Tag: funding

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Startups Strategy

Plus, venture capital

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Venture Capital (VC) firms in ‘startup land’ are undeniably a source of relentless intrigue and mystique – rightfully so, some may say. For, VCs seem to possess seemingly magical abilities (for instance):

(a.) To ‘foresee’ or as one blog elucidates, envisioning the future that propels society forward.

(b.) To bestow mythical, elevatory titles – unicorn, decacorn (astartup valued > $10 billion) and hectacorn (a startup valued > $100 billion).

Week on week, we awake to read countless tales that revolve around a singular theme – venture capital. Rich with proclamations of abundance, of successes, and of transfigurations from oblivion to stardom.

In the Indian context too VC firms undoubtedly exert an undeniable influence on the ecosystem at large. Close to 10% of India’s 80,000 startups have received some form of funding. A number that’s growing at a staggering 19% CAGR.

But, what is often overlooked as a consequence of the mythic-ness of the industry is that venture capital firms too are near constantly seeking a potion of startup and entrepreneur who have the highest potential of de-risking their commitments. A need that takes a number of expressions, including:

1. Potent keywords – ‘IIT’, ‘IIM’ and ‘McKinsey’. Rationalized with a bevy reasons from an apparent risk taking appetite to leverageable alumni networks.

Watch] In a rare interview, Kunal Shah talks about building Cred ...
Kunal Shah, the Founder of CRED and erstwhile Founder of FreeCharge.

2. The ‘social proof’ that a second time entrepreneur brings to the table. Case in point, Accel’s Rebound program.

Leading to the ‘pool’ of investment worthy startups becoming remarkably and unsurprisingly limited.

Any attempt to pierce a veil – necessitates a 360 view. Flipping perspectives, from that of an investee to an investor. So, what must a firm (today) do to distinguish and differentiate itself? I.e., looking beyond the basic, mandatory promise of capital to attract the best and brightest.

Q1. Are there certain ‘standout strategies’ that VC firms (primarily in India) have adopted? The outliers.

Q2. What is starting to be included in the expanding definition of an investment?

Let’s take a peek at the emerging:

1. Taking advantage of the most scarce currency in the world = time, Indian VC WaterBridge Ventures introduced a productized offering christened Fast Forward, a structured model which guarantees feedback in five days, a decision in 10 days and release of capital in 20 days.

2. The sectoral specialists’ (> generalists) edge. Venture capitalists have emerged with a laser sharp focus on a specific sector, such as healthcare focused venture capital fund HealthQuad or the cleantech business catalyst Infuse Ventures which is housed at IIM Ahmedabad’s Centre for Innovation Incubation and Entrepreneurship (CIIE).

3. Blume Ventures, one of India’s most celebrated homegrown venture capital firms offers a ‘suite’ of auxiliary services as a key component of their core value proposition, these consist of financial and legal assistance, recruitment, business development support, founder learning and development etc.

4. And then there is Antler (which has just recently opened shop in India), a truly early stage VC that emphasizes on people > idea / product. Or, as they put it, Antler aims to select the world’s most brilliant and determined people, help them find the right co-founder. AKA, a co-founder matchmaking service.

5.1. The Hive, a VC Fund and ‘co-creation studio’ anchored by the Patni Family (of Patni Computer Systems fame) is (as they term it) a high touch model which among other things compliments and catalyses the startup’s technology innovation / progress. Delivering inherent expertise + a proprietary stack known as Euclid, enhances and expedites the development (and execution) of production grade machine learning models.

5.2. Similarly, another interesting model is that of Spring Marketing Capital – an entity that has positioned itself as a ‘skin in the game marketing consulting company’. Riding on a now established structure of Fund + Services. Essentially, influencing the creation of effective brands through a unique mix of capital and capabilities.

