The non-VC funding path
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Several entrepreneurs in India I come across have an ambition to build steady-growth, profitable & fundamentally solid businesses. While they’re not fit for VC funding (size/speed expectation mismatch), debt availability is also low for them early on. And so their business suffers and such entrepreneurs feel orphaned by India’s investor ecosystem.

While royalty-based funding has been around globally it hasn’t surfaced in India yet. This YC demo day promised that the time for income share funding might have come in the US, but will take time before we see it here.

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5 Key things investors look for in a startup
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A few days ago, I did a session at InstaOffice for entrepreneurs, trying to de-mystify startup investors and their thought process. I really enjoyed the event as it was very interactive, with lots of questions from entrepreneurs in the audience.

One key topic of the discussion was the key things investors look for in a startup. Over time, I’ve realized that things investors take for granted often comes as news to entrepreneurs, such as this. InstaOffice team did a brief video on this topic to go along with the talk, which is the focus video of this post.

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Why are investors unapproachable & unresponsive? And how to fundraise from them?
Why are investors unapproachable & unresponsive? And how to fundraise from them?
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There are several grievances early-stage founders have against startup investors, especially related to approachability & communication. Some of them are — investors never respond to emails, they can at least acknowledge founder emails, they vanish after first call or meeting, and worse, they are snobs. Of course there are other criticisms, like investors don’t know what they’re doing, they fund bad startups, they don’t respect cash or profitability, etc. — but these are topics of another post.

Coming back to the complaints on approachability & communication, the answer is that these are both right and wrong. Some investors are good at this, some are bad.

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Basic accounting errors founders make
Basic accounting errors founders make
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Of late, have come across multiple early-stage startups making a basic accounting error. While digging their choppy monthly revenues, I realized these startups book revenues in the month cash was received, and not when the product/service was delivered. While this seems very tactical to founders early on, it’s important.

Examples – a SaaS startup charged & booked annual revenue upfront, while clients could cancel any month with refund.

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What’s the first step for founders?
What’s the first step for founders?
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Most tech founders start their journey by writing a lot of code. However, many times it’s better to begin with validating product need through a quick non-code/ light-code exercise. E.g. if you’re planning a market-place, you might try to get a couple of transactions done by matchmaking supply-demand simply over email/ offline. Or you might set up a single landing page to collect emails and try digital ads to figure out cost of customer discovery.

Protecting the idea, big bang launch, stealth mode, wowing customer at first experience, etc are all fine ideas if you’re very sure of who your customers are and what they want.

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What can one make of the early-stage funding implosion?
What can one make of the early-stage funding implosion?
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There’s consensus now that seed to pre-Series A funding environment isn’t rebounding. In fact, 2017 has been worse than 2013/2012 globally, and trending back to 2014 levels for India.

There are no indicators that next 6 months will be drastically different. It doesn’t help that there’s too much noise in every sector, including AI, fintech, SaaS, etc. which leads to higher burden of proof for startups. Moreover, every investor is currently distracted by shiny new objects of blockchain & crypto, due to strong bull runs there.

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Tech sector is booming: 4 lesser-known ways to get recruited in it
Tech sector is booming: 4 lesser-known ways to get recruited in it
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It’s common knowledge that the technology sector is booming, almost globally. Tech companies continue to grow and create value at a pace previously unheard of.

Today, 5 of the 10 most valuable public companies (by market cap) are from the tech sector (via Globevestor). One would expect this to get even more skewed in favor of tech over next few years. In 2016, while the tech sector in US employed only 4% of the total workforce, it created 10% of all new jobs.

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Wrong reasons to start up: When not to take the entrepreneurial plunge?
Wrong reasons to start up: When not to take the entrepreneurial plunge?
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You’ve thought about it over & over. You’ve spoken to family, friends & colleagues, and everyone’s been supportive. You’ve got great potential and have displayed it in some way or the other in academics or job. People who matter believe in you. You’re much better than most so-called founders these days. If they could do well, you’ll do great.

Media says this is the golden era of startups. Cost of starting a tech company is very little now. And of course, those who take no risk get no rewards.

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Why Are Indian Founders Less Informed?
Why Are Indian Founders Less Informed?
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I have had the chance to observe startup founders both in the Bay Area and in India over the past 2.5 years. While it’s a small duration, it does seem to me that founders in India are relatively less aware about how startup investing actually works. By this I mean an understanding of the VC math, acceptable investment terms, exit paths, cap tables and other nuts and bolts that have nothing to do with technology stacks, target markets or business models.

If you were to ask an average Joe (or Jai!) founder in India, who’s yet to close a round, anything regarding investment terms beyond pre-money valuation and dilution, there’s high chance that you’d draw a blank.

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