[YS Learn] How Rapido cracked its first fundraise in a sector dominated by Ola and Uber
As an early-stage founder, Aravind Sanka, Co-founder of Rapido, the two-wheeler bike-sharing platform, understood the importance of building the story and conveying the idea while raising his first round of funding.
When Aravind had thought of starting Rapido in 2015 along with Rishikesh SR and Pavan Guntupall, the market was already dominated by Ola and Uber who were fighting for prominence and growing aggressively.
The investors had already deemed the space ‘too hot to handle’ and many had already placed their bets on either Ola or Uber. Thus for Rapido, the journey was essentially a little uphill.
Talking about his learnings from the journey, Aravind points out the essential factors that founders need to keep in mind while raising funds.
Tell a story that builds moats
“When you are raising the initial rounds, there is less focus on the business. They are investing in understanding whether this person can make it big, rather than ascertaining if the idea can be big. The founder should talk about themselves and how they personally can drive the idea. In the early days, there hardly are any product-based growth hacks that you can talk about. But you can talk about how you see the product evolving, or if there are any moats please mention them. That is where the investors gain confidence on the product thinking and the vision of the founder,” says Aravind.
Show strong differences
- When the team was raising funds for Rapido, one of the challenges was that its competitors were billion-dollar companies.
- The mobility segment had strong players and every investor had either already placed their bets on Ola, or they were not investing in the sector.
- For Rapido, the task was to bring in the differentiation in their product.
- There was a strong perception in the market that mobility wouldn’t focus on unit economics or its a two-player market.
- “We never pitched ourselves as a mobility company. We focused on asset utilisation, logistics, and people transport. Also, Ola and Uber had most of its user base in metro cities; that also gave us an opportunity to pitch logistics and mobility for the next 100 million consumers. Tier-II and III cities do not commute by cab,” says Aravind.
- Rapido also focused on safety features since it was two-wheeler commute.
“In the initial days, while the investors do not ask for the moats and differentiators, it makes sense to show that you have thought through your product evolution,” Aravind added.
Use pitches as a network building opportunity
- Being a first-time entrepreneur, Aravind didn’t know a lot of investors.
“If I anyway got a sense that a particular investor liked the idea but wasn’t keen on investing or couldn’t invest in our idea or sector, I would ask them to connect me to other investors they may know of,” he added.
- So all the fundraises have been by the connects. The investor network is close-knit and pretty tight.
- This also builds the top-of-the-funnel of the network of investors and referral networks work well.
- Right now, the investing process and the timing is taking longer.
- Earlier, you would meet the person, and there was an understanding of their body language, co-founder connect through expressions etc. That was an advantage of pitching offline.
- On a call, you can’t express everything and cannot show your passion as you possibly can offline.
- You need to be a little more prepared – the way you showcase your product online, how you show the numbers, and build defensible models matters a lot.
Order of increasing difficulty
- Every round gets increasingly difficult from the previous round because the challenges in the business are different at every stage of progression.
- Every funding round needs a new story and experience.
- You need to show something else apart from what you have already done.
Do not lie
- Do not lie to investors while pitching, be it about the number of paying consumers, team dynamics, co-founder relationship, MVP, market size etc. It is a relationship – you can’t lie and raise money. They come to know in the process.
- Be honest and tell them the challenges you are facing and they will appreciate it even more.
- Never make a pitch based on what sector is going hot. Do not make a plan on that basis; investors see through it and you lose the opportunity with that investor.
“Treat pitches as a learning ground. People tend to get demotivated after meeting the first four to five investors. But my advice is before you pitch to your potential investors, pitch to other investors as a learning session. You will get invaluable insights and helps you prepare better,” Aravind concludes.
Edited by Kanishk Singh