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5 things to keep in mind while raising entrepreneurial finance!

Kaushambi — Sun, 16 Oct 2011 04:16:55 +0000

Whether you are in India or anywhere on the globe, raising entrepreneurial finance is quite a challenge since you have to make individuals or institutions believe in your idea, project, business and vision.

Here are 5 things to keep in mind while raising entrepreneurial finance.

Tap your trade creditors

One of the costs in any entrepreneurial finance is the cost of inputs which can be in the form of services, supplies, raw materials or even finished products. These costs can represent a large portion of the initial finance.

Have you thought of negotiating good credit terms with your trade creditors? Traders are generally happy to give even start-ups credit in lieu of repeat business. So tap your trade creditors and ask for longer credit periods to cut down your entrepreneurial finance requirements.

Prepare a fool proof funding proposal

It doesn’t matter whether you are looking to raise entrepreneurial finance from your bank, financial institution, private investor or a Venture Capitalist, you will need a strong funding proposal.

Your funding proposal outlines the details of your business plan, the vital numbers and forecasts of performance and financial viability. Remember folks, your financiers are looking to invest in a solid business plan so don’t leave any stone unturned when you draft your funding proposal. If you are unable to answer any queries during your presentation to your prospective financiers, you can kiss your dream of raising entrepreneurial finance goodbye.

Be careful of the terms with an Angel Investor

In the day and age of technology, Angel Investors have gained popularity as rich sources of raising entrepreneurial finance. However, what you, as an entrepreneur need to be careful about are the terms of credit with an Angel Investor because this line of credit comes in the form of debt or equity. Debt is costly in the short term, while equity will reduce your share of revenue in the future. Depending on your forecasts and needs, make sure that you manage these terms prior to signing your life away.

Have a clean credit history

Your credit history is going to play a big role when you are looking to raise entrepreneurial finance, especially from the banking sector. So if you’ve been defaulting on your credit card or loan repayments, chances of you being able to raise entrepreneurial finance from your bank are slim. There are many ways to better your credit history and your past dealings with the bank and we suggest you start putting them into practice if you are looking to raise entrepreneurial finance in the near future.

Look for personal collaterals

Before you read on, be warned that using personal collateral is usually every entrepreneur’s last resort when it comes to raising entrepreneurial finance. If you have exhausted all possible sources for capital required to get your start-up business off the ground but still fall short by a tiny bit, personal collaterals might be your saviour. Although using personal collaterals are not your best option, it is always handy to keep the paperwork of your assets up to date, should the need arise to use them as collateral security for your entrepreneurial finance.

If you are you ready with a fabulous business idea and with the know-how to implement it, bank on your business plan and keep the above tips in mind on your journey to raise entrepreneurial finance.

Finally, An IPO priced at Rs.10 Face Value!

Viral Dholakia — Wed, 20 Apr 2011 09:30:08 +0000

Aha! Finally, an IPO offering equity shares priced at near face value – sounds strange, isn’t it? Well, nothing surprising about it, there was an era when such sound pricing model to raise money from public was very much prevalent in the capital markets.

But, with ushering of the wily bull phase and market being slosh with hot money for last many years, the concept of corporate India offering shares at-par price bands has ceased to exist. However, for a change, we’ve a major business group interested in setting a precedent by offering its shares at near par levels.

Kishor Biyani’s Future Ventures, a unit of the Future Group, is all set to tap the primary market with Rs.750 crore offering at a price band of Rs.10-11 for its public issue. This venture capital firm has invested in 14 companies operating in food, fashion and FMCG segment, the ones whose businesses are strategically crucial to the group’s retail business.

Last major public offering from the Future Group stable was that of Future Capital Holding which was over-subscribed by 133 times at the peak of the bull phase in 2008, on account of positive market sentiment then. However, investors have lost a great deal of money as the stock has now corrected to below Rs.200 levels, driven by steep IPO pricing.

In order to make amends for the steep pricing policy which resulted into heavy losses for the group’s investors and regain their confidence, Biyani has underlined the importance of IPO valuations and has announced the pricing of its latest Future Venture offering near to its Rs.10 FV.

