While am lost putting together the pieces of my latest startup on discount retailing and bootstrapping it over the last few months, an interesting comment by another budding entrepreneur got me thinking – “If Marwari’s/Gujarati’s in India have bootstrapped since ages traditionally and built cash positive businesses why this hue and cry over today’s startups not having access to seed funding in India?
Now this is a debatable topic and highly subjective on multitude of factors including startup’s competitive environment, business model and ambitions - and there has been enough instances like above when the whole idea of getting investors onboard have been scoffed at and integrity/objectives of these investors questioned
To begin understanding this we first need to go back to pre-industrialization era when business in India was highly unorganised, family controlled and license raj dominated – there were big gaps in basic services available in the market and competitive landscape was negligible – one could start small, grow over the next few decades and build a value creating business without external funding.Copying international models and replicating them in India would work perfectly as consumers too didnt have much of a choice and room for experimentation and failure was high. Back to era 2010 – India is booming, more aam admi is taking to entrepreneurship (not just the marwari’s), the competitive landscape is cruelly guts crunching and business models have a short shelf life – its mostly do or die for today’s startups.
You may be the first one to do it, but if you cannot capitalize on it quickly, scale-up fast and build strong entry barriers – there would be hordes of others coming in and beating you at your own game – and you would risk running out of steam at your peak! As one of my startup friend Hemant from Bricks Realty (real estate franchisee startup) comments – ” My business doesnt require funding as such – its cash positive – but to expand to 20 more cities it requires considerable funding and professional mentorship”
As Mahesh from Pinstorm/Seedfund rightly points out in a beautifully expressed article – the objective of investor and the entrepreneur are very different – “its best to avoid us investors altogether”. However he also goes ahead to say if your business model does require funding to build value -then understand how we tick. Change your slideshows accordingly and build a case that looks good to us and our investment committees. It’s different positioning.Every good entrepreneur has to be a good marketer first. And investors are a key target audience. And every good marketer knows that your story has to change from one audience to another.Shape your pitch to suit us.
A way out which i believe in would be – bootstrap and build self sustainable business models, if at all you cant avoid investors – build your beta version, get few customers/clients onboard and have a proven business model/product to show to investors – and then go after the fund raising bit – that helps you retain your say in the investor game and avoid being exploited just because you were desperate and ended up killing the chicken before it lay the golden egg!
Change the game of investment – make a workable model and approach the investors saying hey ”we dont need just your funds, we need an “active investor” who works with us to scale the model,adds value to the business and “provides mentorship” not just funds” – let the investor’s pitch to you “Why you should take their funds’ and not from somone else, what they bring to the table apart from the funds !