6. Market access as the Fund’s USP, a mutually beneficial partnership that amplifies scale. Anthill Ventures has conceptualized a number of such cross-industry platforms / (accelerator) programs. For instance, Anthill Studio for media and entertainment startups or ‘Urban’ to scale brands for urban India. The proposition is more or less consistent – market access partners, infrastructure support and mentorship.

7. Funding that enables and accelerates through synergies – a perfect example of this model is Microsoft’s M12 which allows startups access to Microsoft technology, thought leaders and engineering teams to explore product integrations. Cisco Investments would be another instance of a pseudo VC propagating this model. With the ‘feature’ of using the power of their ~ 17,000 strong sales force, network of channel partners and established customer base to speed up your go-to market.

Interestingly certain threads tie together what at first glance may seem disparate.

– The surge in standardization and productization. Consistent investment structures (ex., dilution percentages). Evolving as a science > an art. At the fringes (especially, globally) beginning to witness a greater role for data analytics and AI inside the firm.

– Incrementally looking for opportunities to get involved early on (the early bird gets the worm?). To the extent of partnering with exceptional teams (EVEN) in the pre-idea stage.

– Mere capital is inadequate, the rising expectation that a VC’s value / role in the startup’s success must extend beyond funding. For instance: Expertise, services, ecosystem etc.

Venture Capital 2.0.

REALTY CHECK. Each time a new VC firm launches, it, in a bow to Darwinism claims to be of a new breed. Rightfully so, with 2020 commencing with more than ~ $7 billion in dry powder (capital to be invested) – there exists a need to completely reimagine investor-investee matchmaking process.

There is enough seed money available in India waiting for quality start-ups.

Kris Nair, Founder, Opdrage Ventures.

For, it can be argued that an industry that claims to foster and champion innovation may need to introspect and reverse creeping stagnation.

Categories
Startups

The polyvalence of the Pitch Deck

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For most entrepreneurs today, raising external capital is a milestone in their journeys as businessmen.

And why not?

For many, the act of fundraising is primarily a ‘means-to-an-end’. To fuel-up as you enter the race of delivering on your extremely ambitious business plans.

The secondary, often overlooked objective – is to serve as the single most potent and legitimate form of validation. Externally and even more so, internally.

A venture is by its very nature discontinuous and fraught with risk. So, it comes as no surprise that there isn’t a standardized or predefined process as you seek investors.

What is, without an iota of doubt, a key piece of the puzzle: The Pitch Deck.

As a beautiful encapsulation of your business, the potency of the Pitch Deck extends well beyond the obvious.

For the structure is such that it gives you a 360 view of the universe you’re operating in, articulating questions you ought to have. The exercise, consequently, forces you to pursue, expand, and sharpen your knowledge.

A blessing in disguise for most entrepreneurs who tend to become fixated on a singular aspect of the business (which, usually happens to be the product they’re developing).

So, how should a Pitch Deck ‘flow’?

A number of popular ‘versions’ exist (including, those released by Sequoia VC and RNTO). What follows is an attempt at consolidating these learnings.

Before we jump to the outline that is conventionally the highlight of such notes – let’s align on a few Principles.

1. Begin by imagining yourself taking someone remarkably younger through the presentation. This mindset will reinforce the need to simplify and account for the potential attention-deficiency in the audience.

2. You are NOT writing a research report. The Pitch Deck would ideally reflect your distinctive personality (you know you have one). It would also go easy on the text (I.e., word efficiency) in favour of the visual. In addition, NEVER underestimate the potency of powerful/thoughtfully crafted packaging.

3. Each heading should both summarize the respective slide’s content and, seamlessly tell a consistent overarching tale.

4. You may be tempted to use ‘impressive’ numbers and creatively leverage data (we’ve all done it). Don’t. Kindly account for the reader’s capability to digest.

4.1. In a similar vein, you may also be enticed to understate your difficulties and overstate your upside. Don’t. The idea of ‘authenticity’ isn’t only a must-have millennial catchphrase for your marketing. It serves to establish your traits of awareness (the reality-check) and raw-honesty in the conscious of a weary individual who barely knows you.

