DARE - Because Entrepreneurs Do

Don’t hesitate to change or fine tune your original business plan to get the right results

Anurag Batra

I have always maintained that I am an accidental entrepreneur. I did not plan to become an entrepreneur, just stumbled into it. As with most entrepreneurial journeys, it was only after I got into it that I discovered the pitfalls along the way and navigated my way around them. This took me in an entirely different direction, and today my business is far from what I envisaged. Don’t get me wrong. I love what I do, it's just that it’s not what I thought I would be doing. I have faced many difficulties along the journey, but by far the most challenging was sourcing the funding for the venture.

I was lucky enough to present our plan (I have two partners) to an angel investor, who saw opportunity in us (honestly speaking, he trusted us more than the business plan we presented), and gave us funding and other support. He later told me that what really impressed him was the story we told him and not the numbers, the data or the fact that no-one had come up with this product till now. It was the story. It was how we explained what our product would do, how it would change the current scenario of doing business, and how it was the need of the hour that really convinced him. It was in the first few hours of our meeting that he made up his mind to invest in our business, according to him, the rest of the time was spent on making sure that his hunch and the data was in the same direction, and safeguarding his interest. I can't begrudge him that; after all, I would do the same if I were in his shoes.

We went around setting up our business and working towards the goal, but with poor results. Finally, when our funding amount started drying up and we started looking for more funding from our angel investor, he clearly told us that he had invested a certain sum of money based on his risk appetite, and that he expected us to make the business work within that sum of money. He told us that we could change around the model but that was all the funding that we were going to get. He was even willing to accept that the business would fail and thereby his investment  but he was not willing to throw good money after bad.

It was a difficult situation. We had to quickly develop a new business model, one with low investment and high yields. There were some teething problems that we faced but it was a case of survival. We were desperate. Thankfully, we were lucky that it started generating modest revenues, which soon built up to sustainable amounts. We had to manage our expenses and run the business on a skeleton staff and on a shoe-string budget, which we continued for quite some time. Since then, we have come a long way, where we have become the leading group in our domain, but that’s another story.

The point I am trying to make is that funds are a key issue in every startup. There is never a situation of unlimited cash reserves, let's face it, if that were the situation, no first-time entrepreneur would ever fail. In the worst condition, he would simply be developing the business model, and the business would be at a stage where the revenues simply had not caught up with the costs. It is working with a budget that is the real trick. I know of several entrepreneurs who started their enterprises on little money and good ideas but just ran out of money on the way and were unable to sustain it. I am sure that if they had funding for a little while longer, their enterprise would have been successful, unfortunately, it was not meant to be. On the other hand, one of my friends who started with very little seed capital (saving up some money and borrowing a little from his relatives) has made it big today. He said that he had a very simple rule when he started off that the costs could never be greater than the revenues. Even when extending credit to his clients, he ensured that he never gave more credit than the profits he derived from the client. He was willing to give up some opportunities and a lot of his comforts to stand by this rule and ultimately it paid off. Difficult times will emerge in every entrepreneurial journey (it is part of the game) but only those who stick through the rough time will emerge successful.

Funding is a mixed bag, it is not only about the money that you get. I live by the rule that an angel investor should have no role to play in the day-to-day functioning of the business. After all, the person who started the business and is running it is the best person to lead the team. Thankfully, we were lucky that way  our angel investor gave us a wide berth and would only ask us of the returns on his investment. However, I know of several cases where the investor had more than just investing in mind, and wanted to take over the company. Usually, the hallmarks of such relationships are evident in the beginning itself, and if you and the funding entity do not see eye-to-eye on the objectives, the leadership and other key issues, the deal evaporates or quickly sours.

Ultimately, funding should always be the Plan B in any entrepreneurial pursuit. The first option is to use your own funds. In the event that you do have to go in for funding, make sure that the reins of the business remain firmly in your hands.

 

Image credits

Image: winnond / FreeDigitalPhotos.net

Image: scottchan / FreeDigitalPhotos.net