In my opinion, even Indian government should take cognizance of this IPO pricing phenomenon for all its PSU offerings; looking at the fact that disinvestment ‘process’ is going to be the mantra for all the future governments at least for a next decade.

VCs, VCs everywhere, not an Angel to fund!

Sandy — Fri, 27 Nov 2009 01:52:00 +0000

How difficult it would be, for a great team working on cutting edge technology with a proven track record, and potential military applications, to raise Rs 20 lakhs in India? That is not a hypothetical question. That was the question faced by a team of 8 students from Delhi College of Engineering , as they set about building a fourth generation Autonomous Underwater Vehicle (AUV)- India’s first Indigenous AUV and the only Indian participant at the prestigious Association for Unmanned Vehicle Systems International’s annual competition.

And the answer it seems is that it is indeed very hard to raise early stage or seed capital in India, for the rock star team has still not been able to secure any funding.

Why should that be so, when just yesterday DFJ announced that they will be raising $400 million earmarked for Indian start-ups and expect to invest as much as $20 million per year in Indian region. And remember DFJ is just #7 when it comes to top VCs that invest in Indian start ups in terms of their investments. Sequoia capital, the top VC in India, in comparison, invested as much as $138 million in 2008.

Perhaps the problem is not with the venture capital funds as such, as it is with the view that VCs have of early stage companies vis-a-vis growth or late stage companies. Private Equity in India flows predominantly to late and growth stage companies and to a substantially lesser extent to early stage companies. with the recession, the flow of PE to early stage companies was further affected.

VCs in India typically do not want to fund anything that does not require funds to the tune of crores. Perhaps what we need is more vibrant angels and more seed stage funding- a necessary part of the ecosystem that would complement the biggie VCs an fund to the tune of lakhs.

Also pertinent to remember here, that Angels, are the first to get hit during the time of recession and the ones that play safe during hard times, so perhaps 2009 has been a really tough year as far as it relates to securing angel funding; but I doubt that even without recession we have a vibrant angel funding ecosystem to take care of the bubbling entrepreneurial spirit now evident in India.

It is sad indeed that while large funds may be available to late stage companies, the early stage companies where most of the innovation happens, still struggle to get a paltry 20 lakhs rupees. What do you think can be done to make the angel ecosystem more responsive and vibrant? Would you consider becoming an angel investor and funding in some small early stage start-ups? If so there are many more such teams like the team from DCE that are waiting for your mentoring and incubation and that can do with a little funding.

The synergy between Bay Area and India: what the future holds

Sandy — Wed, 25 Nov 2009 07:57:00 +0000

Bay Area council economic institute has just released a 2962 pages long ‘Global Reach’ report on ‘Emerging Ties Between the San Francisco Bay Area and India’ and they have also made available a 14 page extract of executive summary [PDF] and both are available for free downloads from their site.

The summary takes a historical look at the tie-ups between Silicon Valley and India recounting,the early Punjabi immigrants, the Brian drain of IITians and the outsourcing to Indian IT companies due to Y2K scare. Some statistics about the thriving Indian community in Bay Area were simply remarkable.

Fifteen percent of Silicon Valley startups in the 1995–2005 period were founded by Indians—a larger number than for any other immigrant group. California topped the list of states for Indian startups, with 26% of the U.S. total.

By any standard, the Bay Area’s Indian community is successful and affluent. Median income is more than $107,000; 75% of adults have at least a bachelor’s degree, and 70% are in management and professional positions. Roughly half are homeowners.

The trade between India and Bay area has been small but growing, and apart from almonds import and potential from wine import from California, the trade is largely driven by IT products and services. Tourism is not really flourishing as people travel more for work than for pleasure.Students are amongst the most valuable exports form India.

India is the leading country of origin for international students in the United States, with 94,600 during the 2007–08 academic year, surpassing China’s 81,100; 2007–08 was the seventh consecutive year that India has sent the most international students to the U.S.