5. Remember and reiterate to yourself, the objective here isn’t to walk away with a term-sheet. What is, you ask? Clarity, ‘business-clarity’ that induces excitement and allows for that elusive second meeting.

Now, without any further ado: The Outline.

  • (Title slide) Slide 1-2: Start with the vision, purpose and value proposition. Many companies ride on a proven business model (thereby establishing social proof). For example, Netflix for education.
  • Slide 3: The problem, who has the problem? Why does it matter? What is the magnitude of the problem? What is the foreseeable growth potential?
  • Slide 4: Expand on who you’re speaking to, demonstrate how much you know about them.
  • Slide 5-6: What is the competitive landscape? Even indirect competition. I.e., how is the problem being solved today? How are they failing/falling short (and therefore, what’s your ‘competitive’ advantage)?
  • Slide 7: The story behind coming up with a solution – a new take on a long acknowledged/appreciated problem (AKA, reframing)?
  • Slide 8-9: Revealing the ACTUAL solution. The ‘big reveal’. Explaining ‘why the time for such a solution has come’. What are the solution’s USPs?
  • Slide 10-11: Emphasize on barriers to entry (your ‘moat’)? What are the risks? And, what do you need/what will you do to prepare for them/mitigate potential challenges and challengers?
  • Slide 12: Where do we stand as on date? What has (initial) the traction been like? How does the MVP look? Do you have any customers/pilots onboard/ongoing?
  • Slide 13: What is the ‘broad’ company roadmap and product roadmap?
  • Slide 14: Elaborate on the current and future marketing and sales process.
  • Slide 15: Introduce the team, the mentors and the partners. What are their (respective) experiences, past successes? How are they best suited to solve this particular/specific problem? You may even consider mentioning those team members you’ll look at bringing on board in due course.
  • Slide 16-17: Let’s talk about the money. The business and ‘revenue model’. How will the product (or service) make money? Where does the product’s pricing stand in the broader competitive landscape?
  • Slide 18: Financials in brief – Sales, Profit/Loss and Cashflow forecasts for the following 1-3 years.
  • Slide 19: How much are you looking to raise? At what milestones (addressing, further funding requirements)? What’s the role the money is going the play? How will it help achieve the ‘goals’ you’ve set for yourself?
  • (Thank you slide) Slide 20: In summary – what do you want the prospective investor/whoever to walk away with (the highlights or a powerful single-minded message)?

Phew! Congratulations on reaching this point. You may consider counteracting that feeling of being overwhelmed by taking the initiative of reading the above once again (a little more slowly, please).

Now that you’ve taken the first step (acknowledging and appreciating the magnitude of the task), think about these questions whenever you’re working on your ‘Baby Unicorn’ or you believe you have discovered the secret to creating/birthing the next Unicorn.

The hard truth? Chances are, when you can convince yourself with the answers to the aforementioned questions – you can be rest-assured you are poised for success.

P.s.: A few additional pointers to further compliment your entrepreneurial endeavours follow.

1. Read obsessively. Not only Pitch Decks, but nuanced journeys of all the businesses you admire and those which inspire you. Books, stories covered by the media – anything and everything you can lay your hands on.

2. Network and socialize, far and wide. In the hope of finding a mentor or a partner, maybe. Even more so with an objective of developing an uncanny fluency of telling your story – consistently, crisply, and (most importantly) with a high degree of efficacy.

3. Consider (by default), not only potential investors but everyone who you want to talk to about your venture as being inherently impatient. The idea of an ‘Elevator Pitch’ is more relevant than ever before. You may also find value in drafting a two-three page ‘Executive Summary’ of the Pitch Deck, at the very least for your consumption (aka, practice).

4. Value and actively find avenues to incorporate peer reviews, press and user testimonials in your larger argument/value proposition.

5. Try and have a relatively detailed technical understanding (and associated documentation) of the product/solution you’re attempting to craft BEFORE you head out into the big bad world.