Category Archives: Tips

India, Marketing, Mobile, Research, Tips

The 99-0.9-0.1 rule for Indian Startups

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Jakob Nielsen is given credit for the 90-9-1 rule of Internet participation.

The “90–9–1” version of this rule states that 1% of people create content, 9% edit or modify that content, and 90% view the content without contributing.

In the last 6 months, I have gotten 21 Indian web and mobile consumer applications data on visitors, engagement and contribution.

In India the numbers are closer to the 99%, 0.9% and 0.1% in terms of lurkers, participants and contributors of any consumer application.

This explains a lot of things, including the 2-speed nature of Indian market adoption.

Its not that we don’t have early adopters, its that most people (99%) are really laggard adopters.

The difference between 1% and 0.1% is dramatic for startups who need the early contributors to get the community going.

To give you an example. Lets take a mobile application which has 3 competitors in India. Each of the 3 products has been in the market for about 6 months and still they total about 140K total downloads.

In the 1% scenario they would total 1.4 Million downloads. This assumes 140M total Internet users for both mobile and web. In reality there are only about 50-80 Million real broadband users.

Is it cultural? I have heard many folks blame (yet again) our Indian culture & education system which values listening to others than voicing our opinions. I don’t quite agree with that though.

I don’t know why exactly we have only 0.1% of people contributing.

This however has dramatic implications for “traction” among startups.

If you are going to show traction and have between 20K to 50K users or downloads, then you should realize that the 99, 0.9 and 0.1 % rule applies again to your users.

Only 0.1% of those who download will actually be contributors (such as check-in to locations if you are Location based service).

So the engagement metrics will be consistent but woefully low compared to what our US counterparts are seeing.

Traction among Indian consumer startups is not really “traction” in other markets.

P.S. I am still trying to see if this is the same for ecommerce startups. I am hesitant to think it will be the same, but among new and smaller (lesser known) ecommerce companies, these numbers are in the range. However, among established companies, the US engagement (or purchase) numbers are probably more valid.

Funding, Learning, Tips

Lessons from tennis – The one rookie mistake every entrepreneur looking for funding makes

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Admiring the shot instead of preparing for the return

Early this year I got a new tennis coach, since the one that was helping us left for Hyderabad. It was a big change for the entire family as we all got new coaches and the adjustments were tough. Most new coaches try to understand your game for a few weeks before they point out changes you need to make, but the new coach focused on only one aspect of my game.

Although the rest of my game is pretty average, I have a mean forehand cross court. I knew that it was good. So I’d never give up the chance to show how good it was. Play to my strengths has always been my motto. That still does not result in winning points, though. It just resulted in many people admiring my shot.

After about 15 minutes of playing with me, my coach stopped, asked me to come mid-court and said

The biggest reason you are losing more points, is because you are busy admiring your forehand cross court shot, instead of preparing for the return.

It took me a while to understand that. Having been told always I was good at that particular shot, I was expecting him to help me improve it. Instead, while he said it was good, he pointed out that I was too enamored by it to prepare for the return from opponent. That’s where I lost my points.

I see this also in many entrepreneurs who ask me to review their pitch deck before they seek funding from VC’s. Their pitch deck is awesome, super tight, glitzy and slick.

Their operating plan is an afterthought.

It’s almost as if they don’t expect the investor to take things forward, so they are unprepared.

Similar to my forehand cross court shot.

I expect most shots to be winners, so I am not prepared for the return, instead I am admiring the shot I just made. Trouble is over 50% of the shots were being returned.

Same with investors

In golf there’s an old saying.

Drive for show and putt for dough. (quote)

I am going to modify that for funding.

Pitch for show and plan for dough.

If you want to get funded, focus on getting your sales, marketing, hiring and financial plan in order, because that’s what investors value. Its showing them how you are going to use the money to create value for the company and a return on their investment.

Of course, without a good pitch deck you won’t get to the next step, but since most entrepreneurs do a fairly good job of focusing on the pitch deck, I’d recommend you spend enough time on the operating plan as well.

Entrepreneurship, Tips

Strong Entrepreneurial traits – How to develop a thick skin

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Over the weekend I was at the IPMA conference hosted by Ravi Padaki and his team. I was in at about 11 am and missed a good session by Ram from eBay. I was at the session with Alok Goel of RedBus. Long an admirer of Phani, I am even more impressed with his ability to recruit star players such as Alok. His talk was funny, insightful and full of great examples.