Many entrepreneurial networks including TiE and their positive effects both in Bay Area and in India were adequately covered. The major synergistic entrepreneurial and IT cross-bored networks encompass:

Indian engineers, programmers and computer scientists in Silicon Valley and the Bay Area,engaged in the forefront of product and technology development;
successful Indian technologists and entrepreneurs reinvesting in the region’s economy as venture capitalists;
Bay Area technology companies with R&D centers designed to access India’s large, educated talent pool; and
Indian IT service and software firms moving rapidly up-market from call centers and basic software coding to provide overseas companies with increasingly sophisticated software and systems integration services, in-depth sector-specific consulting and product engineering, and knowledge process outsourcing.

Many Bay Area companies are having R & D centre in India and also Venture Capital firms are funding start-ups in India, but the focus seems to be on market-driven volumes associated with the emerging market of India, rather than technology.

While some Bay Area venture firms are retaining their focus on technology, the wider trend is to invest in India’s consumers. Most companies receiving funding from the Bay Area are not creating groundbreaking new technologies, but are providing low-tech responses to the opportunities presented by the India’s fast-growing markets.

This to me seems worrisome; we should attract more capital for innovative technologies and not just based on our market advantage. However, one cannot deny the ground realities of doing business sin India, which the report highlighted and why tech innovation and entrepreneurial spirit may not take off in India.

In interview after interview, successful Indian engineers, programmers and scientists recount a similar narrative—of coming from a culture of bureaucratic obstacles, scarce credit, limited education and opportunities, and power and water shortages, to a place where infrastructure works, advanced research is supported, government generally stays out of the way, new ideas are embraced, and capital is readily available.

It is good that at least the Silicon Valley is providing the infrastructure and innovative environment and ecosystem where Indians can thrive. In the end it is a truly synergistic relationship and hope that with better infrastructure and ecosystem in India , the relationship moves up the value chain.

The Bay Area’s economic and cultural ties to India are unique. Much of this uniqueness comes from the high levels of education, wealth, entrepreneurial activity and business leadership in the region’s Indian community. India’s expanding economy, with its growing business and consumer markets, also anchors the relationship. The Bay Area’s focus on innovation and entrepreneurship is mirrored in India’s deep reservoir of human capital and its focus on technology and other services. Bay Area companies draw on both and have led the world in establishing strategic partnerships with Indian counterparts and service providers. This relationship, properly managed, can play a major positive role in positioning the Bay Area for continued success in the global economy.

With a reverse brain drain and people returning back to India, how do you see the relationship unfolding? Do let us know via comments!

Is twitter Geotagging feature a sign of things to come

Ankit Agarwal — Sat, 21 Nov 2009 19:51:21 +0000

Twitter has been rolling out interesting new features in phases recently. A nifty little Retweet button in twitter web was something that the user’s had been asking for quite sometime.

It is another matter that twitter rolled it out in a way that has had its share of criticism.Â Twitter lists feature is a potential gold mine for making the best out of twitter. The “lists” go far beyond the Ego-booster as some see it , they offer a real value by primarily allowing users to take the noise out of the their public timeline. With you following people from a variety of niches, it is quite likely to miss out on some important information that comes through your timeline. So, what do you do? You create a set of lists and name them appropriately based on the niche.

The best way to understand the potential value of twitter lists can be understood from Scobleizer’s Why I don’t use google reader .

But then , another thing that takes the cake when it comes to Twitter is ,

“How will twitter make money?”

Yes, there is this licensing agreement with the search giants Microsoft and Google and a small widget based advertisement section on twitter web. But, with the venture capital flowing in, twitter needs to come up with better ways to make money, ain’t it.

I might be too naive to suggest monetization techniques but the latest little feature roll-out caught my imagination. Twitter recently enabled Geo-Tagging to further enhance the user experience. What this essentially means that every tweet of yours will have your location info embedded into it. It has been released only on twitter API’s so its sometime before we get to experience it on twitter web.

What could possibly be the advantage of geo-tagging from a monetization perspective ? Context based advertising-the advertisement model that accounts for Google’s billion dollar revenue. With twitter already loaded with a constant supply of real time news via tweets and the search deals cut out with Google and Bing , geotagging might just be what the doctor ordered.

