How start-ups can get Investment ready

Funding undoubtedly plays a major role in scaling up a business. A lot of questions arise – Is it the right time? How much will I need to scale up? How much will they invest?Chennai Angel Investor

All these must definitely not stop you from growing or wanting to grow.

There is a lack of investment readiness that can be seen among organisations that are seeking investment. The issue of investment readiness is something that needs to be tackled. Here are some tips on how to make your start-up investment ready.

Believe your business

Ideas are there in plenty. People have great ideas, but what sets them apart is the way they tell it. Those with the best stories are the ones who are unique in the way in which they convey it.

Your idea needs to provide a solution to an existing problem, then model it and test it.  Stories are powerful and through the story, you can showcase that the problem you are solving is relevant. For this, you need to believe in your business. If you don’t believe in it, why will anyone else?

Understand your ecosystem

To truly distinguish between an innovator and a fabricator, one must understand the ecosystem. The ecosystem includes all factors—the friends, foes, competitors, bystanders as well as the larger environment—the laws, policies, social norms, demographic trends, and cultural institutions. So you need to have a clear idea and check your domain, customers, influencers and the law makers.

 Understand your resource needs

Before thinking about the investment, one needs to have a clear idea about the resources needed for your startup to function smoothly. This includes your team, vendors, machines needed, location as well as the other stake holders.

Understanding of financial resources

When it comes to the financial resources, you been to be sure of the capital needs, the working capital, cash flow and P&L and apply this in your Business model.

Apart from this, a thorough idea of the financing methods is also needed. One needs to understand the Investment Fundamentals in terms of Debt Financing, Short term financing, Capital funding, Friends & Families, Customer, Seed fund, Angel, VC, Private Equity, and others.

Structure your company

The structure of the company must be decided, for example, Private limited etc. The accounting must be in order and transactions must be well documented. The compliances must all be in place and all the debts/investments must be out in the open.

Value your belief

In your plan, try and ensure a stable revenue. Having a partner to invest is a positive move. Think about the kind of growth that you are expecting – organic/inorganic. If your growth pattern is going to be inorganic, it will be more of Angel / VC funding. Keep that in mind while seeking investment.

Caution to avoid failures

When your idea is final, don’t forget to validate the problem with a bigger sample size. You need to understand the hidden influencers and be clear on the behaviour of financial resources. One must also be open to changes in the market. Remember, startups also requires constant planning and validation.To showcase your Investment Readiness, ensure that you prepare pitches and understand the need of the market. Be clear on your values, milestones and terms.

The Original article appeared on Bizztor

Common Misconceptions about the Angel Investors

I am definitely not exaggerating when I say that there are a lot of misconceptions about angel investors. In the world of entrepreneurs, there is a lot of predetermined ideas on what an angel investor does. Being an angel investor, I would like to bust some of these myths. I also have a wide network of investors in my circle and it is safe to say that none of us are scary! People make us look like a blood thirsty Dracula and let me tell you something – we are far from that!  I will try and clear a few myths with this article.

Angel investors need complete control

It is often implied that, when you’re seeking funding, all of the power lies in the hands of the Angel Investors. While it is true that in order to get funding, you need to showcase the value of your company to the investors, it is not true that we need compete control. Remember what the Angel Investor brings to you – the connections, background, credibility and knowledge that will immensely benefit your company. You can actually trust and build a real relationship with your Angel Investor.

MVS Mani Angel Investor

Angel money is easier than VC funding

Let me tell you something – it is exactly the opposite. Imagine yourself as an Angel Investor. What you are doing is investing your own hard earned money. To open our purses is not going to be an easy task. Also, Angel Investors are well networked and can verify most domains. A VC’s livelihood is investing, whereas Angel Investors are not dependent on funding companies. They can actually turn back and decide to do something else with their money.

Angel investors make money on profits only

An Angel Investor does not have revenue or profits, but owns shares in the business. They make money by selling their ownership. Angel investors look at unit profits and also inorganic growth possibilities. They will not seek P & L (Profit and Loss) that is bound by time. Profits, without the exit, don’t flow to investors in normal start-up situations. A company that loses money but grows well in terms of revenues, users, etc. is a good investment as most valuations are based on revenue. Paradoxically, investors may be better off with high-growth with money loss as their money becomes more precious when it is what can lead to growth. Investment is more likely optimized when it funds growth.

Angel investors look at low risk investments

Most start-ups fail. Angel Investors don’t look for the low risk investment that might yield a more reliable return, because they fail too. What they look for is the big win, the jackpot, the massive victory that will pay for all the failures that came before.

Angel investors don’t believe your numbers

The best market evaluations activate the dream and the imagination of the investors. Investors definitely want to see the numbers because they show what you’re thinking and how well you understand the business. Like anyone else, the Angel Investor will review market numbers.  However, it is your assumptions that will help them in deciding whether they believe them or not.