After the talk, I was part of a panel with Sanjay Jain of Kosha labs and Dhimant Parekh of Hoopos. Both are strong product management experts and I was excited to participate in the event just to hang out with them.

The session was billed as a product clinic, which is similar to the ThinkNext events we run at the accelerator and what we have done at Delhi, Bangalore and other cities. In this session 4 entrepreneurs were to bring their product issues or go to market issues and were given 5 minutes to present their company and problem and the jury got 10 minutes to help troubleshoot. The cynic in you might say this is “gyan” session and what some people term as “too simple”. I disagree completely with that thesis that you cannot provide some guidance, largely because most issues with companies fall into the basic 3-5 buckets of problems which are easy to diagnose but hard to provide solutions to.

One of the presenters was the founder of a company that started in July and had built 4 products. One of the products was a dentist appointment system for patients. When he presented he mentioned the market was fairly commodity and that his product was one among 5 others with similar capability.

It was fairly obvious that they were trying a lot of things to see what sticks, but it baffled me that if he knew that the market was commodity and he still chose to build a product with no immediate differences than what was already available. It seemed to me that he was really building a services company with an interest in products as opposed to having a product focus upfront.

I did admire the founders ability to build a team of 13+ people in <6 months, get 3+ paying customers but did not get a chance necessarily to point that out, given the short amount of time we had.

So I chose to point out the need for focus and mentioned that he ought to try and get one great product as opposed to 4 commodity ones.

He was genuinely upset.

I could totally relate to his reaction, given how tough it is to accept criticism of any sort towards your baby.

One of the things I do admire in a lot of successful entrepreneurs is their ability to have a thick skin – the ability to take criticism well, take a lot of body shots and still keep going.

Then I read an interview with Ratan Tata over the weekend.

“In my interactions with business leaders in India, as against elsewhere, there is this feeling that they are looking for cracks in your armor in order to pull you down; this happens not just to me but to everybody,”.

I am torn. I really admire Ratan Tata and I think he’s a role model for many, but I cant help but feel that the emotions are misplaced.

I try to help entrepreneurs do it with the intent of making them stronger and better. Not with the intention of “pulling them down”, but I can totally understand if it comes off as “beating them up”.

I never intend to really deflate another entrepreneur’s zeal, but a reality check is in order.

I think the best thing I could do is to “say it better”.

With empathy and emotion as opposed to with a detached sense of being.

So I am committing to do that.

If you are an entrepreneur and in any of the clinics I do make it blunt and you get a a sense that I am “beating you up”, feel free to call me out.

It will help me be a better person.

Regardless of people like me, please do develop a thick skin. It is the trait of strong entrepreneurs.

Angel investing, Entrepreneurship, Funding, Tips

Why it is a LOT easier to raise seed money for your startup in India than silicon valley right now

If you are an Indian entrepreneur who is looking to raise seed funding for your startup do it now. There’s been no better time to raise money for technology product startups than this year and possibly part of next year.

I understand the issues entrepreneurs face with Indian investors in the seed & early stage. They take too much time to make a decision, they ask for too much of your company and wont fund anything pre-revenue.

There are 3 major trends that are making it easier to raise capital now than any other time.

1. The number of accelerators has grown tremendously over the last year. There are 30+ privately funded (6+ in Bangalore alone), for profit entities, who are all keen to add bigger batch sizes to their portfolio.

2. Many Venture capitalists, stung by criticism that they are not taking enough risk and are not early adopters are eager to engage with startups earlier in their evolution, and are tweaking their investment thesis to add a few more pre-revenue and pre-product stage companies to their mix.

3. Angel networks, seeing over 15+ VC’s raising over $100+ million funds to focus on India, are signing up new angel investors in droves, and expanding their footprint. 2 years ago only 3 large angel networks existed in India. Today there are 15, and each of them has over 25 angel investors and some have over 150.

Seed stage of the Indian startup ecosystem has never had so many things working for it in confluence.

The demand side of the equation is fairly consistent. Our database indicates that after the eCommerce boom of 2010 and 2011, this year has seen a modest fall in new product startups being formed, from over 700 to little over 600, which means fewer companies chasing more investment options.

