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How does an entrepreneur get funding for his
vision from a VC? This is best answered by a person who has been on both sides
of the fence. As a struggling entrepreneur,he was one of the founder's of Fabmall and now a VC
who gets to decide who gets the moolah.....
Vipul Parekh is currently an Investment
Director with one of India's largest Private Equity funds, Peepul
Capital which
invests growth capital into emerging companies in India. Vipul began his career with
TVS Electronics Ltd in Sales and later joined Wipro Peripherals. Vipul has extensive experience in Sales,
Marketing, Product Management and design of B2B and B2C initiatives both at
Wipro and at Fabmall. As President Retail Operations and Business Development
for Trinethra Super Retail Ltd for them he has doubled Trinethra's number of
stores over the last 18 months and initiated expansion into new store formats
such as Hypermarkets.
Excerpts
from Vipul's Talk.....
There are some key things you can do when you are looking
for funds to scale up. As an entrepreuner, I learnt that it is just commonsense
that is required to raise capital. Many times, raising money is a matter of
being ready whenever the market is right and not by waiting till you need the
money.
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Raising
money has nothing to do with whether you need money, it is a matter of being
ready whenever the market is right
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3 Key things
to do before you raise money
Don't
loose faith - As an
investor I meet a lot of Entrepreneurs, who do not have confidence in
themselves, it may be because they are not well prepared or because they have
gone through lot of bad experiences and are in doubt whether they are doing the
right thing. But the investor can sense very quickly, whether you have confidence
in your own idea and if you have the passion to carry it through. How much
passion and courage is there in the team and whether they genuinely believe in
the idea will make a significant difference to the valuation and the amount of
funds that can be raised.
It is tough to be an
entrepreneur; it scrapes the skin off your back. Being successful in a business
is lasting a long time, it needs lots of determination. There
is a cynical saying that ‘Overnight success takes about 10 years' and I've seen
it again and again.
You will have self doubts, but you are a successful entrepreneur if you survive
when you don't have any money, when no one believes in you or when you have
nothing to lean on.
When Bill Gates started, not many
realized how big the potential was. When we started with an online commerce
site 9 years back, we believed it was a great thing; We were early by 15 years,
Physical retailing took off much earlier, if we knew it then, we would have
done a lot of things very differently. Not being able to predict (the future)
causes a lot of uncertainty and nervousness.
When I see people who come up
with very optimistic business plans, I tell them that Businesses
usually take 3 times expected capital, 3
times expected effort and 3 times expected time and gives one fourth of the
expected result.
There may be a large opportunity,
say a $ 30 Billion market, for your product or service, but do you have the capability to capture
that market. Aggression and ability to scale, to build up your idea is
essential.
Get yourself
ready - Most of the business plans are made on excel sheets, It
is easy to create an magical excel sheet, and sometimes you get lost in them.
Look at it from the point of view of a VC, the risks as
the VC sees it, Founder risk, Market risk - Is the team good enough,
Competition risk - Is there a very large competitor sitting there, Timing risk
- are you market ready, Marketing risk/ Distribution risk, Product risk/
Technology risk, Team risk, Location risk...are the customers paying you. Address
each of these risks in your Business plan.
When you present your business plan to the VC, good
amount of preparation is required. I learnt it the hard way; we were making a
plan to get funding for our company. It took 3 months to get the plan ready, it
went through iterations and iterations, and resulted in a 70 slide presentation.
A huge amount of detail and preparation went into it,
every word was thought 10 times, every data was checked multiple times. It
covered every question a VC could ask, every risk, every analysis, every market
and every business percept. At the end,
every VC we presented the plan to, was willing to invest in us.
When a great team meets a lousy market, the market wins.
When a lousy team meets a great market, market wins. When a great team meets a
great market, something special happens, that happens very rarely. Sometimes an
average team meets a great market and still does very well. Hence getting the
right Product Market Fit is very essential. Largest company killer is a lack of
product -market fit.
Get
professional help - Get Professional help to seek VC funding. If you are
raising serious money, get an intermediary to work with you. The amount that
you pay for it, is a small price. It is like, when you get fever, you don't go
to the chemist and swallow a lot of tablets, but you go to a doctor, for a
proper treatment. The fever will go away in a couple of days, if you can't
raise money, your business will be in serious trouble.
He was speaking at a Panel Discussion organized by
Businessgyan and TASMAC on the topic ‘Funding for Growth'.
Compiled
by Ms. Mangal D Karnad for Businessgyan
Issue BG81
Dec07
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