Pitching your startup!

Founders usually are looking for advice and thoughts for pitching to VCs. Typically VCs look at hundreds of deals every month. Not every VC is looking at the same data or has similar preferences, making it even more complex to know what to cover in a pitch. While I’ve pitched only a few times, it occurred to me that I spend a lot of time listening and discussing pitches, so I should just put a piece about what VCs would like to hear!

You have around 5 minutes to grab the attention of VCs; so do not wait to tell about the most awesome part of your startup – team, market entry, technology etc. Tell it like a story. We need to know what problem you are solving and why you care about it. Tell us about your market. How big it is, how much can you address, how soon and who are the competitors? How will you have sustained differentiation against your competition? Who are your partners in crime, your team. Of all the things they could do in their lives, why this crazy thing? If you have launched, show us what you have done. Nothing like seeing product demo and hear customer testimonials. Have a clear ask, having clarity about what you want from an investor (how much are you raising, at what terms, introductions) tells a lot about your planning skills. One last key takeaway is to know your audience before pitching to them.

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What will it take for high tech startups to bloom in India

A few weeks ago, I heard the pitch from Team Indus which is the only Indian team competing for the Google X prize to launch a rocket to the Moon. In the process of competing for the prize, it is building the next generation aerospace company in India. I left the room with a lot of optimism in the future of high tech in India and with the thought – What would it take to see many more bold startups from India aiming for tech breakthroughs like advanced materials, super computing, blockchain technologies and space?

Nasa photos

Pic from: http://history.nasa.gov/ap11ann/kippsphotos/apollo.html

India has seen hundreds of consumer internet startups by founders who had just graduated. These 23-25 year olds understand the millennials and technology better than anyone else. They built startups that took advantage of the current technologies to define new business models. However, few ventured into advanced sciences, as high tech startups require people with doctoral and post doctoral degrees, research background and experience in the relevant field. Though Indian’s bloom and flourish in research labs outside India, few have built hi-tech businesses here.

The spawning of high tech startups in India could be driven by a trifecta of diverse forces. First, we need to create a higher education system that focusses on real innovation. India has very few institutes that are renowned for advanced research, so people who want to pursue research end up studying in the US / UK. Most end up working in high tech startups in the Silicon Valley and Cambridge, UK. To provide these talented people the opportunity, the Indian government must focus on building advanced education institutions on par with the best in the world and open up 100% FDI in higher education. There are examples of how this has been done. Saudi Arabia founded KAUST (King Abdullah University of Science and Technology), a private post graduate research university that brings together the best faculty from around the world in areas of super computing, visualization, nano fabrication etc. The university has become the nucleus of research and development in the region.

Next, We need to bring together research and business ideas. The scientists and researchers at the various advanced institutes, like ISRO, IISc and HAL are our best bet to start up in the near term. These institutes must encourage their scientists to commercialize their ideas. Most accelerators are focused only on popular business models and consumer internet, which require little intervention. We need specialized accelerators for high tech businesses like the global aerospace business accelerator by Airbus in Bangalore. Government and industry must promote / incentivize many such accelerators that incubate technologies that take longer to gestate.

Finally, the Indian investors – both venture and corporate must build capabilities to evaluate high tech. Opportunities in this space have potential for very large impact and outcomes. Investors could form alliances with universities and foreign funds that have experience in advanced tech investing to understand the technologies. They can take cues from Israel’s venture capital and incubator industry that plays an important role in the booming high-tech sectors like material technology, medical devices and internet security.

With these forces coming together and the large domestic market, India will be among the best places for true innovation and commercialization. I hope to see the next breakthrough medical devices, AI robots and spacecraft designed and built in India.

Let a 1000 high tech startups bloom in India.

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.

No_VC_Angels

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.