Now, lets look at the valley.

1. There has been a boom in new product startups, and the competition is fierce. The number of new startups has increased from over 1700 per year in the valley alone to over 3000. As I mentioned in an earlier post, VC’s are seeing nearly 150+ companies in the SaaS market, each of whom are doing more than $1 Million in revenue. There are 2 times as many companies fighting in the valley for the same quantum of funds.

2. Venture investors, seeing the boom in the seed stage and seeing also far fewer exits are adopting a wait and see approach to series A.

3. The VC freeze on series A in the valley has led to many sapling round investments from seed and micro VC’s and super angels, who are increasingly picking and choosing the companies they put seed money in for an extension round or “sapling round”.

If you are an entrepreneur, raise your seed round NOW. Things will get more “sane” by June next year and there will be many who start to take a more cautious approach to seed stage investments.

The equation on series B in India, is not as rosy though.

Funding for eCommerce companies, many of whom raised series A at HUGE valuations last year has pretty much dried up. Most companies are doing inside series B rounds (from their existing investors) and 3 of the  CEO’s I spoke with claimed down-rounds (where valuation of this round is lower than the previous round).

Entrepreneurship, Tips

The right time to launch your product

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In my 14 years of developing and launching products, I have launched early, late and at “just the right time”. Truth is there is no “right time” if you have been working with customers and getting feedback. At that point the launch event tends to be largely a PR & AR (Press, Analysts & Bloggers) communication and outreach effort to create awareness, feel good about the traffic over the next few hours and get back to work.

Thanks to accelerators and the 3-4 month programs, almost every startup “launches” during demo day. To investors at least.

Since they want to launch “to investors” with some good momentum and traction, most startups are doing a soft launch or private beta a few weeks / months before and getting users and customers and some form of usage so they can show that traction to the investors.

I got a question about when to launch yesterday from an entrepreneur in Seattle. He’s been working on a consumer travel app and they have about 200+ active users that have been using the solution for the last 3 months. The beta criteria they kept for themselves (besides removing all the bugs) was active usage once a week by at least 10% of their registered users.

I ended up having a conversation of the pros and cons of launching early versus late. While I am fan of the “launch early and often” approach, I am also very aware of the problems of launching early, especially in a mature market such as the US. It tips of potential competitors who have a chance to be an better fast follower, that executes better given the lessons they can learn from the first mover.

Launch late and you will invariably get lots of people comparing you to the first mover and asking for features (right or wrong) that are already available with the competitor, making your ever so slight difference in the product strategy seem like an afterthought.

The easiest part of the conversation was my experience stated that the “Launch for investors” was the worst thing to do. Even if that’s your goal – to raise awareness so you can raise money, launching to the public the same day you do your demo day makes no sense, unless your product is aimed at investors.

Lets define launch of your company & product as the time you believe the product you are building is ready to be showcased so more people can be made aware of it. Its the equivalent of putting up the “Ready for business” sign outside your new restaurant.

Lets define purpose of the launch to be solely to focus on growing your users, customers and usage. Not to get feedback and tweak your beta product (which you should have done earlier), but to attract more potential users to your product.

There are 3 main strategies I have used to time the launch:

1. Time it around a startup event or conference (like Unpluggd coming up this weekend or Demo, TC Disrupt, etc.), so you can leverage the press, investor and influencer gathering to get most bang for the buck.

2. Launch it around an industry event (such as NRF in Jan for retail apps, or NASSCOM product conclave), which gives your more visibility among potential customers.

3. Launch independent of all dates and create momentum by reaching out to the press separately. This is fairly risky because you cant quite predict what else would happen on that day that might “steal the thunder” giving you less visibility than desired.

Regardless of the date, you still want to launch when your product is ready and your app is truly available to take more customers.

Angel investing, Entrepreneurship, India, Tips, Venture Capital

What should a series A funding process look like? Step 5: due diligence and transfer of money to the bank

Please read series A funding plan and strategy, the first step of the process – the introduction to an investor, the 2nd step – first meeting and follow up, step 3 – present to the partnership, step 4 – Negotiations and Legal Discussion and now the final step: the due diligence and money transfer.

