Investment decision: Product Evaluation

Most investors focus on the product to make an Investment decision, apart from the people, potential and traction in the startup. Here are a few questions that entrepreneurs must be ready to answer while making the pitch.

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What are you developing?

This is the question of “purpose”. Understand the context for the need of the product, how are things being done now and why in a particular way. What will the proposed product achieve, considering the current social behavior of users and available technology

Who is it for?

One can’t design a product that is for everyone in the world, there is no one size fits all. Be sure, which segment of customers are your target – Enterprise/individuals, those who seek luxury/value for money, double income couples/teenagers everyone has different needs. Spreading too thin to cater to every segment will bother stakeholders. Continue reading

When startups should not raise money from angels/VCs

A lot of time is spent in startup circles discussing fundraising rather than business ideas and viability.

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Startups must stay focused on the business and its profitability rather than securing investments as the primary goal. If the entrepreneur stresses on commercial viability, the employees recognize that cash generation is of utmost importance. Once a strong business is built the entrepreneur is in a better position to seek funding.

Raising early stage finance is generally a demanding process, which takes up a lot of time, commitment and emotional involvement, which must have been directed towards building the business and meeting customer’s need profitably. Also, external capital comes with demand both in equity and time. There are obligations for results and it limits the ability of the entrepreneur to make independent decisions. So unless, the entrepreneurs have made plans, like a strong execution team, to stay focused on business while trying to raise funds, they must not pursue angel/VC money.

On the other hand Angel and VC money has its advantages – entrepreneurs not only get capital, but also get the vast experience of active VCs, who might prove connectors for you in the industry and help you make decisions. Raising private equity from VC and Angels is a straightforward process and does not require complex permissions/regulations that are a part of raising public equity/debt. And sometimes, the business can benefit from the publicity of the investment,

Reference: A Guide to Early Stage Investment by Alan Gleeson.

Disclaimer: This blog is my personal perspective of this and is not intended to constitute legal advice.

5 Exciting b2b startups in India

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Here’s a list of 5 exciting b2b startups that I’m following. I used the evaluation criteria used by Jason Ball in his blog. – People, Product, Potential and Traction.

1. UnicommerceUnicommerce

Cloud based Multi-Channel Order Fulfillment Platform which enables E-commerce merchants

People: Started in 2012 by a group of IIT / IIM graduates, they have proved that passion, talent and ability are more important than experience. Without any previous experience in warehouse/inventory management , they have build world class inventory management software and have over 4000 paid users! Ankit, Manish and Vibhu have relied upon their IIT connects for the first few deals and there after relied on the products strength and customer service.

Product: Their product, Unicommerce, is comprehensive enough for big e-commerce players to rely on and easy enough for smaller online merchants to use.  It provides end to end order fulfillment including procurement, vendors, inventory, warehouses, drop shipments and returns. Being hosted on Internet, it enables small and medium sized online sellers to tap power of technology without any technology knowledge.

Potential: One of the ways that small offline businesses can survive the onslaught of e-commerce is by joining the e-commerce marketplace. The millions of small offline retailers and suppliers willing to join the online marketplace in India are the potential market for inventory management software.

Traction: Within a short span of 2 years, they could help their 4000+ customers do Rs. 1000+ Cr business. Unicommerce comes pre-integrated with all the leading marketplaces like Jabong, Snapdeal and Lazada, carts, couriers/shipping companies, accounting software and have built high barriers with these alliances for new entrants and in 2013, they raised their first round from Nexus.

2. Power2sme

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Group buying site for SMEs

People: The founder, R Narayanan is a seasoned entrepreneur with experience in diverse industries, he is also a cost accountant working on profitability from early stages. He has built a team of around 60 and is advised by a very capable board.

Product: The company is a group buying site for SMEs in India. It has also diversified into SaaS applets and employee retention and motivation for SME. The primary business of group buying can include several products (over a million products listed in amazonsupply.com) and serviced through the common infrastructure.

Potential: The Indian economy is poised to return to high growth and the new government will provide an impetus to manufacturing, the market for industrial supplies will only increase. It is a blue ocean out there and the market is in billions, even amazon has started catering to SMEs in the US through amazonsupply.com.

Traction: With $8m of funding from Inventus, Accel and Kalaari, there is enough capital to see the company through the venture phase. The company has its head quarters in Mumbai, which is the hub of commodity business in India. Continue reading