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The post How To Raise Money For Your Startup appeared first on Startagist.

Chances are that you’re either a founder or are working with a startup if you’re reading this. That means you’ve had to raise funds at some point or are looking to do so now. We’ve written this especially for you.

Truth #1. Starting a venture is not all fun and games, as much as HBO says it is.
Truth #2. Everything will not work out unless you put in the work and make good decisions.
Truth #3: Building a startup requires money. Sometimes a lot of it. All the time more than what you have in your savings account. #fundraising

In this series, we want to focus on the less-spoken-about Truth#3.

Disclaimer: Yes, money is important but remember fundraising is not the end goal. We have seen a lot of founders getting so absorbed with fundraising that they forget the real goal: building a kickass company. So don’t forget that as we run through, five important questions you should answer before you kickstart your fundraise.

1. How much do I need to DILUTE my ______?

For the first timers, fundraising is done through multiple financial instruments that give away shares of your company in exchange for investments. The top ones are private equity and convertible debts.

So the question is further broken down to: “how much should I raise?” and “how much should I value my company?”

Rule of thumb, what you should raise is contingent on your goals for growth. Don’t get greedy, you can always raise another round. Ideally, set six month/one year/18 month goals and calculate the cost of reaching them. Be clear on where the money will be spent and why it’s essential for your growth plan.

Next step, calculate the pre-money valuation of your company. Valuation of your company is usually driven by projected revenue, your team, market growth, market size, and scalability of your solution. There are more, but these should help you start. Calculating your valuation at an angel level has become a science, but the main takeaway here is being able to convince your investors of your math. Equity is costly and investors should know why.

2. Does my LOCATION affect my fundraise?

FYI: Angel Investing is a high-risk profession. As an investor, I want my risks to be minimized. I do this by spreading my investments across ventures. So I write smaller cheques with a larger pool of investors, usually a syndicate, to close a round. Key takeaway here being smaller cheques and a pool of investors.

So in short, yes, access to a group of investors is important and hence, location is as well. Data from our platform suggests that startups in Tier 1 cities have the most exposure and the shortest time to raise funds. But do note, there has been a rise in angel investments across Tier 2 cities via newly established angel networks and digital investment platforms. The big ones being Pune, Hyderabad, Jaipur, Kolkata and Chandigarh.

3. Timing + My Idea = Born to Succeed?

Investors are big on accounting for team, product, scalability, market penetration potential etc. But a lot of big success stories are almost always based on timing. Think about it. Airbnb: built post recession when empty wallets opened people up to being part of sharing economies. YouTube: blew up at the peak of internet expansion in US. PayTM: enough said.

So pay attention to market sentiment. What is hot right now might not be later and vice versa. The dynamics revolve around the sector of operation. For example, an early-stage horizontal e-commerce company will struggle to raise funds at present and an enterprise software company might just raise post a couple of pilots. So be up to date on your sector, observe who raises money and who doesn’t. Sometimes it’s good to wait and be strategic.

4. Is my startup at the RIGHT STAGE for Angel funding?

Another means for investors to mitigate their risk is to study the initial adoption of the product/service looking for funding. Your ask changes based on the stage of your product. Goes without saying that successful startups with early revenue will find it easier to attract investors and larger cheques than startups in earlier stages like ideation where proof of concept is still being proven and traction is less convincing. Would you have invested in Facebook when it was in an ideation phase? Less likely right?

How good is your TEAM MARKET FIT?

Your team is one of your strongest selling points and value proposals as a startup. The important question here is “Do you have a Founder (team) market fit to raise funds?”

Here are three key things investors look at in a team:

1. Domain experience – The more exposure you have to a problem the deeper your insights are and usually, the stronger your proposed solution. It tells investors the kind of research that has been put into the idea.
2. Previous startup experience – Once bitten twice shy? Not in the startup world. Teams with previous startup experience have a better idea on what to expect and how to navigate to success.
3. Pedigree – Touchy subject, but investors tend to lean towards teams that have been vetted by reputed educational institutions aka IITs, IIMs, Ivy League schools. If that’s not you, don’t sweat it; it’s only one tick in a checklist.

So there you have it. Five big questions to ask yourself before a fundraise. We will be exploring each question in-depth in our upcoming posts with data insights from 12,000+ startups and 2,200+ investors.

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The post 5 Questions You Need To Ask Yourself Before You Kickstart Your Fundraise originally appeared on LetsVenture blog.

LetsVenture’s flagship event LetsIgnite conference is back. This March, 300+ Angels, 25+ VCs and 20+ Lead Investors will meet and network at the event. It’s opening up the event to both early and growth-stage startups looking to raise funds, partner with VCs and more. Click here to get started, applications close on Jan 15th!

Picture credit: Pixabay

The post LetsVenture: 5 questions you need to ask yourself before you kickstart your fundraise appeared first on Startagist.

“How much do I need to dilute while raising an angel round?”
“Will investors agree to this?”
“Is it too low or am I diluting more than required?”

We get a lot of questions along these lines and thought it’s time to share insights around fundraising and valuations.

To make it easy to digest; in this post, we split the data into two categories. First, we look at the funding ask and valuation numbers of the 3 hot sectors (based on the number of deals done). Then we follow up with a macro view of what is happening in the angel fundraising ecosystem. Angel fundraising ecosystem = ask in the range of INR 1 crore to 9 crore.

The Data in consideration here includes a sample size of 650+:

1. Startups who applied for fundraising on LetsVenture in Q2, FY 16-17
2. Funded ventures in Q2, FY 16-17 on LetsVenture and publicly available information

If you are not a Fintech, Healthcare or Enterprise Software, you may want to jump to the second part of the post from here.

