“Hi, please let me know if the offer is still on the table?” With trembling hands, I sent the text, put down my phone and turned to my laptop.
Though I could sense the change in interest on the investor’s side, I still hoped the investor would not reply,as it was too painful. Deep down, I was hoping for a miracle. I scrolled through my Facebook feed but my mind was still focused on the phone. No reply. My news feed was filled with posts from YourStory and Inc42 with news like ‘Two IIT Mumbai Alumni raised X million $ funding from Y investor’ and‘Three IIT Delhi students raised second round of funding from another investor’. Looking at all this, I was starting to ask myself why no one told me to join IIT.
**TINNGGG**, somehow everything around me became dead silent as I read the message.
“We think that the risk has increased over time and we decided not to pursue this further,”the investor replied.
We were in a lot of trouble now. The discussions were happening for the past two months. Everything was decided. We had got the commitment from the investor, readied the marketing plan, hired new employees, and even pre-ordered a huge batch of T-shirts. Only thing needed was the funding amount and we would have been on our way. But the sudden withdrawal from the investor at the last moment left us completely paralysed.
We messaged each other for next 30 min trying to know the reason for the sudden change but nothing good came out of it. Almost in tears, I ended the discussion with the final message: “ I don't understand the sudden change, but we planned everything based on your commitment to us. I won’t force you to change your mind but I would say this: I am confident in my abilities and I would make the coolest T-shirt brand in India. With funding, I would have achieved it sooner. Without funding, it will take some time but will happen for sure. Wish you all the best in your endeavours”.
Needless to say, we were angry and disappointed. We had planned so much based on the funding we were to receive. Sitting at Paradise Restaurant, over a jumbo pack of chicken biryani, my partner and I discussed for hours over what went wrong, how we could have avoided it and the future course of action.
Here are the lessons I learnt after my first encounter while raising funds –
Think hard about what your ultimate goal is. Are you happy with having a decent-size 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 the way to go.
Once we achieved good traction, we focused on raising funds and lost focus on the ongoing business. Raising funds takes a lot of time and energy which can be utilised in business growth. If you have more than one co-founder, one person should focus on fund raising and other should continue on the growth of the business. Funding may or may not materialise but a sustainable business will keep you in the race.
We had got the commitment from the investor and stopped other fund-raising activities. We used all our time in planning how to use that money for business growth. We saw slight downfall in the daily number of orders but we didn’t think much of it, as we assumed our funds will arrive and we can 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 downward slope in growth and a lot of debt.
Do not share every single detail about your company, plans, growth strategy, competitors etc with the investors, until they’re fully on board. We played all our cards based on commitment. We told them who our main competitors are and how much money they were making and it’s possible this may have worked against us.
Before putting the ring on the finger and saying your vows, it is important to ask pertinent questions like if you are interested in raising children. What I mean is it is also important to figure out if you and the investor agree on the same exit strategy? In the future, if the investor wants to sell the company if a good offer is made, while you want to retain it, things may get awry. Nothing wrong in asking upfront what exit the investor is looking for?
Raising funds and getting an investor onboard might sound great but ultimately it is a business deal. Investors are looking for a 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 told myself that was just a business deal. They saw some risk or they found someone better or changed their mind. One can’t blame them. This is why maintaining focus on a growing sustainable business is imperative so that you don’t fall if funding efforts do not materialise.
We made a mistake of not pursuing other offers. When we got a commitment, the investor told us it was final and asked us not to look anywhere else. We got inquiries from other investors after the initial commitment but we politely refused them.
We were so down when this happened. We were tempted by thoughts to give up or sell the company, but we didn’t. Funding efforts did not succeed? Not a problem. Remember, you did not start the company just to raise funds. Fund raising is just an activity to grow 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.
About the Author:
Mubaid Syed is the Co-founder of ShipNinja (http://shipninja.com). His first venture was LazyNinja.in, a popular t-shirts brand.)