If Angel investors won’t fund you, then your idea is bad

This is definitely not true. We are not God. Some of the most prosperous companies that exist today couldn’t initially get funded. There are many other options that you can look at. If we don’t fund it, it could just mean that it is not in the industry that we invest in, or another subjective reason.

Pitching to angel investors and building relationships with them can be a nervous, but exciting time for many entrepreneurs. There are many more myths attached to Angel investing like these that could be preventing some start-ups from receiving the funding they might desperately need. Angel investing can be extremely gratifying. However, one has to definitely understand investments and be prepared.

The original article appeared Bizztor

DESIGN YOUR THINKING

As I was browsing the Agenda of the TiECON 2018, the workshop on Design Thinking caught my attention.  This brought back memories of an earlier session by Arun Jain (Promoter of Polaris & Intellect Design) where he had mentioned that Design Thinking can be applied to any small business, and/or even in a village panchayat.  That earlier session had triggered my curiosity and I wanted to know more.  I had checked with my mentor, who suggested a very old book written by Don Norman, “The Design Of Everyday Things”(1988).

mani_123

When I started reading, it felt like “all this is common sense”, and “I know this”.  But as I went in deeper, it set me thinking.  There are many design thinkers who have made us believe that this is simple common sense, which is really not common.

The book gave me perspective of few elements like Experience Design, Industrial Design, Interaction Design and Human Centered Design.  I also understood the principles of interaction like affordances, signifiers, and feedback mechanism.  I enjoyed the book and it gave me some input on the fundamentals – but the question was to know how to implement this in our business and bring in a major shift in the Organization thinking.

We are a 20+ years young organization with many stakeholders who have put in 10+ years and are in the comfort zone of teaching what they know to peers and colleagues.  Someone recently asked me what is your vision for the company.  Though I was not comfortable talking about it, a small group works with me on this.

So, the TieCON workshop came as a solution to many of my unanswered questions – and the icing on the cake was that it was being conducted by the same Arun Jain who had set me thinking many months ago.  I went to the workshop with an open mind to learn as the speaker was in himself a unique combination of being a successful entrepreneur who jumped out of his comfort zone to build high enterprise value for his stakeholders.

Arun Jain opened the session by stating – “Design your Thinking” & “Think Your Design”… this was like a magic wand that opened the locker of thoughts.  According to him, some of the necessary elements that help in designing your thinking are Listening, Dialogue, Observation & Reading.

He spoke about the “Five Drivers of Design” – SEPIA – S – Skill; E – Expertise; P – Perspective; I – Idea; A – Alignment.  The term “idea” was mentioned in the context of connecting patterns in a new way, and this got me thinking and became the starting point of mapping my thoughts on what I should do in the organization.

Arun went on to speak about the FIVE Frictional Force – “D CAFÉ”… does it sound similar? Yes, it is in one way similar with D – Doubt; C – Conflict; A – Acceptance; F – Fear; & E – Ego (I know all).

This was enough for me to get going and I was all set to go back and verify where I was with respect to my thoughts, beliefs and the organization.

As my thoughts were racing, the speaker continued the workshop by talking about howthe multiplier effect works.  It was through “VAL”  V – Vulnerability; A – Appreciation; L – Limiting Beliefs (order taker to Agenda Setter).  This topic attracted good amount of discussion on the speakers perspective.  This formed the base, and the speaker had given us the route to take to build a thinking organization.

The session continued and the speaker was mentioning about how the multiplier effect works.  He said that it was through “VAL” V- Vulnerability, A-Appreciation and L – Limiting beliefs ( order taker to Agenda setter) . These topic attracted good amount of discussion on various perspectives & gave insight on how I should think to build a thinking organization.

With the concepts in place, finally he came in to business to speak on “Elements of Designing the Business”.  I felt I had reached my “AHA” moment that I had been waiting for.  This was going to be very useful to me as I could use it even when I meet start Ups who come in for mentoring.  When he said, it is “Belief” – I was stumped. “Hey! I have enough belief in what I do till I fail J “So what is it that I don’t have?

When Arun Jain expanded the acronym., B – Brand Capital; E – End Customer; L – leadership; I – Intellectual Capital; E – Execution Capital; F – Finance Capital., I understood what it takes and the experience of the speaker in building a thoughtful company called “Intellect Design“.

Arun Jain is a practitioner and not a consultant, so there is so much of conviction and answers for different scenarios.  His experience helped him articulate with depth.

He ignited my thoughts on Design Thinking many months ago, and I took the first step by reading more on the same.  With this workshop, I experience the feel of being with a mentor who has given me the next set of homework, “Plan your 2025 and come back”.

 

5 Things to consider when accepting an Investment

No matter what your idea is – be it to build a small start-up by bootstrapping or even a big one with tons of money from VCs– you definitely require some funding.

