The TiE event, ‘Start Small, Finish Big’, brought together entrepreneurs and investors to unravel the mystery of seed funding. It also pondered on marketing, technology and HR issues
“You should believe in your dream when you approach the investor,” said Dhruv Shringi, Co-founder, Yatra.com, a well-known travel portal. Shringi was part of a panel discussion on financial aspects of entrepreneurship, moderated by Sudhir Sethi of IDG Ventures, at a TiE event held on May 30 in New Delhi. The event titled ‘Start Small, Finish Big’ was co-hosted by Sun Microsystems, as part of its StartUp Essentials Program. Shringi stressed that when his team approached investors, they tried to convince them that they were the right people to back and that the business they wanted to set up made financial sense to the investors.
Making the pitch to investors is one of the most crucial steps towards securing seed capital, and no entrepreneur can afford to avoid it. It is at this stage that the financier cross-questions the startup team to judge if the plan holds promise for the future.
Shringi and his team made multiple pitches to investors, only to find that each meeting made their thought process clearer. Based on their discussions, they kept fine-tuning their business plan. While most investors were convinced about the capabilities of Shringi’s team, some of them questioned their understanding of the Indian market. This was because the founding members of Yatra had spent long years abroad. What worked in their favor was that the promoters had been in the business of online travel during their stints in Europe. Thus in the end, three investors agreed to fund their business.
| There are three things we look at—team, a large market opportunity and a simple and clear exit. Sasha Mirchandani |
Sudhir Sethi of IDG Ventures quipped, “Do stick to your business plan once you get the funding.” The other member on the panel was Sasha Mirchandani of Blue Run Ventures. On a query raised by a member of the audience regarding what the investors look for, Mirchandani said “It is very simple. There are three things we look at—team, a large market opportunity and a simple and clear exit.” He said if these three things come out clearly to an investor, he would not mind putting his money into the venture. If not, the investor would want to suggest some changes in the team, and discuss and debate further.
Exit is very important in the case of VC funding. “We are very patient investors. We can wait for five or seven years, but that much is the timeline we have. We cannot wait for nine to ten years. Therefore, entrepreneurs should understand logically how a clear exit happens,” said Mirchandani.
Dwelling on the jargons of term sheet when it comes to negotiating with investors, Sethi said that liquidation preference is a given in the case of VC deals. He added that it varies with the amount of capital, the stage of the firm and the risk perceived with regard to the business. “I would strongly advice you to get a lawyer to help understand the term sheet,” said Mirchandani, who recently founded Mumbai Angels.
| It is important for entrepreneurs to understand that venture is about risk and equity holding. Sudhir Sethi |
VC funding is not just about money, but also the references and contacts that investors bring in as value-adds. “We at IDG Ventures, after eight investments, collectively spent one-third of our time in customer introduction to our investee companies,” said Sethi. Shringi agreed that investors bring a lot of credibility to a business venture.
The session on HR was moderated by Gita Dang, Founder Director, Talent Advisory Services. The discussion focused on issues related to finding the right co-founder and the classical mistakes of hiring.
The discussion on technology focused on virtualization, standards compliance and security, while that on marketing revolved around the importance of understanding customers and time to market, changing with market change and keeping your ideas secure.
Sanjay Sharma of Sun Microsystems highlighted the benefits of Sun Startup Essential Program for entrepreneurs. The program makes available Sun’s hardware at deeply discounted prices for startups.
The end of the event saw five startups showcase their businesses. A mentoring session was also held for the benefit of entrepreneurs.
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