[TechSparks 2020] Winning investors in times of crisis - the VC point of view

It’s almost a year since COVID-19 hit the world. The economies across the globe are still finding ways to revive and stand back. In such times, the sector which took the worst hit is the startup ecosystem. Not only are entrepreneurs facing dearth of funding, but there is also investor skepticism with tight purse strings.

At any stage, fundraising has always been a tough bet for the founders. But with the pandemic, staying afloat and keeping the investors on board active as well as attracting new growth capital has become another challenge altogether.

In such times, the founders should be prepared to do what it takes to win investors. At TechSparks 2020, the 11th edition of YourStory’s annual flagship event, the investor ecosystem shared its viewpoint on the existing gaps in the funding ecosystem and how the startup founders can continue raising funds in this time of crisis.

Existing funding gaps

According to Ajai Garg, Director of MeitY, India knows what the problems are and is in a position to build low-cost solutions. However, the ecosystem needs support from the industry, government, large corporates, and flow of capital for the next wave of growth. He also suggested there is a need to encourage crowdfunding, where individuals and small investors can participate. This will help in creating the pressure point needed for the companies to grow.

The investors believe the missing link in the startup ecosystem is the lack of rupee capital. It does not allow Indian companies to scale up and remain in India. There is a need to create a system in which the rupee capital starts flowing into the system.

“There are a few venture capitalists who, over the last few months, have been doing this to ensure that Indian companies stay in India,” said Ajai.

Key points of focus for entrepreneurs

According to Shailendra Singh, Managing Director, Sequoia Capital, the hardest thing to do is to have restraint when you have the resources. Founders always want to spend more on marketing, growth, and talent. Sometimes they want to blitzscale so that their company and the category become synonymous, especially in consumer tech.

“But we urge them to not make knee-jerk changes when they have resources. Moving from one curve of acceleration to another is tough. Nobody can do that perfectly. The startup world can be the toughest place to figure out what you should do,” he added.

Ritu Verma, Managing Partner and Co-founder, Ankur Capital, suggested that despite assessing the opportunity in the current market, investors need to look from the long term perspective. Also, Rama Bethmangalkar, Director, Qualcomm Ventures, said that when it comes to fundraising, from preparing pitch decks to negotiating term sheets and valuation, the fundamentals still remain the same.

The conversation with many other VCs bring out some key points, which the founders must keep in mind going forward:

-       Keep the board and investors aligned, and then be honest with themselves as this requires both short term and long term goals.

-       Keep the gross margins in check.

-       Remain sharply focussed on what will be their specific goals in terms of market share and network effect, and work towards reaching that goal, which could include burning significant cash.

-       The core focus should be on showing differentiation rather than just a better product.

-       The startup pitch deck should provide the confidence to the VC community that there is a team, which is going to back this venture.

TechSparks - YourStory's annual flagship event - has been India's largest and most important technology, innovation, and entrepreneurship summit for over a decade, bringing together entrepreneurs, policymakers, technologists, investors, mentors, and business leaders for stories, conversations, collaborations, and connections that matter. As TechSparks 2020 goes all virtual and global in its 11th edition, we want to thank you for the tremendous support we've received from all of you throughout our journey and give a huge shoutout to our sponsors of TechSparks 2020.