Though getting an investment is a triumph in itself, it is important to look at certain aspects while accepting it. When an outside investor gives you a big fat cheque, it may seem like the best possible thing ever. However, stop right there and check the fine-lines of what you have laid on the table for that money to come in. So every entrepreneur should know some fundamental realities of accepting the funding beforehand.

Let us take a look at 5 things that you need to consider while accepting an investment.MVS Mani

Type of Investment

The way an investor invests in your start-up has a drastic effect on your company. Actually, debt may be better than equity. Let me put it in a simple manner. If you are lent money by someone, what you have to do is just pay it back with interest. They do not have any say in how you run your company. However, if someone buys your stock, then they are your legal partner with rights.

Another point to consider is if you have an equity investor, he gets paid only if you are profitable. However, a debt security investor needs to be paid monthly even if your business is not yet profitable. So make sure you take an informed decision.

Type of Shares

If you have gone in for equity investment, then the next thing you need to look at is the type of shares that the investors are taking – preferred or common. Preferred shares have a higher claim on the assets and earnings than common shares. They normally have a dividend that must be paid out before the other dividends. So here the investor has more control over you and the company than the common shareholders. If an investor is getting preferred shares it is not always undesirable. However, you need to understand the set of rules that come with it. You must be aware of the power you are giving them and plan accordingly.

Type of Investment Protection

Almost every investor (Equity) will ask for anti-dilution protection of their shares. When this comes up you should be pushing for what’s called a “partial ratchet.” Here the outside investors would get to buy additional shares at a price that is closer to the actual market price of the shares. This is a win-win as they also get it at a lower rate and you do not lose as much as you would when it is a “full ratchet,” where you end up having to sell investors additional shares at the lowest price they were offered them at.

Type of Liquidation

When your company sells, how much money you make depends on the type of liquidation that you have planned for at the beginning. This is the order in which the business owners get paid if the business is sold or goes bankrupt. Depending on the preference you have signed with the outside investor, they will get a double or triple of their original investment. Make sure that you know what you have agreed to.

Types of Promises

Outside investors seek covenants or promises in the agreement as they are not always there to check on you. These can man anything and you must ensure that you are not promising anything that you can’t actually do. Ensure that you do not need permissions from investors before each and every decision or hiring that you do so that you can operate freely.

So be thorough on all the legal clauses before you take on an investor. There are chances that investors will seek certain things in their favour depending on the amount they are investing on your company and it may not always be a bad thing. What you need to do is be aware of what you are agreeing to so that you don’t get the bad end of the bargain in the end.

The original article appeared on Bizztor

 

Factors that will affect start-up funding

Securing the first round of funding is an unnerving process for start-ups. The founders have to get their product or service and boil it down to Rupee’s and Paisa’s for investors whose main worry would be about how quickly they will get their money back.Mani MVS

The usual ways for funding are seed, bootstrapping, grants, friends and family and angel funding. It is not a new statistic that a very few percentage of start-ups get VC money. In fact, generally start-ups do not get VC money. The number stand at about one percent of start-ups in the US and it is around the same in India. If the person is a serial entrepreneur and has an idea with cutting edge technology where the initial investment is very high, that is when the VC checks in.

So, how can you make your start-up stand out and get funding? Here are the factors people look at before doling out the money.

Unique idea

The core idea of the start-up always becomes an important factor. This is what will be responsible for the success or failure. For example, if your idea is the same as a Google or a Facebook, chances are that you will not find any backers as you are entering a tricky market with established players. However, if your idea is something new and targeting people who have not been targeted before, automatically the uniqueness of it stands out. You are solving a problem. Along with the idea, you should have a business plan that is clear and structured. It must cover all the elements of your business idea in order to get funded.

Solid team

By team, I mean both leaders and executers. Leadership is imperative in start-ups as this is where the decisions are made and visions set. At the same time, great things cannot be done alone. The successful running of a business is dependent on the team who executes it. Even the best of plans can become a failure if you have the wrong team. When you are looking for funding, it is important to project your team as solid. The more adaptable that team, the better the success rate.

Early traction

Early traction refers to your early set of users. These early adopters of your service or buyers of your product are vital. The reason is that although you are not yet established, they became your customers. That means that they saw some value in your product. What you have solves a problem, so you automatically become a solution for it. They will also help in bringing more customers and will be the loyal lot if you do things right. Now, if you can show these customers, securing funding becomes that much easier.

Backing by good advisors

Start-up advisors are the people who will support you to run your venture successfully. Choosing the right advisors mean that you can substantially improve the way you function. Your goals can be achieved faster with the immense experience that these people bring in. They can also introduce you to the right people and help you with their timely advice. If you get the right advisors, their coaching abilities, passion, industry knowledge, and other skills will bring great insights to your business. Having those means that you are on the right track and this is also a key factor in funding.

