What you didn’t know about entrepreneurship and raising funds
Startup Saturday, on the 13th of this month, saw an overwhelming number of over 500 start-ups, listening to start-up pitches, an investor’s panel on how to raise funds, and Sumit Jain, (Co-founder and CEO, Commonfloor)’s take on the growing trends.
Sumit Jain on entrepreneurship
To begin with, Sumit said that entrepreneurship is not only about people leaving their comfortable jobs and work on an idea; it is about what drives you. “From personal experience, I can say that you can do what you want, but it all depends on how badly you want to do it,” said Sumit. He added that while he had several options, including being part of the family business, he chose to start up.
“When I was looking to start up, I was focussed on creating a strong self-image. You need to be very sure of yourself and what you do,” says Sumit.
He adds that while looking for a Co-founder, you need to be very sure before hiring. “Look for someone with skill sets complementary to yours,” adds Sumit. He says that all three founders of Commonfloor complemented one another, supported one another, were very passionate about starting up, and highly focussed on success.
Panel discussion – All about raising funds
Unlike a regular panel discussion, this panel was open to questions from the audience from the beginning. The panel consisted of Sumit Jain, Sanjay Swamy (Managing Partner at AngelPrime), Sharad Sharma (Co-founder and Council Member at iSPIRIT), Sanjay Jha (Founder at LetsVenture), Sanjay Anandram (Venture Partner Seed Fund), Manish Singhal (Entrepreneur, Startup Advisor and Angel Investor), and Girish Rowjee (CEO at Greytip Software Pvt. Ltd.)
Idea v/s execution
Beginning with the difference between preferential shares and equity shares, the panel discussed how important it is how entrepreneurs to execute their idea. While the idea is important, Sanjay Swamy added that it is not the reason a business succeeds. Manish Singhal tacked on to that by saying that if an entrepreneur thinks that his business idea is something that only he or she understands, then the chances of its survival are low.
Manish told the audience that intellectual property is a very broad concept, not be limited to one aspect of a business.
“When we hear the word intellectual property, we tend to associate it with a secret algorithm that only the entrepreneur is the custodian of.” He says that 99.9 per cent are not of that category. Most are on faster, cheaper and better, which means that execution is crucial.
Tech Startup Bubble
Are we in a tech bubble? Absolutely, says Sanjay Swamy. Sumit adds that India is offering great opportunity for tech startups and there is still is a lot to be accomplished in this area. “Companies are building interesting businesses, which provide great solutions. Most of these businesses are here to stay, and we still have a long way to go,” says Sumit.
However Sanjay Jha said that while there are daily reports of interesting figures and numbers in the startup ecosystem, the angel round of funding has no such bubble. He said that the angel rounds are pretty sane even today.
“Everything is a bubble depending on your time horizon. The single biggest signal that shows growth is the number of exits we have. It is easy to put money and people in to get high valuation; the question is more about exits. Until that happens in a similar ratio to investments, it won’t be healthy,” says Sanjay Anandram.
While exits are important, Sumit says that entrepreneurs need to be more focussed on creating value. He adds that, while IPO is one of the obvious ways of exits, many are working with SEBI to see if rules for start-ups to go public can be relaxed. Sumit feels that investors should continue looking at supporting startups and not worry too much about short-term returns.
“A lot more exits are happening than are being written about,” says Swamy. Taking the example of Silicon Valley, Swamy adds that lot of exits there too are in the $30 to 100 million range. He says that while these don’t get publicity, they are what keep the ecosystem going. He says that as the companies start getting bigger, we will see global acquisition and exits as well.
“As long as you’re creating long term sustainable value and are focussed on that, and you’re solving real problems, you can never go out of business, whether there is a bubble or no bubble,” adds Swamy.
Factors investors look at before funding
Swamy says that AngelPrime has always wanted to work with great entrepreneurs. The investors believe that there are several softer aspects that investors look for in entrepreneurs. It is important for an investor to feel comfortable with the entrepreneur. The scope for growth of the domain and space is looked at as well.
Investors also see if entrepreneurs have the capacity to take a step back and look at newer ideas and methods of growing their business. There needs to be belief in that the relationship between the entrepreneurs and the investors will be symbiotic.
Anandaram adds that another thing investors look at is how much capital a company can take, and what the financial returns they can expect, depending on the stage, are.
From an entrepreneur’s point of view, Sumit says that the team really matters even for the entrepreneur.
“It’s like a marriage, so different factors need to be considered. There is no wrong VC or wrong entrepreneur. Their ideas and plans need to gel. What you sell needs to be what you believe in, and what you would buy for yourself,” says Sumit.
Girish warns people to steer clear of investors who only financially invest in a business. “This is because investors need to get a good return on their investment. There has to meeting of minds. The investor has to support the entrepreneur in order to achieve the business goals they had set out to achieve,” says Girish.
He adds that the moment investment happens, it is the beginning of a huge responsibility on the part of the entrepreneur. The entrepreneur has to be able to keep all the commitments he has made. Investors are nothing but the supporting cast. Manish adds that there are many entrepreneurs who want money, but want everyone else to stay out of the picture. Then, there are investors who want to take over. Manish believes that both are dangerous.
Entrepreneurs can learn and network from investors. “They need to learn to leverage that network. The onus is completely on the entrepreneur to leverage the goal; if investors don’t see that happening they intervene,” adds Anandaram.
Investors believe that ‘Bad news takes the escalator and good news takes the stairs.’ They urge all the entrepreneurs to share the bad news first.
Gauging the market
If the market is non-existent it’s difficult. If you are creating the market, you need to do research. Market research reports are important as a starting point for entrepreneurs in approaching investors. It also is important to figure out what it will take to get a customer. What does it cost to acquire one customer? And how do you find a thousand others? This will help estimate all other details and statistics.
It is also important to talk to as many people as possible before coming to your own decision, build a market for your target audience, and determine what it costs to create that market. Swamy says
“If you’re not an expert in your business, don’t start it. While it is important to talk to people and get opinion, it is your decision that matters in the end.”
Headstart is looking at two more events this month - Co-founder search and an event on Student entrepreneurs. The next Startup Saturday is on IoT.
Video Editor: Anjali and Anand
Cameraman: Rukmangada Raja
Video Reporter: Dola Samantha