Here is one hypothesis which might help put things into perspective,

Organic search engines are going to index Twitter Streams. Given the freshness of the tweets , it is highly likely that the tweets will occupy the top positions in the searches. Now, with geo tagging in place, this completes the pre-requisites for serving the most relevant contextual ads that there can be.
Now twitter does not have ads right now but then who knows what lies in store.Â Geotagging might just be there answer for a possible monetization model.

Moreover, since the API’s have it available it provides all the more benefits for developers making twitter based products. The developers themselves could find a way to leverage the geotagging feature in one way or the other and make some money out of it.

There might be more to the geotagging feature then the hypothesis that I have put together. Only time will tell how twitter and third party apps based on twitter utilize the geotagging feature.

What are your thoughts on the Geotagging feature. Is it a step towards a possible contextual advertisement model or there are some other aspects too ?

PS:: For developers who are already making products using twitter API’s , is there a way you could cash onto the geotagging feature ? I would love to know your thoughts on the possible impact of geotagging for twitter based apps

Gaming Is a Darn Serious Business , Zygna secures $15 million in funding

Ankit Agarwal — Wed, 18 Nov 2009 17:00:38 +0000

Zynga-The game studio specializing in making games for social networking sites has recently secured a funding of $15 million in venture capital. The company has been on a roll ever since it introduced games for Facebook. What started with Mafia wars turned into a rage with its another sticky offering- Farmville. To gauge an idea of the popularity of the game, FarmVille application boasts of a mind boggling 65,387,640 monthly active users.

Mind you , this is not the first time that Zynga has secured a big ticket funding. They raised $29 million during 2008 and the total funding according to Crunchbase stands at $54 million. To me, that looks like loads of cash for a gaming company. Zynga seems to have stumbled upon a cash cow with its association with Facebook and enticing users to play it games.

What is interesting to note here is the revenue model which has taken a lot of flak during recent times and one of its new game Fishville was taken off for this very reason. Â The gaming apps lure the users to sign up forÂ confusing offers and misleading advertisements in lieu of virtual cash and rewards.Even with all the skepticism surrounding the revenue model , Zynga is definitely doing good to attract a lot of venture capital.

To put things into perspective, Internet Gaming in general is a seemingly a brilliant business idea. Everyone likes to have a little fun and the best part about games of any sort is the sense of competition they create. This in itself leads to a word-of-mouth publicity and creates the Viral factor for the product. However, not all gaming portals click and from my experience playing Farmville (yes, I am a culprit too) , it is the stickiness and the recall factor that seems to be working for Zynga .The games are no brainer and extremely simple to play is another factor which help them go viral.

Here are some of the striking features that Zynga games have in common

All have a Neighborhood concept making the user invite others to create a community kind of thing.There are obvious rewards on offer for having more neighbors and this leads to automatic promotion of the game and more and more users signing up
All the games keep up the Recall factor with handy notifications.If you have played Farmville , you would have noticed every single activity that happens with your farm. Eg: If someone helps you the farm , if someone adds you as a neighbor etc.
They keep the Stickiness factor by constantly coming up with the so called Mystery elements at regular intervals.The additions are very minor but they are big on the surprise and uniqueness factor.

These are some of the aspects I discovered during the time I spent playing Farmville. The question that got triggered in my mind is ,

Can non-gaming products take a lesson from these apps and work on the Stickiness and Recall Quotient

I have encountered innumerable start-ups that start with a bang and a lot of offering during their betas , but then stop offering new value additions.A few internet based forums/apps miss out on increasing the recall factor by not creating any notification mechanisms.

Games like Farmville and Mafia wars may not be high on the intellectual aspect but then they do offer a lot of fine learning points to analyze and absorb in other areas.

Do you think Gaming apps will continue to attract the user and the Venture Capitalists alike? Zynga sure seems to be doing it just right

Less is More -Sequoia does a Mallika Sherwat with their website

Arun Prabhudesai — Tue, 25 Aug 2009 05:31:59 +0000

What do you think of the above snapshot?

