How to Seal the Best Deal for Your Series A Funding? "Negotiation with investors is all about playing hardball for the founder"
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After quitting their respective corporate jobs, when two college engineering friends Nisarg and Jasmin decided to embark on an entrepreneurial journey, all they had was just an idea and nothing else. Like every entrepreneur, they had to go through the similar phase of hardships that included everything from managing finances to capital allocation in business. In September 2015, they bootstrapped the company. It was only two years later that they managed to convince India Quotient, Lets Venture and other angel investors to back them with $500k.
Indian startups attract millions of investments from the private equity funds from across the world, but it is also true that the early stage startups often end up facing difficulties in raising funds.
Entrepreneur India caught up with a few startups that have recently raised Series A funding to shed light on the dos and don'ts while raising Series A funds.
"More than Money, We Wanted a Mentor"
The Hyderabad-based eKincare, a health-tech startup secured an undisclosed amount of Series A funding from a stellar line of investors that include Venture East, Endiya Partner, Padma Shri BVR Mohan Reddy. When Kiran Kalakuntla, the founder of eKincare was asked why he chose to raise funds from a group of investors instead of opting for a bank loan or crowdfunding, he said, "More than the money, we wanted to get the right set of active investors who can help us mentor to scale."
The startup is based on an AI-powered personal health assistant that reads medical data from health records and various healthcare interventions. It also predicts health risks and provides timely personalized recommendations to beat those risks.
Another startup WealthTrust, a fast growing Digital Investment Advisory platform owned by Nisarg and Jasmin shared the same opinion on raising the Pre-series A fund from India Quotient and LetsVenture because the startup wanted to have a mentor by its side.
"They know the struggles, the dilemmas, the nitty-gritties of the how to manage a company during the early stage. This guidance to balance financial prudence and growth is very important for early-stage startups," said Nisarg, founder of WealthTrust.
Here's How to Seal the Best Deal with Investors
Most of the early stage startups face major difficulty in negotiating with investors. Negotiation with investors is all about playing hardball for the founder. The founder of WealthTrust, Nisarg advised never to ignore this point while preparing to pitch before investors. "It is a very important skill where the founder needs to work on," said Nisarg.
On the other side, the founder of eKincare, Kalakuntla advised to jot down major points like company's valuation, number of board members etc. at the time of negotiation. The facts will help you get quick responses.
Dos and Don'ts Startups Should Follow while Pitching to Investors
Dos
- Investors ask a lot of questions and sometimes you don't have answers to those questions, always maintain your calm in such a situation.
- Be patient and confident.
Don'ts
- Do not pitch to every investor.
- Do your homework and be very strategic in your approach
- Try and keep the story/pitch short and really simple
- Do not sound desperate