The Original article appeared on Bizztor

4 factors that predict start-ups’ success

The corporate scenario of today has made it simple for anybody to start a business. What is difficult is to sustain your business and turn it into a profitable venture.

MVS Mani

Oftentimes I have been asked if there is a set method that could help in making a start-up successful. I cannot tell you to do these things and say that if you follow it you are definite to succeed. However, there are certain time tested factors that can help in predicting the future of start-ups. It is nothing but a remarkable mix of powers that influences the growth of start-ups.

Research has shown various surprising and reassuring correlations between age, education, gender, and location of start-ups. Here are 4 factors that can envisage the imminent success of your start-up:

Market Need at that time

During the launch of a start-up, it is important to keep a check on the market. A lack of market need definitely contributes to shut down or failure of start-ups. One needs to understand the need of the market and also go deeper into what your competitors and your market is doing to ensure that you are ahead at all times.

Pricing of product/service

Here is a factor that has to be given ample thought and research. This may seem a simple matter, however, if the price is too low, the cost becomes high and people may wonder why there is such a variation. At the same time, if it is too high, you will lose the market to the competition. One has to ensure that pricing is arrived at in such a manner that the start-up is profitable.

Timing of the launch of product/service

What is the ideal time to launch a start-up? The only answer to this is – when the market is ready. If there is a fantastic idea and the product/service is launched too early at a time when the market is not ready, it will not work. At the same time, if one is too late, the market is already overloaded and the level of saturation is so high that it will again be a failure.

Right Team

The quality of the members of the team including not only their knowledge, competence and skills, but also their attitude is something that has a direct influence in the success of a start-up. Even if you have exceptional entrepreneurship qualities, to accomplish great success you need the right team. With the support of the team, the vision can be achieved by creating achievable goals.

Statistics say that 90 percent of start-ups fail eventually. It is a myth that if a person has a great idea, your start-up will succeed. Yes, a great idea is definitely needed, however, a start-up cannot not run only on great ideas. It requires the constant support of a skilled team and the correct functioning of each factor to successfully nurture and develop it.

The original appeared on Bizztor .

What are the growth drivers of start-up firms?

If you are a start-up, then growth definitely isn’t merely an option for you. It is the only way for your survival and one has to ensure that one achieves it or work towards it constantly to succeed.

Growth in itself may mean different for different start-ups based on the stage they are at. For some, it might mean an increase in revenue whereas for others it may mean expansion and yet others may see growth as the maintenance of their position in the market. No matter what your startup is looking at, here are some time-tested techniques that are drivers of growth.

Learn from mistakes

As a start-up, you have to absorb lessons from all fronts. Some may be from your experiences in the past and others might be experiences of others that have been shared as research or even word-of-mouth. Either way, it is important to learn and not have a stubborn mindset that refuses to change. It is only if one is willing to pick up lessons from those mistakes that one can grow one’s organisation and ensure a successful path.

Consumer Innovation

What your consumers are looking for is what definitely turns into the major drivers of growth for any start-up. You need to ensure that the consumer is convinced that they need what you have to offer and what you are offering is the best in the market as well as unique. Understanding the consumer in such a manner that you know exactly why they need your product is pertinent. You need to get into their shoes and try to see things from their perspective. Apart from this, one needs to collect regular feedback to improve consumer experience as well.  

Early Customer Retention

This is something that is very crucial as it is more economical to get existing customers to buy from you than it is to find new ones. A start-up must definitely work towards retention right from the beginning. This is what will bring them back to you and repeatedly buy from you. Retention is even more relevant today in the crowded e-commerce arena where clicks and conversions always seem to be increasing.

People and process

No matter which stage your start-up is at, these are two things that cannot be ignored. One needs to have a team that is good and skilled, a process that works and brings desired results without many setbacks. If you have both of these set, then half the battle is won. Today, it is becoming increasingly difficult to find good people who are willing to take on responsibility and if you already have them then make sure you hold on to them.

Technology adoption

In a world where everything is driven by technology, a start-up is no different. It is not only about the use of technology in your start-up, but also the ability to incorporate it in such a manner that you get the best out of it. A process can be optimised with technology and a system may be enhanced by using a particular technology. Therefore, technology is definitely a key driver of growth.

Effective Communication

Communication is not only within the start-up, it is also about communicating with the end consumer. In today’s technology-driven world, it has become very simple to have an open line of communication with consumers. With Social Media marketing, this is something that has become far simpler and cannot be ignored anymore. At the same time, communication – that is both top down and bottom up – must flow within the start-up as well.

Leadership

No matter what stage you are in, what is crucial for growth is not just a great idea, but also, a great leader. A leader is one who will see your start-up through when the times are bad and also ensure that he steers you towards the shore. All the other growth drivers will definitely fall into place as long as the leader is a good fit.

The original article appeared on Bizztor