A new search engine?

Nah..you got it wrong. This is the internet home of one of the biggest Venture Capitalist firms Sequoia capital who have funded the likes of tutorvista, cotton county retail along with the real biggies like Apple, Google et all.

Surprised, well you should be. Even I was shocked the first time I saw the revamped homepage of Sequoia. Now, had I not known what Sequoia capital before, I would have branded it as a wannabe search engine.

Well, how on earth could a website rewrite the limits of minimalistic Web UI with just providing a search box as their landing page. But then, Sequoia did it and it is for all of us to see.

All said and done, how was it accepted by the folks in the Internet space? I can’t vouch for a huge dataset but a search on twitter suggests that Sequoia has managed to raise as many eyebrows as praises for this crazy move they pulled off. Surprisingly, this time around it is not unjustified criticism that is doing the rounds.

The critics have been spot on with their concerns and allegations.Here are some of the finer points that I could pull up. They have all been sourced from twitter search and would have loved to credit all of them individually lest for causing redundancy and link overload

Critics:

Poor usability
Caters to only a matured and well targeted user base, thereby making itself hidden from the normal crowd
An ego boost-"Everyone knows us"
Making relevant information difficult to access
Calling it stupid – period
A publicity/marketing stunt gone too far

There were more and probably will continue to crop up as more and more people come across it.

Given the fact, that I am no where close to call myself a VC literate, I frankly did find the search results not to my liking. But, then did I actually know what I wanted to search for? may be not… but for something that I did know what a VC site is to be used for , I did type the following in the Search box.

"How do I get funding"

And boy-o-boy, it did the job for me. Bulls eye it was. I was straight on their ‘Submit a business plan’ page with their contact details right there.

So, from all that I gather the move is a bold and refreshing change from the usual change we have gotten accustomed to. Now, that’s why I call challenging the Web 2.0 limits.

More than generating truck loads of BUZZ , positive or negative, it is something that is shouting out what they actually are-Venture Capitalist. Here is why I think so.

I may not have read too much literature on the VC dynamics , but whatever I gathered from my scant readings, here are some terms that epitomize VC’s

Bold and Crazy – Yes, you have to be crazy enough to invest millions of dollars into a company that may not even have a ongoing revenue model. A Venture Capitalist firm and its team have to be crazy to back ideas that may sound crazy at first
Risk Takers- Imagine investing a dime into a so called product idea that has never been tried before. It is impossible, but it is just another day at work for a VC firm.
Believers in Change- Entrepreneurship is on most counts bringing about change, moving away from the usual. A VC firm has to be a believer in change too. What better way to go ahead and be a part of the change.
Stretching Boundaries- VC firms help worthy ventures break the growth barriers. How about pulling one off by stretching the limits themselves.
Focus on The Target Audience- With a well identified target audience comes better analytics and better insights, that’s what VC’s help the backed up ventures to achieve. So, why not do it for themselves.

With the website usability getting shrunken to a more educated and a matured user base, they have the right audience searching for right information

This is my hypothesis and the extrapolations may not be right. But, I heartily admired the Paradigm Shift that Sequoia capital might have initiated with their website re-design. In fact, with ‘Targeted Search’ being touted as the next paradigm of the Internet, Sequoia Capital have arrived at the scene quite early. And don’t we know, VC’s have the knack of foreseeing future before the rest of world does.

However, I am not completely biased in my opinion. I did try some relevant searches like "Clients","portfolios" etc, which surprisingly uses Google Custom Search Results for their content. The results were basically their Press Releases of investments etc. Not much to my liking !

With that I bring to rest my case. They have taken a bold step and I applaud them for that – Whether it works for them, time will tell.

Goes without saying that i would appreciate your thoughts on the website re-design in question. Would you approve of it??

PS:: With Channel V doing a not so great ‘I saw The Change’ campaign on Twitter, I wonder if I can pull their slogan and say – I saw the change at Sequoia !

