The TiE event explored what ticks inside a VC’s mind and tried to demystify the intricacies of funding for entrepreneurs

Is money the only thing holding an idea back from execution?" asked R Ramaraj of TiE Global and Sequoia Capital India – a crisp line of thought that left others thinking in "Funding Your Enterprise & Entrepreneurship Essentials",

An entrepreneurial and funding event organized by the Chandigarh chapter of The Indus Entrepreneurs (TiE) on October 19 in the CII auditorium in Chandigarh.

With a focused agenda of demystifying the intricacies of funding to these new and established entrepreneurs, the names on the guest-speakers’ list included Ajay Kapoor of SIDBI Venture Capital, R. Ramraj and G V Ravishankar of Sequoia Capital, Shailesh Jacob of Copal Partners and Kalpana Jain of Deloitte Touche.

The entrepreneurship story was woven right from the horse’s mouth by passionate local entrepreneurs such as Yashovardhan Saboo of Kamla Dials, Atul Gupta of RedAlkemi, Harbir Khurana of WiZiQ and Sukhwinder Singh of Vismaad.

The event was started with a welcome address by I.S Paul, President TiE Chandigarh and Chairman of Drish Group. Speaking on his funding experience, Yashovardhan Saboo of Kamla Dials related how he started Kamla Dials and Devices in 1983 with an initial capital of 1.5 crores and relied on conventional financing in the form of capital subsidies and bank loans. The company, now known as Kamla Dials, manufactures premium watch dials and retails them under the brand name of Ethos. He further stressed on the importance of having absolute clarity about one’s business model before looking for investments and scaling it up to an appropriate stage of workability before looking for any external funding.

Atul Gupta of RedAlkemi, formerly Pugmarks, related instances during his entrepreneurial life when he had to take crucial decisions on financial strategy. He hit the nail right on the head when he quipped, "Ideas alone don’t carry enough steam. You need a good team, talent and the ability to execute". Gupta is an IT entrepreneur who started Pugmarks as a design studio in 1985. In 2002, it tied up with Fidelia Inc., a US based monitoring and performance based software-solutions company. He elaborated on the importance of choosing the right investor who would add value to a business. "Approach only those VCs who have companies running on similar business models or segments as yours in their investment portfolio" he said to drive the point home.

Harbir Khurana of AuthorGEN voiced similar opinions when he weighed the pros and cons of acquiring some random VC investments or going for partnerships which add tremendous value to your business in the form of appropriate guidance, exposure to the right markets and general hand-holding. He has recently raised a round of angel investments from Band of Angels and strategic investment from Educomp Solutions.

Sukhwinder Singh with his colleagues of Vismaad Mediatech is credited to have come out with the first animated Sikh movie, Rise of the Khalsa. He started his business with an initial capital of mere Rs 25,000. When he approached a Singapore firm for producing 20,000 DVDs, he was met with skepticism. "Warner Brothers’ Brother Bear sold 10,000 DVDs. You want to produce 20,000?" he was asked. With his 20,000 DVDs, he made a country wide tour of the US. "I put up stalls outside fairs and Gurudwaras. Wherever I would see a Sikh with a turban, I would set up shop!" He sold all 20,000 DVDs.

"That’s passion", remarked R.Ramaraj citing Sukhwinder’s example. Ramaraj is among the pioneers of the Indian internet space. He was instrumental in co-founding Sify and listing it on the NASDAQ, thereby making it the first Indian internet company with a listing in the US capital markets.

Providing the inaugural note on "Entrepreneurship Essentials: Early Stage Fund Raising & Mentoring Best Practices", he emphasized the importance of differentiating an idea from existing businesses. "We look at how relevant an entrepreneur finds his own idea" he said. Citing the example of Travel Guru, Ramaraj expatiated how Travel Guru had differentiated itself from the many travel solutions companies in the market by working on a unique business model offering last-minute hotel and travel ticket reservations. Capitalizing on this USP, they had obtained an investment of $15 mn from Sequoia Capital and Battery Ventures in their second round of funding.

"Believe in your idea and execute like hell", said Ramaraj stressing on the importance of efficiently executing an idea. He elaborated how VCs bring in much more than money. "It goes beyond money and networking. We bring in mentoring and exposure". He, however, advised companies to boot-strap for as long as they can, that is, acquire funding from personal sources. In answer to a question on equity stake in investee companies, Ramaraj explained that Sequoia usually looks at 10-20 % equity. "We do not want to control the company. We just want to make sure that our equity share enables us to mentor and guide the company".

His colleague in Sequoia Capital, G V Ravishankar, channelised the discussion further by drawing down discrete points of what VCs look for in a prospective investment.

"If you’re taking a bet, let it be large", he said delineating the significance of a huge target market.

"A great team in combination with a great market provides the perfect equation for a great investment with great chances of success".

Shailesh Jacob of Copal Partners, a global financial research firm, presented on the standard valuation and due-diligence processes followed by VCs and PE (Private Equity) firms.
Defining valuation as an art in venture capital, he said, "Your value is the potential someone sees in your company." Increasing this potential or rather presenting it in such a way is, hence, important. "The key thing is your business plan. Most VCs want to be a part of the next big thing. So make sure that you are focused on capturing a billion dollar opportunity", he said in consonance with Ravishankar’s views.

The likeliest question succeeding this was, "How can you increase your valuation?" in reply to which, Jacob had a few succinct points up his sleeves. "Don’t waste money. Be focused on cash flows. Prove to investors that you can scale up and are capable of following a big market opportunity."

Kalpana Jain of Deloitte Touche expanded further on the valuation and the due-diligence process by presenting on the factors driving value and specific valuation tools used by funding agencies to arrive at a valuation of a prospective investee.

Ajay Kapoor, a veteran in the VC industry and CEO of SIDBI Venture Capital, advised entrepreneurs to work on exit models in addition to cash-flows early on, for that is one of the first things that VCs look for in a proposition. "Typically, VCs expect returns ranging from 5 to 10 times on exit." Hence, it’s pertinent to work out an appropriate exit strategy which would address a few primary concerns of VCs, namely when to exit, how much to exit with and what kind of buyback would happen.

An atmosphere heavy with valuation techniques and exit strategies was lightened up by the arrival of Kunwar Sachdev, CEO of Su-Kam. Narrating how he made Su-Kam the top manufacturer of inverters in the country, he engaged the audience with snippets from his life which involved crossing one professional hurdle or the other. He described how he made innovation his top priority and came out with the first and only DSP (Digital Signal Processing) sine-wave inverter of the country.

The Last Word was delivered by the charismatic entrepreneur-turned-investor, Rakesh Rewari of SIDBI Venture Capital. He dealt out the entrepreneur and VC cards with doses of good humor. "First reach a size that VCs contact you", he quipped. Until then, the option is to boot-strap, that is, obtaining funds from friends and family. Boot-strapping was, in fact, a significant part of his discussion, just as it was for the others. "If you need money, there are options that you can avail – friends, family and in-laws, if you’re lucky! Do not seek external funding unless you absolutely need it," he said.

The closing address was delivered by Somnath Chatterjee, the Executive Director of TiE Asia. Ajay Tewari of SmartData, who was instrumental in organizing the event, delivered the vote of thanks, thereby providing a fitting closure to an engaging day.

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