After the investor offers your a term sheet, they will mention that the final money transfer is subject to clearing their “due diligence”. Anecdotal evidence from 4 people in my VC network suggests nearly 10%-15% of companies which get a term sheet do not clear the due diligence. That’s a very high number.

What is a due diligence?

Its examination of the facts stated by you to ascertain if they were true.

The due diligence checklist (sample: pdf file), typically consists of anywhere from 10-15 (short) list of items to 10-20 pages of items. The items include your incorporation paperwork, tax and regulatory compliance, IP rights ascertainment, contracts signed, customer verification, and a host of other items.

Everything you mentioned in your presentations before (including customers you signed, revenue you currently are booking, etc.) will have to be verified.

Typically if you are a small startup doing little revenue, this might take 2-3 weeks, but if you are a larger entity it might take a month or more. Usually it is done in parallel with the term sheet negotiation, and will take up (in India) 1/2 time for that period of any individual. It consists of bringing together multiple documents and paperwork that you may have missed, filed or recorded.

This is one of the main reasons why fund raising becomes a full time job for one of the cofounders. I would also recommend you giving a heads-up to your Chartered Accountant or your lawyer so they can help you with these, but realize you (or someone you assign) will have to project manage this entire task.

Most investors (both in the US and India) prefer to transfer money in full to your account once the paperwork has been signed. Sometimes as part of the negotiation, you might get specific milestones that you might have to hit for more money to come to your bank. That’s typically called investing in installments or “tranche“.

Within 1-2 weeks of your final negotiation, you will be expected to put a “90 day” and a full year financial model and plan. You will be expected to hit these metrics (preferably go above and beyond). You should also expect a monthly (at the minimum) review of the key metrics (revenue, customers, hiring, etc.).

What might go wrong and how to fix it?

1. Your are missing certain items in your due diligence list. The key is to warn early. Tell your investors you are either missing or have lost or dont have a few items. You will be given time to get those fixed or in some cases they might waive it – it depends on the nature of that item.

2. There are some discrepancies between what you mentioned during your initial presentations and the documents you submit. That happens more often that most investors like and is probably the cause of most of the term sheets being rescinded. My personal suggestion is to be totally transparent and upfront with your investors before the due diligence so you can avoid this situation.

3. Some of the items in the due diligence dont apply to you, or they dont make sense or you dont like to share them. If they dont apply, ignore them and communicate. If they dont make sense, learn. You dont have a choice but to share everything with the investor.

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Angel investing, Learning, Tips, Venture Capital

What should a series A funding process look like? Step 4: Negotiations and Legal Discussion

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Please read series A funding plan and strategy, the first step of the process – the introduction to an investor, the second step – first meeting and follow up, step 3 – present to the partnership and now onto Step 4 – Negotiations and Legal Discussion.

Congratulations, you have achieved what nearly 95% of startups (anecdotal evidence) wont end up doing – getting to a “term sheet” discussion with an institutional investor. After your first VC meeting, usually this step happens about 3-4 weeks later in India and a week or two in the US.

Typically most VC’s and their associate / principal will make a trip to your office between this period. They will want to meet the team, check out your offices and make sure that you are a “real company”. My personal experience shows that you should use your “lack of funds and frugality” to your advantage. Dont try and have them meet you at someone else’s office (has happened once) or try and spruce up your office (keep it clean, but dont go overboard).

Question I get is usually “I am working out of my home / garage”, should I invite them there? Let the investor know that you work out of home and they will usually ask you what your plans are post funding. Most will decline to come to your home, but if you wish you can ask them to meet at a coffee shop near your home / garage.

Most investors like the frugal quotient in startup founders.That shows that you focus on hiring the right folks and building the right product instead of “AC offices” and plush “Aeron Chairs“.

Your investor champion will typically call you with a short message in which she will say the firm is pretty excited about your opportunity and would like to offer a term sheet. She will invite you for a discussion on valuation and quantum of funds, at their office typically, with their associate and/or principal – let me call them “investment professional” or IvP from now on.

The IvP would have done quite a bit of work by this time to review your financial projections and assumptions. They will have also called a few potential customers, a few existing customers, some industry experts and a few of your friends and past acquaintances (yes, this happens in US and India) to get more information about you, the market, customers and other trends.

