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Anil Rego
Anil Rego

Anil Rego

Founder & CEO

Righthorizons

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Common Challenges Startups Face
Access to capital is one of the biggest challenges faced by startups.  This is especially true of smaller sized startups which are too small for VC's. Thus, many deserving startups miss out on being able to raise capital.  Setting up a business is also a lot more difficult in India, especially if there are a number of regulatory approvals to be taken. Raising debt capital is also very difficult for startups – they would end up providing personal guarantees to the financial institution even if they are able to raise capital. 
My Advice If You are Starting Out
It is good to have a flyer which provides an overview of the business before one formally builds a business plan.  Having too elaborate a plan; could result in the VC not going throughout the opportunity in the first place.  One can follow this up with a detailed ppt and then with detailed financials.  It is important to have this done upfront together lest there are inconsistencies in versions that one provides.
3 Piece Advice
1.The timing of the funding is critical.  Too early or too much funding would result in significant dilution and too late funding could impact growth and even the possible existence of the organization.  Ideally one should look at demonstrating proof of concept to the investor through the initial operations and then raise capital.

2.Try and run through your idea and stress test it through your friends and associates.  Many a times promoters end up making assumptions that do not end up being true. 

3.Different types of capital may be useful at different stages of the company.  One could start with Angel capital and then look at VC funding.  Many investors also miss out the opportunity to raise debt capital.  While doing so, it is always preferable to go for loans that are secured since most financial institutions would end up asking for a personal guarantee.  I have seen some organizations being innovative.  Eg one startup I know is based out of a customer premises where rentals are taken care of from the revenues of the customer.  Another startup has been given a loan which will be set off against the revenues.
Points to remember for startups
I would also like to add that one should be careful while making any spending.  Each large expense needs to be thought through as to whether it makes financial sense.  Keeping your expenses low will increase margins and also help sustain yourself for a longer period of time.

The second point I would like to stress is that it is important to do a financial planning for promoters of the company to ensure that the family is protected from this decision and also to ensure that there is some buffer capital to infuse into the business if required. This is what I personally did – started off when I had sufficient capital to sustain the family if required.
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