[This post is written by Ankit Agarwal, an ERP Consultant by profession, a wannabe entrepreneur and stock market stalker by passion]

One of the reasons why Entrepreneurship does not grow in India!

Arun Prabhudesai — Tue, 07 Jul 2009 07:40:05 +0000

Yes, I know, I may raise a few eyebrows with that title – But it is a fact that cannot be overlooked.

I will explain you with a real-life example, read on…

I was sitting with a serial entrepreneur friend of mine today at office and as usual our discussion veered towards Entrepreneurship. He was lamenting about the fact that how Entrepreneurship has not grown in India, even though we have probably some of the most creative, talented and innovative minds on earth.

He gave me his own example – He has had a startup in India for about 2.5 years and has been pouring money into it. During this time, he approached 10s of Indian VCs for funding and has never even received a second call from them – not even a mail saying “All the best for your startup, but we cannot fund your startup right now”.

Here comes the interesting part – 6 months back, he opened up a office in a small South Asian country, which is not known much for anything other than for tourism. The reason – he was talking to one of the local Internet & Mobile company – They liked the product and wanted to give it a try.

In the meanwhile, he came across their local government aided firm that was set-up to promote Entrepreneurship in this S.E Asian country. He demo’ed his product to them and applied for funding, so that he could build the product for the mobile company – He actually very little hopes of hearing anything back from them – but to his surprise, he not only got a call for them but they also showed much interest in his product.

Within 3 months of contacting them, he has not only received funding from them, but also a mentor who will help him with his product.

This small South Asian country which has fraction of GDP compared to India has allotted half a billion dollars to promote small entrepreneurs like him – Take that !

Now he is probably planning to move his company’s base and will offer employment to the locals in that country.

Just think about it for a second, if we had something like this setup by our Babu’s here in India and more importantly – if it was honestly run – we would be called aÂ land of Entrepreneurs!

Today though, my friend is a one happy man – He says “Thank God, none of the VCs replied me back here in India” – coz they would have taken good amount of equity and would have offered very low valuations, especially during this downturn!

What are your thoughts on this? Don’t you think Indian Government should take steps to seriously promote Entrepreneurship? The Union Budget was a golden chance to announce something to that effect, but like so many other areas, there was no mention about this as well.

Would love to hear your comments on this – I am sure few of you may have conflicting views. Let us know!

Shilpa Shetty gets into the IPL action. Buys 12% stake in Rajasthan Royals

Sriram Vadlamani — Tue, 03 Feb 2009 13:10:05 +0000

Reality show Big Brother of UK catapulted Shilpa Shetty from her sagging career. There is no looking back for her since then. She released a Yoga DVD and became the host of Indian Big Brother reality show. This show pushed the new channels of Colors to the big league but then I digress.

After that show was completed Shilpa went into exile – almost. She is back in the news again. Not for her beauty but for her brains. She has turned entrepreneurial and bought a stake in Indian Premier League team of Rajasthan Royals.

Rajasthan Royals got greedy for a while as I have blogged earlier and dumped their sponsors Bajaj Allianz. Rajasthan Royals wanted to raise capital through the IPO route but decided against it. Not because of the credit crunch but because it would be ridiculous for a cricket team which only plays once in a year to give any strategic returns to the investors. It decided to sell stake to Shilpa instead.

Shilpa Shetty would be the third Bollywood celebrity after Shah Rukh and Preity Zinta to own a cricket team. Shah Rukh owns Kolkata Knight Riders, which did not do very well in the previous edition but rumored to be profitable from its merchandise sale. Preity Zinta along with Ness Wadia owns Kings XI Punjab, which did pretty well but ended up on the losing side. The celebrity list is not complete without the mention of Vijay Mallya who owns Bangalore Royal Challengers team which sucked through out the tournament.

Rajasthan Royals or Jaipur franchise costed the owners $67 million. Now, with the 12% stake sale the team is valued at $140 million. Some of the venture capitalists will be closely following this space. I wonder what would be done with all that money. Buy new bats and pads? I hope they they don’t spend all that money on yoga classes.(source)

*Image credit