The negotiations are never one meeting. It will take typically 2-3 (or more) weeks to discuss between you, lawyers at both parties and the IvP. In your first meeting with the investors, they should state clearly why they are investing in your company – we like the market, we think the team is good, we think you can make it big, etc. They should also give you feedback on what needs work – you need to revisit your assumptions on hiring costs, the revenue projections are aggressive, your channel strategy is something they can help with etc.

Then they will give you two numbers of your term sheet – the valuation and the investment. They will say something to the effect “We are willing to invest $1 Million at a pre-money valuation of $3 Million”. Or they might say “We are looking to invest $1 Million for 40% of your company”.

You should be aware of these terms: pre-money valuation, investment quantum and post-money valuation, ownership %.

post-money valuation = pre-money valuation + investment

ownership % (for money invested) = investment / post money valuation – this is also the amount you “dilute“.

So in example 1: If they are investing $1MM at pre-money of $3MM, then your post money Valuation is $4 MM. So the company is valued at $4MM after funding. Since they put $1 MM, they will get 1/4 or 25% of the company.

In example 2: They are investing $1MM and are looking for 40% of the company. Which means the post money valuation is $2.5M and the pre-money is $1.5 MM.

How they come up with these valuation numbers is a series of posts in itself, but suffice to say its part art, part science and largely a function of market conditions (supply / demand). If you have multiple investors competing for your deal, you might get a higher valuation if your company is *hot*. If the investors you are talking to are the only ones who are still interested, and you need the money, be prepared to dilute more.

After this meeting they will let you, the IvP, their lawyers and your lawyers hammer out the other “terms”. The term sheet (pdf file) will have many other conditions and clauses. I wont cover them all, they require a series of posts in themselves and enough people have written about them.

The most important terms are: liquidation preferences, anti-dilution, full ratchet, drag-along, tag-along (called co-sale in the US), ROFR (Right of first refusal) and board representation.

Keep in mind that your company will pay for your legal fees, and also the investors lawyers. You need two sets of lawyers so each party can protect their interests.

Most investors will say most of these terms are non-negotiable, but depending on the deal they will negotiate with you – through the lawyers, obviously. Realize that the lawyers really are the go-between. They wont do or ask for anything the investor really does not want. So, its pointless blaming the lawyers (they are a few errant ones, but they are largely service providers who do as they are told).

What might go wrong and how to fix it?

1. You dont like the valuation or you would like more money (investment amount). That’s negotiable and depends on the deal dynamic. Some investors low-ball and others will give you “fair valuation” Its rare that an investor will over-bid – (A16Z is an exception). Let them know your expectations and be prepared to defend why you think your valuation metric is the right one.

2. They term sheet is loaded with investor-friendly (anti-founder) clauses. Some of those are negotiable as well. I would advice you to pick your battles. Choose 2-3 items you consider very important to you and only negotiate those. The investors typically will do that as well. Most likely you’ll meet in the middle.

3. The lawyers take up endless time splitting hairs. In India, legal advisers will work on a fixed fee for the transaction model, but in the US that’s rare. So in India the incentive by the lawyer is to protect the parties interests but spend as little time as possible so they can bill at a higher rate. In the US though, the incentive is to take the “right amount of time”. Be aware though, that lawyers only do as they are told. Either your investor is telling them some terms are non-negotiable or your are telling your lawyer some issues cannot be compromised. Either ways, get on the call, and fix things proactively.

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Angel investing, India, Tips, Venture Capital

What should a series A funding process look like? Step 3: presenting to the partnership

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You have a series A funding plan and strategy, the first step of the process, the introduction to an investor, the second step the first meeting and follow up, now its step 3 is to present to the partnership.

Most times this step is hard to get to. Getting to this step means the key partner who is “sponsoring your startup” believes in it enough to get your company in front of the other partners. Most investor firms have 3-5 partners who (should) have the same # of companies they fund and same amount of funds to deploy. So if the fund is $500 Million and has 5 partners, then each person has to deploy $100 Million to get best returns. The partner sponsoring your company has to convince other partners why he’e excited about investing in your company.

