India is leading as the third largest startup ecosystem in the world, a huge number of innovations have led to the booming startup ecosystem in India. However, some of the basic questions for the new and old entrepreneurs remain the same. One of those is: When should a startup raise funds?
So, after seeing various users asking this to our guests on Facebook Ask Me Anything, we have narrowed down the answers from the two young and successful entrepreneurs of the Indian startup ecosystem.
During an Inc42 Facebook Live AMA, we caught up with Suchita Salwan, Founder and CEO of the Little Black Book (LBB), a robust recommendation platform with over 2 Mn monthly users and over 30,000 local businesses across the country who have benefitted from it. LBB’s growth continues to be 80%-85% organically.
So, we asked her at what stage should a startup seek funding – at the idea stage or when the product is ready?
As an entrepreneur who raised money two and half years after she quit her job with the BBC to work on LBB full time, the startup was bootstrapped for two years before it pitched to its first set of investors.
Suchita shared with us that the success of being an entrepreneur should not be dictated by funding. Funding is the means to an end, it is not the end itself. “It would be great if as an ecosystem we change the dialogue from how much money you have raised and which VCs have funded you? What value, you as an entrepreneur, are creating? Those are more important questions to answer as compared to when one should think of raising funding,” she added.
However, addressing the question of the time, Suchita Salwan added, “As an entrepreneur, one should only go and raise money when you are 2,000% sure that you are happily dedicating a significant portion of your life towards the product you are creating. Starting up gives you a great high, but only raise money when you feel that come what may; hail, snow, sunshine; I am going to see this through.”
To understand, an entrepreneur’s point better, we also asked Paras Chopra, co-founder of SaaS startup Wingify, to share an advice on raising funds.
During an Inc42 Facebook Live AMA, Paras Chopra told us, “Before raising funding, one should reflect on what purpose the funding is required for. I want to emphasise that funding is not a magical bullet, it’s like a medicine that amplifies whatever is going on in the company. If something is going on well, it will amplify that and if something is going bad it will amplify that. It cannot give you a new insight.”
Now with these being the thought process behind any startup’s funding, it is to be noted that as per Inc42 Datalabs’ Indian Tech Startup Funding Report 2017, the Indian tech startups raised about $13.5 Bn in funding across 885 deals in 2017. The amount invested in 2017 is almost 3x than what it was in 2016, while the number of deals reduced by 7.14%.
Also, in Q1 2018 report by Inc42 Datalabs revealed that the tech startup funding deals were found to have increased by 20% while the deal amount fell by a staggering 50% in comparison to the previous quarter.