Raising capital for an early-stage startup is stressful. If you’re raising money for your startup and want to pitch to angel investors or venture capitalists, then there are a few important things to know that savvy investors care about.
Anil Joshi needs no introduction for those following investment news. He has been one of the pioneers of angel investments in India as head of operations and President at Mumbai Angels and Bangalore Angels. Anil has helped around 60 ventures and directly involved in closure of over 25 deals. Anil has served on the board of 5 companies and is involved as mentor with various incubation centers in India and internationally. Mentoring start-ups is his passion, and he also advises Government and industry bodies.
HerMoneyTalks caught up with Anil Joshi, Managing Partner of Unicorn India Ventures, for a thought provoking chat.
HerMoneyTalks: Let us know the notable startups you’ve invested in.
Anil Joshi: Unicorn India has made over 15 investments from first fund and the portfolio is fairly diversified with tech as central theme. Some of our investments are:-
- Smartcoin – in micro landing for shorter duration and all is done leveraging ML
- Bankopen – in Neo banking space and offers lot of digital services on top of normal banking services provided by partner bank
- Sequretek – in Cyber security and first one to have AI for their products
- Pharmarack – Pharma supply chain automation and processes over 50K order on daily basis
- Neuroequilibrium – in vertigo diagnostic and present in over 50 clinics/hospitals
- Inc42 – tech media covering startup space extensively
- Genrobotic – have developed robot for manhole cleaning thereby helping eradicating manual scavenging of manholes
- Inntot – in digital radio space
- Sectorcube – smart appliances and working on interesting kitchen appliances.
- Grabonrent – in shared economy space and specialises in appliances and furniture renting thru tech platform
HMT: What differences do you see in entrepreneurs a decade back and today?
AJ: Historically, India has been a very entrepreneurial society and the current entrepreneurial ecosystem in India is on a strong growth trajectory, with the average age of entrepreneurs dropping from 40 to under 30 years. India saw a new breed of successful ventures built by first generation entrepreneurs.
By the beginning of the new millennium, the entrepreneurial wave had made inroads into various sectors of Indian society. However, in the last decade or so, the profile of entrepreneurs has changed a bit – the current entrepreneurs are more focused on revenue and have started building ventures all by bootstrapping. The jolt of 2015/16 was a good reality check that resulted in focus on revenue generating businesses. The entrepreneurs have not only matured on business side but also identifying globally scalable opportunities.
HMT: What should an entrepreneur consider before approaching his/her first investor?
AJ: The Startup India / Standup India way opened lot of funding avenues with the start of many local angel groups and starting of micro &early stage venture funds. The funding as such is not an issue for a good idea, however one needs to be careful before approaching investors, as having the right investors on board is very important and would go a long way in building scalable business. I would suggest following checks before shortlisting investors:-
- Investor’s focus area, meaning which segment they are investing in
- What expertise he or she has and what value add they can provide to the venture
- What kind of connects or network they have
- Can they help opening doors for sales
- Can they help on technology front or product development
- Can they help on recruitment or identifying key resources
- What kind of investment they have made in past
Speaking to investor’s portfolio company would give a decent idea about them and their focus.
HMT: What one big thing must Indian startups do to become sustainable?
AJ: Coming out with a “market fit” product, which consumers would need and be willing to pay for.
HMT: What’s the one big thing an entrepreneur can do to convince you to invest in their startup?
AJ: Prove why he/she is the one who will be market leader in their space.
HMT: How should an entrepreneur prepare himself before approaching early stage investors? What are the common mistakes often made by entrepreneurs while pitching?
AJ: Entrepreneurs have great ideas and most of them are revolutionary and they believe that these path breaking ideas are enough to seek funding to fuel their plans, which is not reality. There are many factors that are important for fund raising; here are few of the aspects that entrepreneurs ignore while applying for funding:-
What’s different, are you doing something disruptive: Investors / VC always scout for path breaking ideas; the thumb rule is that your concept or business proposition should be disruptive or disruptive enough to shake the existing practice of doing business.
Be patience and tolerant: Most of the time, entrepreneurs reach out to investors at the last minute and expect the investment round to close as of yesterday but in the real world it takes longer than expected. The investment process normally takes longer time. Hence entrepreneurs should plan well in advance and not when they would go dry.
Proof of concept: It is very rarely that investors will be convinced purely on the strength of a business plan alone. The proof of concept or some working prototype or beta version software always helps.
Real market potential: Investors would like to fund realistic business plan. Hence entrepreneurs should do proper research on market potential – not only domestic but also international potential.
Know your requirement: Most of the time, entrepreneurs plan with a short term view and start-ups burn a lot as revenue cycle is not clear. While making the business case, entrepreneurs assume that what they are offering will be absorbed by the market and they will be flooded with orders, however you may be required to do some iterations before you hit the market with right products. Hence entrepreneurs should do proper analysis on fund requirement else will be trapped in another fund raising cycle too soon without making any significant progress.
Importance of team: During early days, entrepreneurs may be doing everything, which I refer to as “P2P” (role of Peon to President) and may miss on team required during the growth phase post funding. While it is true that you may not attract too many guys joining your venture without proper funding, but do identify people who can be on board post funding. The assumption that you would start looking once you get funded may result in delay of 3 to 6 months.
HMT: How useful is it for entrepreneurs to pay to attend networking events and startup conferences?
AJ: Attending events and conference is important but one needs to be careful and attend the right events. Otherwise, entrepreneurs may end up wasting time and money without any gain. Events and conference do help on following:-
- Brand building
- Identifying right candidates
- Locating investors
- More importantly, finding customers
HMT: Are women underrepresented in Indian VC circles?
AJ: Not really, there are women VCs, however the numbers could be better.
HMT: Have you invested in any women-owned business? Reason? What was your confidence level?
AJ: Yes, we have invested in businesses where women are co-founders, like Inc42, Vanitycube, and Bankopen. The fund is not person biased but continuously looks for star entrepreneurs, hence doesn’t matter whether (the entrepreneurs are) men or women.
HMT: Do you think women founders move forward with less capital?
AJ: Women are well trained to manage the show with limited resources hence they make really good managers (of money).
HMT: Do you think women owned startups are a big bet? If so, why? How is it different from men owned start ups?
AJ: Not really, women owned business have done well and there are several examples like Zivame, Mu-sigma, etc. The point is there are less women entrepreneurs and there is need for them to be more confident in starting and scaling business.
HMT: Which are the sectors you are interested in investing? Your future plans?
AJ: The fund is tech-focused or businesses that are disruptive using technology.
HMT: What is your piece of advice for women entrepreneurs?
AJ: Believe in yourself – sky is the limit.