Band of Angels, now rechristened Indian Angel Network(IAN) held it’s 1st meeting in Mumbai today afternoon, where 6 businesses presented for raising early stage capital. IAN has now assigned a member to work with each of the businesses to help develop their plan and undertake diligence. Upon completion of these steps, which usually takes a month or two, IAN will either invest, decline, or request the business to revisit later.
With the Mumbai chapter now formally in place, there will be a monthly meeting where businesses can present plans and thereafter work with the team in Mumbai. This is excellent both for businesses in Mumbai/Western India, and for angel investors in this part of India. IAN hopes this will be a significant boost to entrepreneurship in Mumbai/Western India.
What struck me during some of the presentations, is that, founders were spending too much time on presenting product features and not enough on the other aspects necessary for a potential investor to evaluate the opportunity:
1. Team: what are the credentials of the founder and his/her core team? We want to know what kind of a track record of success the team has in the professional and academic level.
2. The addressable market: what is the addressable market for your product? I found that this was not tightly defined by many of the presenting founders. So (for example) if it was gourmet chocolate business for India, the founders were giving stats of the whole world’s chocolate consumption, when instead they should present data on the Indian gourmet chocolate market.
3. The competition: what is the existing and potential competition in your addressable market? This has to be presented with brutal reality.
4. Competitive advantage: what advantage do you have over your competition? Or, why should someone use you and not your competition.
5. Intellectual property: what is the intellectual property that the business will develop, such as brand, technology, processes, exclusive contracts, licenses, etc? A business without Intellectual property may not be able to sustain profitably for very long. On the flip side, especially on technology product you will need to show that you are not violating existing IPs with what you have created.
6. Marketing innovation: what marketing innovations are you undertaking to significantly cut cost of customer acquisition? Often marketing is far more expensive that building a product, and what use is a great product if you can get lots of customers/clients for it. With these in mind, you need to come up with marketing innovations which will significantly cut your marketing cost and carry your limited startup capital further. A few famous marketing innovations: Richard Branson who mastered the photo opp; Sabeer Bhatia who put the “Get your free hotmail” footer on every email; Larry & Sergey with Gmail’s 1GB storage; Kabir Mulchandani with buying out downtime on hoardings (when a hording had no ad on it) to splash AKAI, and paying taxi drivers across India to carry big empty AKAI tv boxes on their carrier to make it appear to people that lots of AKAI tvs were being sold.
7. SWOT: what are the strengths, weaknesses, opportunities and threats of the business? This gives an investor a realistic view of what s/he is getting into.
8. Proof of Concept: what is the proof that the business’ product will be accepted by the market? Are you getting good sales/adoption? Do you have positive testimonials from clients in you addressable market?
If you are presenting to IAN or any investor, please do keep the above in focus and you are sure to get a good response.
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Anish,
good info. There are also some schemes in NIRMA and IIT Bombay. Another route is to enter biz plan competitions, which are held almost every year. My brother in law Monish Pabrai also did some research and wrote a book called Dhando, where he observed that VC/Angel finance makes up less than 1% of start-up finance in the US, and if it disappeared the world wouldn’t be too badly off !
I agree that the angel system needs improvement. We need to find ways to evaluate projects prior to proof of concept, otherwise we are the same as VCs, but writing smaller cheques. To do this, angels need expertise in what they are evaluating. This is why I think Indian Angel Network is a good group, as it has over 60 diverse professional business leaders, and someone in there has goto have deep expertise in the project’s industry. I think we are moving towards this surely but steadily. There should be a lot more maturity in the next few months.
Jack,
Bangalore IAN went live a few months back. Go ahead and submit your plan on the IAN website.
Anish,
I agree and hence the intersting facts of entrepreneurship. But, when do invention happen in the market (filling the gaps are all examples of innovation).
Should market wait for reccession to think differently, to break traditional-barrier? Keep repeating same business model concepts until it get exaushted!
Comments please!
Well my above post doesnt mean that you shouldnt aproach seed funds, but just my views on startups without a prototype or who are looking for funds for the beta launch. My suggestion is to better aproach a seed fund in the second phase after you have testd your product in the market or have some acceptance like some customers.( Till you reach this point , you may try for alternatives like a CGTSI scheme or a TEPP fund or other schemes by Technology devlopment board).
Also all the points by RYK is really helpful for entrepreneurs because at one point or the other every entreprenuer should have to aproach a seed fund or a VC and defnitely these points are valuable for preparing your home work well( Even for banks or TEPP funding you will need to have a good business plan).
Earlier there was a post by Vijay on bootstrapping and many people posted comments on how people survived those tough moments and succeeded. Though it is easy to say that you follow the 3F rule ( Friends, family and fools) for initial seed funding or things like working day time to survive during the bootstrap period to meet the expenses many a time’s it’s not that easy. Becuase everything depends on the circumstances…..for example sometimes a failed entrepreneur trying to raise funds from family and friends may not work becuase he was a failure in his first innings and many will think twice before helping him out by offering say a 10,000 or 50k…so those entrepreneurs who has a solid idea or a sound business plan thinks of other options for seed funding and aproach angels or seed investors and what they will ask may be a proof of concept or a prototype or some initial customers and finally the entrepreneur ends up in wasting his valuable time.
So my suggestion for those aspiring and the needy entrepreneurs is to try out alternatives like the CGTSI scheme by banks or TEPP funding by Dept of science and technology or the funding option from Technology Development Board.
Coming to CGTSI ( CREDIT GUARANTEE FUND TRUST FOR SMALL INDUSTRIES) (http://www.cgtsi.org.in) , you can avail loan up to 50 lakhs from the member banks with out any collateral. The scheme is applicable for new startups and IT is given special importance under this scheme. Under this scheme CGTSI will offer a guarantee of 75% of the loan amount to the bank. You can apply for this scheme through all major banks in India including SBI / Canara / PNB etc.
Once you have submitted the application to the bank, the bank will intimate CGTSI about the project.( Kindly refer the website for more details).
Also please refer http://www.dsir.nic.in for details on TEPP project ( It provides upto 40 lakhs for any original innovation by any Indian).
But web2.0 and social networking kind of startups will have to find other alternatives since neither banks nor TEPP won’t fund such type of products..but again for web2.0 projects u dont much investment in the initial phases till u launch beta.
Ok. All very nice. when will the bangalore chapter open?