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IT’S ALL ABOUT THE MONEY?
It
takes capital to grow an enterprise and the art of acquiring funding in
today’s crowded space is a carefully guarded secret
All enterprises require external funding at some
point. After all, personal capital can only go so far and money is the fuel
that powers the engine of expansion.
Getting an audience with angel investors and
venture capitalists is the first challenge in the thorny process of
funding. “In our initial days, we reached out to investors by meeting them
at events conducted by TiE. The difficult part was that all we could get
was their visiting cards, and cold emails (without any introduction) didn't
get us any responses,” reveals Shachin Bharadwaj, CEO, www.tastykhana.com, an online food ordering service. “In
the initial days, due to the absence of a financial track record, we
pitched to existing promoters and short-term loan-lending individuals. The
difficulties included convincing promoters and individuals about the vision
of the company and also higher interest rates,” says Umesh Rao, founder
& CEO, Vector Projects (I) Pvt Ltd, an integrated turnkey solutions
interior company.
Funding avenues change, depending on how much you
need and the size and nature of your business. “My advice to budding
entrepreneurs is to come up with a realistic business plan and decide how
much funding is needed to get to a safe cash-flow positive level. Please
note that most entrepreneurs underestimate funding requirements. If funding
requirements are low, say Rs 10-15 lakhs (eg: services companies), it is
best to look for funding from family and friends. If funding requirements
are around Rs 50 lakhs, approach angels and other entrepreneurs. If funding
requirements are much higher (Rs 1 crore to 25 crores), my advice is to
approach VCs,” recommends Anupam Bhide, CEO, Calsoft, a technology company,
specialising in software product engineering services.
So, how much money can entrepreneurs aspire for
from various funding sources? “For seed funding, a company can aspire
$10,000 to $100,000; however, initial growth can expect somewhere around
one to three million dollars. A growth capital can be around five to twenty
million dollars, whereas private equity can be even more than that,” suggests
Shashank Joshi, managing director, MoneyOnMobile, an M-Wallet service,
which permits customers to purchase goods and services using their mobile
phones. “Angels typically invest in the range of INR 50 lakh to INR 1
crore. VCs typically invest in the range of three-five crores in Series A.
It can go up in subsequent rounds,” says Chaitanya Ramalingegowda, founder,
Twolymadlydeeply (TMD), a dating website.
A good idea can kick-start your funding pitch but
to win your investors’ confidence, you need a lot more than that. “As much
as a good idea, they also look at the people behind the idea and
capabilities of the people and team to execute and implement the idea
well,” says Kush Medhora, CEO, DREAM:IN Social Networks, an incubator for
start-ups. “The team that would be running the business is assessed very
keenly at every funding round - right from the seed
stage to the growth one,” agrees P Ramakrishna, general partner, Utthishta,
a seed fund for start-ups. At a later stage, the effectiveness of the utilisation
of initial funds is assessed.
Thus, every detail counts when it comes to
acquiring funding for your venture.
P RAMAKRISHNA THROWS LIGHT ON THE SOURCES OF FUNDING AVAILABLE TO
ENTREPRENEURS:
Seed funds: At the idea stage, you
can approach seed funds;
Angel
funds/early stage fund: Once your idea has been tested in the
market and you have achieved good traction, you can approach angel
investors and early stage funds;
Venture
debt: You
can also obtain venture debt if you do not want to liquidate your equity
any further. You can approach specialised debt funding organisations for
the same;
Government of India schemes:
TIFAC – SIDBI revolving fund for technology
innovation program;
Technology Entrepreneurship Promotion Program (TePP)
from Department of Science and
Industrial Research;
Rural Innovation Fund – NABARD;
Women
empowerment scheme – SIDBI;
Collateral free loan from public sector banks for
all angel-funded.
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