Archive for March, 2013

“Accelerators should not try and be all things to all people”

At the recent Venture Intelligence APEX’13 Summit, Sateesh Andra of VenturEast Tenet Fund provided what I thought was very useful guidance to entrepreneurs on which type of early stage investor to approach – depending on the type of company they were creating.

Accelerators should not try and be all things to all people. They are great for fast moving businesses – like Internet, Mobility, Cloud-based technologies, etc. – which need things to be put on a fast track. But you cannot accelerate anything for a Retail consumer company. That message is getting mixed up in India. Companies that require longer gestation and diligence (to solidify their business model) – like ventures in Cleantech, Medical Devices, etc – should go to incubators. Angel networks are good for very domain specific businesses where the entrepreneur is fairly seasoned and already knows what they want to do. Seed funds can bet up to a $1 million even on concepts, but need to see full fledged teams.

View more highlights from the summit here

Things to know about Angel Investors

As a start-up, if you are looking for angel investors, it would help to remember the following:

Have a complete Business Plan:

Remember, you don’t need a 30-page plan. Investors do not have the time to go through such huge plans. They need all the information in a precise and concise form. It would help to consolidate your entire plan in a 10-slide PowerPoint presentation. Clearly outline the business model, how you will get your revenues and your exit plan, so that the investors will know how the business will grow and when they will get their return.

Most important – start with the problem-solution statement. The solution details can follow.

Get your numbers right:

Investors look for a plan with a clear potential to scale. That means you must be addressing a market that is atleast 10 times the revenues that you are projecting for the 5th year. Your year-on-year growth should be in double digits. Anything less would make the Angel sceptical. Keep your numbers credible and doable. Do not over project.

Business Knowledge:

Angels feel more comfortable dealing with people who have good domain knowledge for the business they are planning and/or have prior experience in setting-up companies. Please do not mistake domain with solution. You will have a good knowledge of the solution but may or may not have knowledge on the business domain that your solution is addressing.

Go to a known Angel:

Angels prefer dealing with people who come through a known source. Make sure you activate your network to get connected with some Angels before you actually start looking for funding. Sending mailers to large number of Angels will not work. They will treat your mail as spam.

Look for an Angel in your city:

Angels normally like to be actively involved in the venture. So it does not make sense to work with an Angel from some other location.

Size of Funding:

Angels normally fund anywhere between Rs. 50 lakhs to a Crore. For anything bigger, you will need to look for VC funding. Angel investors also help you get VC funding when you need to get larger funding to grow the business or explore new markets. This is in their own interest.

The author, Srikanth Vasuraj, is a Business Consultant focused on helping start-ups to grow. He can be reached at +91-98454 78585 or srikanth@nodiva.co.in .

Launching StartupCatalyst.in

Canaan Partners is pleased to announce the launch of StartupCatalyst.in – an online startup community, bringing practitioners insights and Canaan’s global expertise.

Check it out!

Is India ready for Online-only Banks?

WSJ has an interesting article on online banks. In India, there has been rightful emphasis on financial inclusion as a key direction for banking sector. However, there is a segment of current users who could enjoy the efficiency of an online-only bank. Are Indian banks ready to make that transition? Is the regulator ready to make that transition, or will this be a blind-spot forever at the alter of financial inclusion?

Nielsen Report – The Global Consumer

Interesting report from Nielsen regarding the mobile consumer. Has a ton of data on mobile usage patterns, and includes India as a key coverage market. Happy reading!

http://nielsen.com/content/dam/corporate/us/en/reports-downloads/2013%20Reports/Mobile-Consumer-Report-2013.pdf

Tech Startups: We are NOT on our own

As much as Vijay would like us to be left on our own, doesn’t look like we have that option :-) The budget seems to continue to impede the pace at which Indian entrepreneurship wants to grow. Some key elements below.

The tax passthrough status to angel funds is welcome. It seems that this immediately sparked a demand for “similar tax break for individual angels and angel networks”. My understanding is that this is no a tax break, and only a tax “passthrough” – if there is no intermediary, such as a pooled vehicle, then the notion of passthrough is irrelevant. So as individual angels and angel networks, lets make a ton of money from angel investing, and be happy about paying our taxes!

On the VC/PE side, some clarifications, but more ongoing confusion – be it around tax residency, or around indirect transfers. Hopefully, as slow as it may be, this continues to move in the right direction. Some cute stuff like taxing distributions in hands of companies rather than investors – hopefully helps avoid leakage.

The big negative is the continuing confusion around “angel investment tax” – the intent of exempting genuine angel investments from the tax has been reiterated, but specific mechanisms are still unclear after a year of this first being introduced. Reminds me of ghalib’s “yeh to mana ki tagaful na karoge lekin, khaak ho jayenge hum unko khabar hone tak” (I know that you won’t ignore me, but I would be dead by the time you get the message”).

Happy investing!