In the US I have been asked to present to the entire partnership 2 times (they will then discuss it between closed doors among themselves), but in India, the way it works is that the partner presents your case to her partnership. So, instead of you telling the story about your company, you have to arm the partner with the best story so she can convince others in the partnership. Other partners can say no, but that’s rare is my experience. Usually your champion has been sharing details about your company with others early in the cycle so they are typically aware of the company, and now are trying to look at the deal in its entirety and look for any last minute reasons to say no.

To get to this point, though, is a series of multiple steps, follow-ups and constant progress updates. There is no “one thing” that you can do to get here. After your first meeting with the investor, follow up on the action items they suggest and ask the right questions of them so you can do the due diligence on them as well.

One of the most important parts (besides following up and providing frequent progress udpdates – weekly) of the process is the type and kind of questions you ask of the investor.

Smart questions and they realize you are trying to evaluate them as much as they are you. No questions and they will think you are a novice.

Here are a few questions to consider, which you can tailor to your situation:

1. How much time do you spend with portfolio companies and how often? Will give you a sense of their involvement. Some investors like to invest and only attend board meetings, whereas others will also provide valuable advice and connections.

2. What are the biggest challenges to scaling our company that you foresee? Will let you know their thinking around amount of money they think you will need eventually.

3. Which of your portfolio company CEO’s can I talk to, so I can learn from their experience? Make sure you also speak to other portfolio companies who they dont mention, so you get a well rounded perspective.

4. Will you be able to lead our round, or will you expect me to find a lead investor? Most firms will lead your round if they are excited, but some seem to prefer to co-invest and let others take the lead. If the firm you are talking to does not lead, then you will have to spend a lot of time trying to get another lead investor.

5. How long will it take from the time your partnership says yes to the time of finishing the paperwork and completing the money transfer? They will mention “on average it take X weeks / months” which will give you a sense of the negotiation process you have to endure.

Typically the partner meetings are on Monday, so if you hear back on Monday or Tuesday all’s good. Later than that means, there are typically more questions that came up, so you things might go sideways for some time.

What might go wrong and how to fix it?

1. Your investors “goes cold” on you after they present to the partnership (happens more often that I’d like). Remember that admin you started building a relationship with in step 1? Leverage her to find a time to speak to your investor – either when she’s on the way to the airport someday or in between meetings.

2. Your investor “needs more time” since they have some concerns. Get the list of specific concerns. Not generic stuff like “we dont like the market”, since nothing’s changed in the market since they started talking to you (assuming its not long). Try and see if those concerns are valid and addressable. If they are not, cut your losses, move on. Keep them informed or progress via a monthly email update, but realize trying to engage again is going to suck up a lot of your time for an unknown outcome.

3. Investor needs “more data“. Understand what data they need and which parts of it falls into the “due diligence” and which parts of it are truly needed to make a decision to offer a term sheet.

4. Investor does not say a firm yes or firm no. This is the biggest problem. Most Indian investors are fairly straightforward and will give you a quick 2 week (from start to finish) no. But the yes might take longer. The trouble is the quicker you push, the more likely you’ll get a no. US investors for most part (institutional) have a hard time saying no. Usually their “yes, but” means not yet. My suggestion is to focus on building your product during this time and get enough other work going on to ensure you dont keep waiting for the phone call from the investor.

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Angel investing, Entrepreneurship, Learning, Tips, Venture Capital

What should a series A funding process look like? Step 2: The first meeting and follow up

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Once you have a series A funding plan and strategy and also the first step of the process, the introduction to an investor, the next step is to prepare for the first meeting and follow up.

Since you got an email from the investors admin, I’d recommend meeting investors either on Thursday or Friday.   Typically the admin will give you 30 minutes or 1 hour. Plan to finish presenting your pitch in 1/2 your allocated time to leave room for Q&A and a discussion on next steps. I dont recommend taking anyone else for your initial meeting, since its exploratory for both parties.

Typically the email from the investor will request you to “send me something so I can review”. From my experience its better you dont actually send your pitch deck via email, but your ONE page summary. Include detailed profiles of yourself in that one page (5 sentence per founder, with previous *accomplishments*).

Here’s a money tip: Include a link to your LinkedIn profile (not facebook or twitter please) at the bottom of the email with the attachment to your one page summary. [Side note: Make sure your LinkedIn profile is updated]. Make it easy for them to find out about who they are going to meet with.

