No doubt, as a promoter, it is critical to decide whether or not to raise funding for your startup. Funding gives you a runway for rapid growth and revenues of course.
More importantly, the correct set of investors can provide incredible support & networks to your business.
Its little surprising that newspapers, blogs and conversations today are full of fundraising stories. However, just because a venture has raised, ‘bagged’, ‘grabbed’ funds (or whatever is the terminology that currently gets splashed in newspapers), does not mean its already successful.
The journey to success for a venture is a hard one. Raising funds simply means someone else has joined the journey and has invested in the team’s ability to envision and execute.
At BabyChakra, we recently closed our first round of funding from a bunch of stellar investors: The Mumbai Angels, Arihant Patni’s Family Office and The Singapore Angel Network. This was our first experience fundraising and the learning curve was steep.
Here are the few things we learnt during our fundraising journey
There Is Nothing Called “A Fundraising Conversation”
As a promoter, you are always in the process of fundraising. So forget setting specific timelines to ‘start’ fundraising process for your startup. From the time you start up, every conversation you have could be a potential fundraising conversation.
Our fundraising journey started with a coffee chat with a senior veteran in the industry purely for advice on growth strategies. The outcome of that conversation was a series of follow-on conversations on strategy but also introductions to other investors including the Singapore Angel Network. Today, both him and the Singapore Angel Network are part of our cap table.
Caveat: You can, of course, always choose whether to proceed with funding conversations for your venture or go bootstrapping all the way. Bootstrapping has its own merits, it teaches you to be lean, lets you understand what works and what doesn’t in your product and your users. Most importantly, it ensures that you have a strong core team that’s ready to learn to be agile and innovative even with no funding.
Fundraising Can Be Expensive
As a promoter, often we only take the costs of equity as the costs to fundraising.
What have we learned? Fundraising can be expensive. The biggest (silent) expense apart from equity? Promoters time.
It’s quite simple. Fundraising cannot be outsourced. Right from pitching to closing negotiations, you are and you have to be involved. Would you trust someone else to pitch your vision of your product? Gauge whether you fit well with the investors? Delegate the commercial terms on your SHA? No way!
For an early stage venture, you must therefore factor in the costs of promoter time + ‘potential’ distraction and plan accordingly.
We learnt three things in this process:
- In a small team, transparency and regular updates with team especially while fundraising are critical. While I was initiating fundraising chats, we actively worked as a team to prioritize my day-to-day work. This ensured there were no bottlenecks at work created because of me. This practise especially helped when all the founders had to participate in the fundraise process for the two weeks before we were closing our round. That’s where the BabyChakra core team stepped up and ensured that the real show went on. The key was to request team help openly to ensure business could go on as usual.
- We spent very little time on our accounting, legal compliances during fundraising because from the beginning, thanks to my co-founder, we ensured our books were in order. As a young venture, investing a bit of time monthly to ensure accounting and compliance was in place helped greatly, simplifying the due diligence process and ensuring our closing was smooth.
- A major learning overall from our experience fundraising has been that when investors are on the fence, they never commit. If we’d realised this earlier, we would have saved a lot of time. We had a few potential investors who would write in asking multiple questions on BabyChakra and continuously request for meetings. Initially, given some of them were on our hotlist of folks we’d have liked on our cap table, we engaged with them repeatedly and this took up team time. My two cents: early stage investment is always more gut than science. If an investor believes in you, he/she will commit almost immediately. Better to move on than waste time assuaging their every concern.
When building a business, protect your time zealously. Look for and zealously cultivate investors who value your time equally as well.
If I build, they will come
Even if you have multiple investors interested in you, fundraising can still initially be a hard work. As a founder, when you are building a product, it is your responsibility to ensure your team and product get introduced to the investor community. If they haven’t heard of you, you don’t exist.
For instance, we first met one of our (now) investors/ advisors, at the Wharton India Economic Forum where we were pitching BabyChakra. When we were closing our round of fundraising, we met him back in Mumbai, since his questions through the pitch were spot on. On meeting, he offered to invest the very same day. We closed his part of the fundraise in less than 48 hours and he has since become an integral part of our board.
If we had’nt met him at the pitch, he would never have heard about us at the very early stage in our venture. Given he was not in our immediate circles, we would not have had access to him. In our experience, it definitely helps to choose and aggressively pursue platforms that can help you access the best minds there are in the business. Google Launchpad India, BusinessWorld’s Entrepreneur Awards, The Exhibit Awards and The Wharton Forum helped us tremendously in gaining exposure.
For women entrepreneurs in particular, the Anita Borg Institute organizes the prestigious Gracehopper Pitch Competition. Being part of that competition also provided us opportunity to learn from funds in the international ecosystem. We were among the 5 winners and were flown to the Valley on an all expense paid trip to pitch to the Top VCs there some of whom we are now in follow on conversations for our next round of funding.
This was of course our personal experiences. Experiences may differ as we each carve our own journey & story.
To quickly sum up, we are excited to have closed our round with a set of amazing investors. We are also excited to use the funds on making our product better, launch our App and make some key strategic hires. To all those who say fundraising can be serendipitous, I agree. Just that serendipity can sometimes take work, focus & strategy.
[BabyChakra was launched November 2014 and is the fastest growing platform for Indian parents today. BabyChakra helps parents discover and connect with local services relevant for maternity and childcare. It has quickly scaled to cover 3 cities in India: Mumbai, Bangalore, Delhi. The core team comprises of Naiyya Saggi (HBS MBA’12, ex-McKinsey & Co.), Mitesh Karia (FMS MBA’07, ex-HSBC) and Mohit Kumar (IIT-Delhi’13, ex-DZignUp, Zomato). ]