A. Valuation and Ask range for 3 hot sectors

The last quarter saw funding across 20 sectors out of which Healthcare, Fintech and Enterprise Software emerged as the hottest ones.
So We went a step further and looked at the range of valuation and funding ask of the companies who demanded investment (Demand) and who were funded (supply).

I. Fintech

Fintech was on fire with respect to ‘the startups looking to raise funds’ and ‘startups who successfully raised funds’. The companies types were spread across Mobile payments, Trading, SME/Enterprise Payments, Personal Finance and Lending.

Founders looked to raise between INR 0.3 Cr to 13.4 Cr and valued themselves from INR 2.7 Cr to INR 40.2 Cr. We saw around 4-5 Fintech ventures raising funds in the second quarter of the current financial year. The funded companies have raised funds in the range of INR 2.1-2.8 Cr and were valued between INR 11.9 Cr to as high as INR 67.9 Cr.

Fintech founders that looked to raise funds dilute their startups about 10-25% while the successfully funded ones diluted 4-15% of their respective companies. If you’re a fintech founder reading this, you might want to review your fundraise numbers once

II. Healthcare
We saw a large growth in the number of fundraising startups and successfully funded startups in the market. Healthcare saw 3-4 ventures getting funded in July to September of that year. The ventures willing to raise funds were majorly spread across Healthtech, Healthcare Services, Health & Wellness, Manufacturing, Home care and Healthcare IoT.

Founders were looking to raise between INR 0.3 to 6 Cr and valued themselves at INR 1.7 to 57 Cr. The market funded companies in the range of INR 0.7 to 2.8 Cr while the investors in healthcare were comfy with valuations ranging from INR 9.8 to 24.5 Cr. Quite similar to fintech, #trend anyone?

Healthcare founders were willing to dilute 9.5-15% of their company while the market is offered 6.67% to 10.25%. Healthcare founders, looking to redo your valuations?

III. Enterprise Software
Looking at the inbound number of fundraising startups, investor interest and ventures getting funded, it can be concluded that Enterprise Software is definitely an #Emerging sector. Success of companies such as Freshdesk, ZOHO etc. has really given a boost to the entire sector. For those who are not aware about this sector, Enterprise Software companies make products (in form of SaaS, PaaS, IaaS, DaaS etc.) for companies, both SMEs and Enterprises. For most part, we see companies in Cloud, Security, Customer Support/Engagement, Retail Tech, Health/Education Tech, Big Data, BPOs and Accounting.

Enterprise Software founders looked to raise between INR 0.25 to 5.36 Cr and valued themselves at INR 1 to 25.5 Cr. On the flipside, startups raised between INR 3.08 to 6.02 Cr and were valued between INR 14.7 to 21.7 Cr. This meant founders were willing dilute between 17.3-20% and successful fundraises happened between 18.1-21.7%. Fairly balanced!

Moving on, let’s look at the fundraising ask and valuation numbers for ALL the funded sectors:

B. Valuation and Ask of Fundraising and Funded Startups

1. Demand vs supply of fundraising ask

We looked at funded sectors in the angel funding ecosystem and plotted the funding ask of fundraising startups and the actual amount raised by the #funded startups.

Funding Legend : (red – supply (i.e., funding available), blue – demand (i.e., funding asked)

Key Takeaways:

• The market supplied more money than demanded to Travel & Tourism, Internet of Things, Retail, Enterprise Software, Events, Media & Entertainment, E-commerce and Rental.
• The market doesn’t agree with funding demand for Food & Beverages #duh, Augmented Reality/Virtual Reality, Healthcare, Fintech and Artificial Intelligence;
• Computer Vision, Fashion and Dating are well balanced on the demand and supply.

2. Demand vs supply of Valuation: sector wise

Next, we looked at the valuation numbers for all the funded sectors and plotted that in the graph below.

Valuation Legend (red – supply (i.e., valuation finalized), blue – demand (i.e., valuation asked)

Key Takeaways:

• The market is valued higher than the ask for Travel & Tourism #surprising, Computer Vision, Internet of Things, Enterprise Software, Healthcare, Fintech, Media & Entertainment.
• The market doesn’t agree with demand for Fashion, Augmented Reality/Virtual Reality, Events, E-commerce and Rental;
• Food & Beverages, Retail, Artificial Intelligence and Dating match well on the demand and supply.

Wrapping things up, a few observations for the sectors we’ve discussed:

• Travel and Tourism, Internet of Things and Enterprise Software are market #hotties
• The future of Computer Vision is looking up
• The market sentiment has turned negative for Food & Beverages but we can still see funding in Food RnD and Packaged FnB.
• Retail and Healthcare are still hot in the market but that means expect tougher competition
• Augmented Reality/Virtual Reality is an emerging sector
• Fintech is probably the hottest sector in the market at present
• E-commerce and Rental are still seeing a lot of funding but after compromises on the valuation.

If you’re interested we’ve attached an appendix for part 1 below:

Hope you find this useful. If you missed our Introduction post on the 5 Big Questions we’ll be sharing data insights on, you can click here to check it out.

Lastly, applications for LetsIgnite are closing on Jan 15th 2017 so hurry and apply if you’re looking to get funded or find a lead investor.

Stay tuned and let us know if you have any questions, reach us at startups@letsventure.com

Happy Fundraising, you got this!

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The post Funding Ask & Valuation 101 For Founders originally appeared on LetsVenture blog.

LetsVenture’s flagship event LetsIgnite conference is back. This March, 300+ Angels, 25+ VCs and 20+ Lead Investors will meet and network at the event. It’s opening up the event to both early and growth-stage startups looking to raise funds, partner with VCs and more. Click here to get started, applications close on Jan 15th!

Image Credit: Pixabay

The post LetsVenture blog: Funding Ask & Valuation 101 for founders appeared first on Startagist.