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Approaching a VC? Here is a checklist
By Sikta Samantaray   |   Tuesday, 16 March 2010, 20:04 Hrs
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Approaching a VC? Here is a checklist
Bangalore: Seeing the growth of Indian software market, Ravi Varma started its own software venture in 2005, but could not go long and had to shut company's door in 2007, as he failed to raise fund from venture capitalists (VCs).

Currently working as a Vice President - Strategy in an IT firm, Varma graduated from IIM, Bangalore in 2004. After running the business for two years without any financial support, Ravi thought that his company had all the right credentials needed by venture capitalists, but when he pitched his ideas to around 10 VCs, he realized that his idea is premature and can not be funded by any venture firm.

Not only Varma, there are several such start-up entrepreneurs, who are in a race to raise VC funding. So, to help these emerging entrepreneurs, SiliconIndia talked to some of the VCs to know the important factors that can help these entrepreneurs to improve their chances of getting funded. Here are some important thoughts being given by VCs:

Do you have a Team to lead?

A company may have a big business idea, but working individually may not help it to achieve the objective. It is the team which may help one's idea to convert into a profitable product or service. Anurakt Jain, Analyst, Draper Fisher Jurvetson India said, "VCs invest in a team, so sell the team. A start-up should know well about their team members before pitching to VCs."

Pitch

The process of raising fund can be one of the more physically and emotionally draining parts of starting a business. It can go on for weeks or months, taking away focus from business. As an entrepreneur seeking funding, one need to demonstrate that he/she is very clear about his/her idea and how he/she would build an economically viable business around it. Rajesh Vakil, Head, Siemens Venture Capital, India said, "Put together a good investor presentation that covers all aspects of the business plan. A weak presentation can put off VCs easily." Speaking on the similar lines, Jain said, "The first 5-10 minutes of pitch to VCs are very crucial - get VCs on the hook. Describe the company in one-two lines - that would be helpful in running the business as well."

What is your USP?

While explaining about the product or service, a company need to avoid using jargon and adjectives. VCs say that startups should explain the product or service in simple language and emphasize its competitive edge or USP. Manav Sethi, COO BigMaps said, "The basic objective of a start-up should be to show that there is a need of this product or service in the market."

Business Plan

For any start-up, the purpose of presenting a business plan should be to show the potential to investors that if they invest in its business. Vakil said that a business plan must have a very effective executive summary, and in that summary a company should highlight the market, the product or service, management team, stage of the startup, location, market, market size, business, business model, capital structure, capital required and exit options. He also asked these startups to critically evaluate the business plan and do a market opportunity analysis to determine scalability of business. "Ask honestly "Will you fund this if it was someone else's business plan," added he.

Customer Base

Before presenting to VCs, a company needs to evaluate the customer business case, benefits and payback. Also, it needs to know in details about its existing customers as well as its potential customers. Any company can?t have any better evidence than customers to prove its claims about the marketability of its product/service.

A company needs to understand that it is in the market to sell a product, its business idea, which can't be sold unless its customers are satisfied with the product, which they plan to buy. Raghu Batta, Partner, Ojas Ventures said that startups should always make something or sell a service that people want.

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Reader's comments(15)
1: Heres my food of thought,
I have worked for a big VC fund in Midwestern US, funded by some top companies like Morgan Stanley, Wachovia etc.The biggest thing which can turn your idea into a funded idea is an excellent presentation and how you deliver the presentation.
The best idea if not presented well would end up in a dustbin. If you don't have the right skills to give a mind blowing presentation, find someone who can.
Posted by:MSK - 24 Mar, 2010
2: VC financing is good but how much can you trust your VC to
protect your business idea from not getting misused? How to find a genuine VC?
Posted by:Mayank - 21 Mar, 2010
3: When looking at the Indian market and people mentality, for IT ventures, the best idea I could think of is for smaller firms to merge together and work together rather than trying to find big investors. This would bring multiple talents, marketing & business services together with less investments and more profits. This will also help to make use of same employees for 2 or more of the companies involved in the merging process. I could experience this while I am still working with the US Clients here in US.
Posted by:ARun M - 17 Mar, 2010
4: This is an informative article, good for anyone looking for an investor. But how do we find these investors or VC's. I find that most VC's, that are written about, are only interested in IT or software related domains. Are there VC's funding non-IT ventures such as publishing, agri-industry project or food processing.
Posted by:Girish Gopal - 17 Mar, 2010
5: I experianced that investors are very selective, Normaly they don't want to inter in business in starting untill unless U give attractive return with gaurantti.
I have a good Agri business plan and struglling for funding.
J K Nigam
Hyderabad
Mob: 9963849333,jitendraknigam@gmail.com
Posted by:Jitendra Kumar Nigam - 17 Mar, 2010
6:
That's true, Jitendra.
raman Replied to: Jitendra Kumar Nigam - 17 Mar, 2010
7: well do guys dreaming of india starting up companies like US, with lots and lots of startups..hahha...that time is still too far in india...india is just being hyped..reality is different
Posted by:startup - 17 Mar, 2010
8: Indian start-ups have one track-mind, it seems teh way they approach VCs
Posted by:ramya - 16 Mar, 2010
9: Indian startups have still to go long
Posted by:Tamanna - 16 Mar, 2010
10:
can u describe that indian startup have still to go long
javed tyagi Replied to: Tamanna - 16 Mar, 2010
11:
Well, the Indian start-ups lack in most basic field , that is the presentation skill. They neither have the right voice nor a convincing plan to pitch before VCs.
Rajeev Replied to: javed tyagi - 16 Mar, 2010
12:
U r totally correct Rajeev.
Tamanna Replied to: Rajeev - 17 Mar, 2010
13:
I agree that presentation has to be good. But is it the only thing ? What else forms the secret sauce ?
sanjay Replied to: Tamanna - 18 Mar, 2010
14:
Apart from a great presentation, what VCs look for is how innovative and uique you idea is and how well it can start reaping benfits. At the end of the day VCs invest only to make fast bucks. Unless they are damn sure they won't.

For India, I think VCs should also act as business advisors or business partners. Indian ebusiness co.s need good mentors to walk them through the eworld. If this happens then I think ebusinesses in India too will spread.
Abhay Replied to: sanjay - 18 Mar, 2010
15:
we Indians need to go long no good startups are being funded except some ITes set up.
sanjay chaudhary Replied to: Tamanna - 17 Mar, 2010
Beautiful and dress selection, please go to Dresses
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