund raising activities. After that we utilised all the time in planning how we were going to use that money for growth. We saw a slight downfall in daily no. of orders but we thought no problem, as soon as the funds arrive we will start aggressive marketing and will make up. It was a mistake and it backfired. Ultimately the investor backed out and we were left with a down hill slope in growth and lot of debts.
4. What’s mine is yours, not
Do not share every single detail about your company, plans, growth strategy, competitors, etc to the investor until they’re fully on board. We showed all of our cards based on the word of commitment. We showed who our main competitors were, how much money they are making, etc and it’s possible we might have shown the grass much greener on the other side.
5. Will you have babies together?
Before putting rings on fingers and saying vows, at least ask if you are going to have babies together. Meaning, do you both agree on the same exit strategy? In the future, if the investor wants to sell off the company if a good offer arrives and you want to retain it, it will turn very bad. Nothing wrong in asking upfront, “what exit are you looking for?”
6. It’s all about money, honey
Fund raising and getting an investor on board might sound great but ultimately it is a business deal. And nothing wrong with that. They are looking for great ROI and you are looking for quick growth potential. Still, please check if you are marrying a cheque book or a great partner? I was furious when the deal was cancelled, but I looked at it this way – that it’s just a business deal. They saw some risk or they found someone better or they changed their mind, anything can happen. You can’t blame them. That is why maintaining focus on growing a sustainable business is a must, so that you don’t fall, if funding efforts do not materialise.
7. It’s not done until it’s done
We made the mistake of not pursuing other offers. When we got this particular commitment, the investor told us it’s final and do not look anywhere else. We got inquiries from 2-3 investors after this initial commitment but we politely refused them. Now how bad it would appear look if we went back and told them the initial investor refused and so now we have come to you.
8. It’s not the end
We were so down when this happened. We wanted to jump in chullu-bhar water. Got lots of thoughts of shutting down or selling it off, but we didn’t. Funding efforts did not succeed? No worries. Remember you did not start company just to raise funds. Fund raising is just an activity to grow your business. Focus on making a sustainable and profitable business, even if it’s small.
Finally, what I learned is, fund raising is not the Heart of business but just a Part of business.
PS – I used Alok sir’s template for making the Investor Deck and it’s amazing. Trust me, the best one out there according to Indian audience.
I can be reached on twitter – @mubaids
The article was first published on blog The Lazy Ninja
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Read a RodinStar post by the same author:
Why you should never give up on your dreams
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asha chaudhry
wow mubaid.
every time you post something, it comes with a big bang!
thank you for sharing these awesome learnings. it will go a long way for many others. “will you have babies together” is very very valid, considering the stories one hears nowadays.
i think point #2 – Fund raising is not a separate activity is very crucial to understand and follow.
awesome sharings mubaid. thanks for mentioning you used alok’s funding pitch template.
keep rocking and inspiring mubaid. i’m going to be in hyd briefly in sept. we should plan a rodinhooder of hyd meetup. will sort out right after the delhi OH!
pls mention where this story first appeared at the end.
asha chaudhry
omg mubaid! i was so engrossed in your amazing share that i completely missed out the fact that there is no image on this post 🙁
[that’s the power of great content!!!]
pls add one – i’ll then change ur url !!
Mubaid Syed
Thank you so much Asha.. 🙂
I am so happy the article and my experiences could be useful to others. I felt like raising funds has gained such perception that startups are focussing more and more on fund raising and somewhat losing sight of building a sustainable and profitable business. My first experience taught a lot.
Oh… Rodinhood meet in Hyd will be awesome.. It should definitely be planned.. Looking forward.. 🙂
Yunus Dange
Nice Mubaid!
Lot’s of things to learn from this ..Thanks for sharing
Manish Sisodia
Hi Mubaid,
Great share. You stick to the point and walk forward with a purpose. Very clear thought and very helpful insight. Wishing all the best for your enterprise.
Manish
Mubaid Syed
Thank you so much Yunus.. 🙂 Glad it could be useful to you..
Mubaid Syed
Thank you so much Mr Manish.. I am so happy my experience could be helpful to others.. 🙂
Abhik Prasad
This was almost painful to read Mubaid 🙁 I hope you guys aren’t shutting down LazyNinja.
Btw, if you don’t mind, could you share the amount of money you were looking at raising ?
We are trying to solve most of the problems that you mentioned with Relevant Capital … It’s still initial days though.
All the best.
Sridhar Rajendran
It is nice to see you turned a setback into a lesson. Good luck to LazyNinja!
Alok Rodinhood Kejriwal
How old are you? These are lessons that a 45 year old would write. Just be GRATEFUL to this dude for the lessons he taught you!
Mubaid Syed
Thanks a lot Abhik. I will surely check out Relevant Capital. Will message you more details.. 🙂
Mubaid Syed
Thank you so much Sridhar.. Glad it could be useful to others.. 🙂
Mubaid Syed
Thank you so much Alok sir.
haha. Though I am 27, I guess bootstrapping for 3 years taught lessons worth 45 years.. 🙂
But I am somewhat glad, the deal was not finalised. It brought a lot of clarity in my focus.
Ashwin C Parulkar
Good lessons, you said you did not peruse other investors. That was a great mistake, in way fund raising is luring too many customers at the same time and sleep with one
Mubaid Syed
Totally agree Ashwin. We realized the mistake later on. Anyways, lesson learned.. 🙂
Sunil Suri
Hi Mubaid,
You’ve shared a lot in this post. I wonder how could they back out after giving their commitment. Anyways good for you.
Keep going and keep posting.
My best wishes to Lazyninja.
Thanks & Regards
Sunil
Mubaid Syed
Thank you Sunil.. 🙂
Backing out on commitment is not a good thing but its a possibility always. A lot depends on the investor as well. We should not just look at money but also if the investor is right fit for the venture. Else there will be lot of conflict going ahead. Thanks for your wishes.. 🙂
Anamika Joshi
Awesome learnings shared Mubaid! Agree totally and would ensure to keep these in mind!