Funding is tough work. It is also a massive requirement for most start-ups who have a vision to grow quick and dominate a particular space. Raising your first round of funding is a tedious job primarily because you are a ‘virgin’ and mostly have no idea what works and what does not. Here are some useful hacks from people who have ‘been there, done that’.
This session was held on Day 1 of NPC 2014 in the early-stage track at Microsoft Ventures on Lavelle Road in Bangalore. The three founders speaking at the forum were Raj Valli, Mohan Gopalakrishnan and Shivkumar Ganesan.
Raj Valli (Founder & CEO, Tabtor)
Well, Raj had a very direct way of telling the audience of early stage and wannabe entrepreneurs. He said things from his experience without sugar-coating any bit of it – which is the best thing I liked about what he said. But, before telling you the lessons in early stage funding that I learnt from Raj, let me tell you what he does. Raj is the Founder & CEO of Prazas (based out of US & India) which created Tabtor – a math-learning programme offering an interactive experience to students in kindergarten through sixth grade (K-6). The programme engages students using their favourite cartoon characters to teach math concepts and problem solving. Previously, he also had a 17 year non-profit experience with K-12 education. Tabtor had raised a seed funding of US$ 1 million (INR 6.5 crore) from Ranjan Pai (of Manipal Group) promoted Aarin Capital Partners, New Jersey-based Soundboard Angel Fund, California-based Sand Hill Angels, BITS Spark Angel and other individual investors.
Raj feels it is important to know whom are you talking to. Just like an investor makes a strong effort to know everything about you and your business, you must do the same. It is also important to find whether a particular investor understands your sector, your business. Taking money from strategic investors is crucial for the growth stage of any start-up. He also adds that there needs to be tremendous amount of trust that needs to be there between your investor and you. This takes time to build and is like any family relation that you have. So, it would be wise to realize that the entire funding process from exciting the investor, building mutual trust to receiving the money is easily 6 – 10 months in the least and you must approaching the funding process of your start-up accordingly. Raj also puts up a very candid point that if you do not know how to get to your investor, you should not be an entrepreneur.
Mohan Gopalakrishnan (Co-founder & CEO, Synup)
Mohan is a soft-spoken and vastly experienced guy who has co-founded and is CEO of Synup. Synup, a Bangalore-based startup that has built a cloud-based local marketing service. Synup enables local businesses worldwide to improve their marketing performance by managing their presence and reputation across the web. The start-up had raised US$ 500,000 a few months back from Angel Prime being just a year in business.
Mohan’s funding case was very unique. He was able to raise money from the first investor he approached. Well, two things that could make that happen for him would be the facts that he is an experienced person with decent connections with early stage investors and that he was smart enough to know who, as an investor, would be interested in his business. Given this, it still took him 3 months to actually get the money in his bank account from the time when he started his approach for funding. Mohan adds that, in his experience, a 7 slide deck is the best for pitching to investors. An entrepreneur must keep modifying the pitch and deck as he/she starts getting more and more investors’ feedback.
Shivkumar Ganesan aka Shivku (Founder & CEO, Exotel)
I bet there is no one reading this article who does not know Shivku. Shivku created an in-house automated call centre for his previous start-up – Roopit, which later was spun off and Exotel was born as a stand alone company. Exotel is in the highly competitive cloud telephony space where it competes with Knowlarity, Ozonetel and CallNet among others. Exotel is about 3 yeas old and has a team of 25 people. The start-up has done US$ 1.5 million in revenues from about 600 customers that it has. In 2012, it had received its seed funding of Rs 2.5 crore from Mumbai Angels and Blume.
Shivku said that we, as entrepreneurs, approach investors and so do many other people like us. For the investor, you are a random guy asking for money. You may know what you do but it is equally important to convey this idea alone with your vision to a prospective investor really well. You must also be able to prove your domain knowledge because without that you are lost and not a good fit for the investors. He also said that there is a vast difference between raising a seed round and Series A. When you are raising an amount of upto 1 million US$ (or, a seed round), it is about conveying your team strengths, passion and beliefs to your investors. But, the same thing changes to proof of performance, tactical growth and differentiation from others in the same sector that guides the investor’s thought process of investor in later rounds. So, you must adapt and do it quickly.
So, these were my learnings hearing these guys tell about their start-up experience and fund raising. Hopefully, you will hear a lot more about Raj, Mohan and Shivku in coming times as they crazily grow their start-ups. This session was moderated by Sundi Natarajan.
Saying that, I remember meeting someone really experienced in the start-up world who told me that it is far easier for a start-up to shut down post raising their first round than before it. And, I would always agree to that. Money makes you complacent, do not raise money unless you really need it.
At GyanLab.com, we have also raised a slightly smaller seed round but I will keep my learning to be shared in another post. Cheers!
Connect with me on Twitter: @PriyadeepSinha