Another money tip: When they click on your LinkedIn profile try to have at least 3 “mutual connections” with that investor. That seems to be a magic number (yeah, I know these may be lame tips, but bear with me).

Prepare for the presentation and show up about 5-10 minutes early (not half hour). Try to pitch your deck to 2-3 others in your company and let them ask you multiple questions.

You should have a overview presentation of about 15 (7 if its a 30 min meeting) slides for this meeting. The average person takes about 2-3 minutes per slide (depending on content), so you will have 30 minutes to present.

There are 2 strategies you can adopt on your pitch deck: Either you go deep on content (the slides should speak for themselves) or moderate (you are needed for the slides, else they are “content free”). There are pros and cons to both approach.

Content deep: Usually used by technical founders, these tend to focus on sufficient detail so that the investor gets a handle of the pitch The pros are: even if you suddenly develop cold feet (rare, but hey that happens) the slides convey your message. The cons: What’s the point of having you in the presentation?

Content moderate: My preferred approach. As you might have heard, investors are people, who invest in people. The pros are: You are in control of the presentation and are able to add “color commentary and provide lots of stories”. The cons: You might forget some very important points you wanted to cover, but those should have been on your pitch deck in the first place.

Here is a possible list of slides and a suggested order (tweak as appropriate).

1. Your background and your co founders: Try to answer these questions in this slide: Are you credible? What makes you unique to solve the problem you are going to solve?

Money tip: Dont use your background slide to only talk about yourself. Use your background to create “connections” with the investors. If you have (smartly) done some background, you will figure out some way to be a Kevin Bacon. Example: I know you invested in <portfolio company> and we recently hired a UX designer from there.

2. The problem you are trying to solve: Stick to 3 real use cases and make sure you have more detailed knowledge of your customer / user. Tell multiple stories here and use 5 minutes of your time on this slide. Why? Most people believe if you understand the problem clearly, you likely have a solution for it.

3. What is your traction? Show them that you are solving the problem already and address the question: So what if this is a problem? Are people buying? Are users signing up?

4. Your estimate of the market – preferably top-down and bottom up. Try to address the skepticism – is this worth the investors time? Money tip: If you market is < $1 Billion for US and < $250 Million in India, dont go to institutional investors. Dont waste your time, because it wont excite them. If you dont know the size of the market, dont make wild-ass guesses. Just say you are doing market analysis in your first meeting. It makes your pitch more credible. Ask the investor for their approach towards market sizing.

5. Your product: Address the question: Do you understand how the problem can be uniquely solved by you?

6. What’s unique about the way you solved the problem? Address the question: Do you have sustainable advantage or unfair competitive advantage over others.This might also be a place to address any unique technology challenges you have overcome.

7. How are you going to acquire customers? What approaches might help you best to acquire customers in a scalable fashion? What distribution mechanisms will you use to get multiple customers in very short time?

8. Competitive landscape. The best way to show this is a two-by-two matrix. Be real.

— If this is a 30 min meeting, you should be done by now.

9. How do you plan to make money (if you dont have financials) Or how are you making money right now?

10. The ask: How much money are you looking to raise and what are you going to do with that money?

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Slides 11-15 are for your product screen shots, since SNAFU’s happen all the time and you wont get Internet connectivity (or it will be a really slow connection), when you need it.

Use the last few minutes for Q&A and follow up. Have at least 3 questions about how they can help you get further and what improvements would they suggest to your product.

The easy follow-up asks: Ask for introductions to 2-3 of their portfolio companies so you can get a few customers. If you are a consumer internet company, ask them to use the product and let you know their thoughts. Suggest a list of questions they asked that can be the agenda for the next meeting.

Money tip: If you ask “What is the next step”? most will answer “Let me think about this for 2-3 days and get back to you”?. That’s lame.

You should suggest a next step. Examples:

a) Why dont I meet these people you recommend and lets chat on 29th August?.

b) Why dont you come by our office and meet the rest of the team so you get a feel for our culture?

What might go wrong and how to fix it?

1. You turn up really late for the presentation or you get lost trying to find the office. Apologize, try to use the shortened time, but most of all, pray that their previous meeting overran.

2. The investor turns up late for your meeting. If this is your top tier investor, you have not much option, but I know most of them will give you appropriate time if they are late. You can also have 2-3 more “asks” if they are late. If this is not your top investor, be courteous, shorten your pitch, and move on. Life’s too short for people who dont value your time.

