Seeking Funding? With the current developments in the startup ecosystem in 2018, Investors sentiments are positive about investing in startups. As we walk into the 2nd quarter of the year,  everyone is awaiting the announcements of large funding rounds. There is much noise in the known corridors for startups. Many new entrants from the tier 2/3 cities are bringing innovative models to pitches. Saas, Fintech, and Healthcare top the charts as the favorites but many offbeat sectors like agriculture are also receiving new dedicated funds.  

As we move closer towards the pitch deck and put on our salesman hats, we should stop for a while and think, how can our pitch be more competitive amongst many who have met the VC across the table.  Have the Indian entrepreneurial virtuoso wised up since funding rounds? Many questions have been raised on how e-commerce startups have burned cash by spinning money to win the discount wars, many marketing launches and ambitious customer acquisition plans have been of minimal value to generate decent revenues.

Now, that we enter the circle with rejuvenated vigor, the primary question is  “How would you intend to spend the funds that the investor invests  in your business?”

This question can have a wide array of answers but there are some crucial points that need to get covered, irrespective of how niche your business is.

Business Model:

The essential reason numerous ventures fall flat on the grounds is that their plan of action does not work. No measure of subsidizing can spare a start-up that has a powerless or insufficient business model. In spite of the fact that this entity is more well-suited for startups, it can likewise impact medium to considerably large businesses. Establishing a well-researched and carefully thought out business model isn’t only attractive for gain funding but is a mandatory ask from the entrepreneur.  How a founder expects to transform his thought into an operational venture is the thing that VCs need to know.

A well-evaluated business model, covering the key aspects of funds allocation, monthly burn rate, CAC costs and estimated returns adds more value to the pitch. At a pre-revenue stage when all facts and figures which seems like mere speculation, it is important to back up your numbers with enough data metrics you used for the derivation.  Having a plan at your disposal comes handy even when you have progressed considerably in your venture. In an agile environment, it is best that you can come back to your initial plan and make modifications as and when required, which not only keeps your perspective straight but aids the investor in bestowing trust upon the entrepreneur.

Expenditures and Burn Rate:

This is another primary zone for new ventures; entrepreneurs must spend drive their focus on considering operational balance and keeping manual labor to the minimum. Well-funded startups are likely to ramp up quicker by hiring bigger teams and spending on the marketing platforms to meet growth expectations. The downside?

Investors would give more priority to businesses that have lower cash burn rate per month while comparing them on a scale of profitability. Now there is no way to eliminate this unless you are very careful about prioritizing the need of the hour. While hiring the best guys for your team might sound lucrative but this can potentially lead to bigger burns and lesser returns.

The optimization should happen with founders automating as many operational requirements as they can. Less human interference means lesser errors. Hire when there is an absolute need and prefer people who align with your vision not with the money you offer. The core team is the one you would want to retain as long as you can. Investors are more likely to trust efficiency than numbers.

Innovation & Technology:

Let’s focus on a key factor of your product. How innovative is your offering? Many of you, who has been pitching at all opportunities might have been asked this question, “So, what is your USP?”  When you are getting this question post your pitch, don’t repeat your USPs you had mentioned in the slide deck. Take a cue and try to catch what you might have missed or a point you think can add more value to your proposition.

The current market entrants have leveraged the power of tech to implement process automation using AI. Before you use any such cutting-edge tech names, be sure you the saying the correct thing and not just adding for the sake of it. Many angel investors either have a background in tech. Most of them have quite a bit of exposure to the market. They can easily demarcate the genuine from not. So be safe than guilty.

Identify your problem statement properly before you devise your USPs and competitive edge accordingly. Leverage tech whenever necessary but innovation can be beyond that, so if you don’t have a model that needs the cutting edge technology right away, focus on ideas that would make your product more lucrative to the customer and that would definitely ring a bell with the investor.

Customer Acquisition:  

This factor is completely based on what target you set mutually with the investor. On the off chance, initially, it’s safer to not go all out on this aspect. Organic methods to acquire your first set of customers can be beneficial for your product and business. You have no option but to invest in acquiring a fair share in a competitive market?  Come to an agreement with your investor about the plan and the estimated return on that investment.

If you are allocating a huge chunk of your investment on this aspect, ensure these. You have an optimized plan and a plan B to implement just in case. Many cases have been reported about startups trying to capture a market through heavy promotions. The returns in terms of revenue have been meager. If your acquisition plan involves deploying more sales personnel be prepared for an increase in the operational spend. Online channels are a common choice but going online without any offline presence provides little help.

StartUps fizzle out and investors lose interest. This issue of not knowing where to spend how much and when. Some entrepreneurs learn from trial and error and by burning investors money with zero or minimal returns. It is in your best interest to your plan evaluated and work with an extended arm of business consultants to minimize the risks you take while starting up or scaling.

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