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Startup Saturday: Money is vital, but real action begins after startup gets funded, say experts
Apoorv Sharma founder, Venture Catalysts, a seed fund investor, and Vaibhav Domkundwar of Better Capital, speak about what areas the entrepreneurs should be careful about after raising funds
In the life of an entrepreneur the beginning is almost always ridden with a paucity of funds. What is it like when a founder succeeds at raising funds? What areas does s/he have to be careful about? Apoorv Sharma founder, Venture Catalysts, a seed fund investor, and Vaibhav Domkundwar of Better Capital, speak from the investor’s point of view. Once the cheque is signed, what does the investor want
According to Apoorv Sharma, “Money is very important, but the real action begins after a startup gets funded. That is when they have to deliver the results. It is important for them to have a plan on what they will achieve in the next six or nine months. They should, in fact, take constant feedback from their investors and mentors. I would recommend starting a Whatsapp group where they regularly post their work.”
A view that Vaibhav holds is: “It is important to keep perspective. After spending significant amount of time on raising funds, founders have to suddenly switch from pitching to execution and that usually is the hard part. Everything takes more time than expected and hiring and sales generally are the biggest culprits. One should not lose focus of the plan.”
Keeping the relationship between co-founders stable is equally important according to Apoorv.
Says he, “Often I have seen that once the money comes in there is conflict amongst the co-founders. This should be avoided as it can harm the company. Set out roles and deliverables at the outset so there will be no conflict. Another thing I have noticed is that founders start obsessing about competition. It is important to know what’s going on in the market, but there is no need to put all your energies there. What’s more important is how you will achieve the numbers you have stated you will.”
Soon the money you have raised will be over in in about 18 months’ time and you will have to get into the pitch mode again. Says Vaibhav, “I would recommend that all founders think of what their next round of the 10-slide deck will look like. Convert this into 30 slides and you will have an execution plan. This way you can ensure that you make progress on all fronts. And not get pulled in just one direction.”
How going for broke is totally different from going broke
Fintech startups should have their fin (financials) in synch with the tech, right? Not without some very hardwork and killer discipline. Three fintechs who are now in the money share their challenges of ‘going for broke’
Nilesh Agarwal: Point 5 BN Fin Health
Agarwal set up Point 5 BN FinHealth in Dec 2018 and the company provides affordability of varied financial products to the lower income group. “If for example a health subscription being offered by a bank is for Rs10,000 pa, what our company does is get a large number of people on board and offer the same service to them in a way that they can afford it say Rs 800 pm, instead of Rs 10,000 in one shot,” explains Agarwal.
That way the bank gets to broadbase its customers and even write off a few cases simply because the numbers allow it to do so.
How much?
Agarwal recently has raised an undisclosed sum and is well aware of the pitfalls that being flush with funds can bring upon a founder.
Now what?
Says he, “Having been a VC myself I know how the investor’s mind works. For me it has been and is very important that we stick to the unit economics. The customer has to understand your value proposition and be willing to pay for it. Spending on customer acquisition without getting them to pay is a real danger for start ups. Yes there are acquisition costs and we are spending on building our distribution networks, but are very careful about the results. In two years’ time we should see some positive results from such networks else it would mean that our service is not taken up by the customers.”
Anish Achutan: Open Financial technology
Achutan set up the digital banking service company in 2017.
How much?
He has had four rounds of fund raising. Currently, he raised Rs 250 crores in a Series B funding.
Now what?
In days when funds are low you try to be creative, use different means to achieve your goals. If you can’t afford to hire talent you rope in family and friends or offer equity, reduce cost of operations and so on. Suddenly there is money and some founders may lose track of their plans and overspend. Does money make you lax? For me I think of monetisation from Day 1. I wouldn’t want to change the way I run a tight ship. Some people think the more you burn the better it gets, but I know that in many cases there is no correlation between money spent and value created. I prefer the old way of doing business, creating value for customers who will then be willing to pay. It is very important that you stick to your plan. In any case, if you plan for Rs 1 crore expenses, it will often end up as Rs 3 crore. So one needs to be judicious with spending. You may feel that you need to hire a leadership team, but is your business at that scale yet?
Spending big bucks at a time when you don’t need say a marketing or operations head can be a big problem. Or because there’s access to capital you may hire 20 people and the team suddenly is very big and communication is not going the right way. It’s important to remember that you will quickly need to raise the next round of funding so you have to achieve your targets and you should never lose focus of that.
Sumit Maniyar, Rupeek
Rupeek is a startup that provides asset-backed loans to retail borrowers.
How much?
Sumit has raised an undisclosed amount in a Series B funding in 2017.
Now what?
With money comes the expectation of growth. Which is right, but I think it is the founder’s duty to solve the structural problems before scaling up. As soon as you have the capability to spend, certain areas such as marketing and leadership hire quickly come into focus.
Here is where you need rigour and discipline. Spending on marketing before there is a clear product-market fit will erode your value proposition. The other thing is to have cost prudence. You should be able to distinguish between an expense and an investment. In seed stage you will have expenses and later you need to make investment. At a later stage during series B funding one can invest in functional heads who will take the company from 1 x to 10 x.