3. Investor asks you a ton of questions for which you were either not prepared or do not have answers for. Be honest, say you dont know (its okay to not know) and suggest a follow up on your part to prepare and send him answers and meet again when you are ready.

4. Your “live demo” does not work. Go back and read what slides 11-15 are for.

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Angel investing, Entrepreneurship, Tips, Venture Capital

What should a series A funding process look like? Step 1: The introduction

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Once you have a series A funding plan and strategy the next step is to have a defined process to make it easy to scale.

Most developer CEO’s dont quite like the word “process” – which usually means repetitive and bureaucratic. In this post I’ll try and outline how you can use process to scale and not lose your mind when dealing with investors.

There are 5 important parts of a series A funding process:

1. The introduction and initial call. Since your plan has already given you a spreadsheet with the target investors and possible connections, this step in the process is to either email (or call as appropriate) your connections with a request to introduce you to the investor.

I recommend that you do a quick 15 min brief to your connection about your company so they know what your company is doing and why the connection you are requesting is a good fit as an investor. I would recommend a short 40-100 word email with your elevator pitch, which can be forwarded to their investor connection.

I would recommend not more than 10 firms in your list (5-7 is ideal). 3 of them which are your top targets, 3 that have not an investment in the space, but have expressed an interest, and finally 4 who are likely to be move slowly.

Usually in India, most investors respond in 3 days and in the US, the top investors in 1-2 days after you have been introduced via a warm contact. Of course there are exceptions, and it might take longer. If they respond faster, you have a connection that’s very highly regarded by the investor.

Ideally you should email all connections in a day or two and get introductions within 3 days from start.

After your connection has sent and email (ideally she has copied you on the introduction), expect a couple of days to get an email back. Usually the response to your email will be an note to you (with their admin copied) to schedule time to meet. Dont ignore the admin, because she will be a big help in steps 3 and 4 when things get slow or responses are delayed.

Elizabeth’s approach was to get meetings to completely book her schedule in 2-3 weeks, which might work for the US, but for India, I’d recommend spacing meetings out a bit so you can a) iterate your deck and positioning based on the feedback you receive, b) get some time to think and follow up with investors and c) give yourself time for traffic and travel (unlike US where most investors in the bay area are in Sand Hill road, in India, they are all over the map).

Spacing things out a bit also ensures you’ll get time to work on the action items they give you. Example: please go meet this person who I know is an expert in the space, or please send an email so I can connect you to a potential customer who is in our portfolio.

Nothing pleases investors more than you taking their advice, acting on it, and showing that you are diligent and value their input. Its the best way to build a relationship.

Setup the follow up meeting, ideally on Wed or Thur – why? Mondays are partner meetings so most people are busy all day. If you meet on Thursday or Friday there’s more chance of your deal being brought to the “partner radar” fresh the next Monday.

What might go wrong and how to fix it?

1. Your connection might not respond to your email. Follow up with a gentle reminder via email (if your connection is a good friend, call her)

2. The connection may take 4-5 days to send your email and may sent it to a influencer (associate) but not a partner. That’s okay, just make sure you meet the associate and try and see if you can get the partner to join – “Hey I met <partner> at <this event> and I’d love to follow up with him on my company”, might work.

3. The connection sends an email but the investor does not respond. Try twitter (most US VC’s are on twitter, but a few Indian VC’s are as well). Best approach is to get a second connection who can also put a word in for you. Calls rarely work if email did not, so try another connection.Try your legal firm’s partner as a person to connect you as well.

4. The investor says they are not investing in the space or they dont like market you are working on. Try and get an alternate investor who they think might be a better fit. “I understand <investor>, would it be possible to suggest someone who might be a fit?”

5. The investor says they are busy for the next few weeks / months (either because of their board meeting schedule or they are raising their own fund). See if you can meet them at the airport when they have a little down time. Dont laugh, this has worked for me several times in SFO. In India, investors attend many events, so suggest you meet there.

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In the next set of posts I will cover the next 4 steps in the process including:

2. The first meeting & followup.

3. The presentation to the “partnership”.

4. The negotiations and legal discussions.

5. The due diligence and transfer of money to the bank.