Pearl Uppal, former CEO of Fashionandyou.com has become an investor and accelerator for the digital startups. Cofounder of 5ideas.in, she was in Pune on 28th Jan with her partner Gaurav Kachru, on a pit stop to meet some digital startups in Pune. I had a privilege of attending this event and had the pleasure of not only listening to them but also interact with them 1-1, in person. What Pearl and Gaurav Kachru talked during this TIE Pune event mostly matched with my experience as an Entrepreneur in the digital space in last 2 yrs. These answer the myths, doubts or misconception many entrepreneurs have about startup. Here are the top 5 things from the event .
#5 How do I value my startup ? Should it be 2 crore, 3 crore or 5 Crore or 12 Crore ?
Ans : There is a lot of misconception, floating all around on the internet and also among the investors in India. Its not done by any rocket algorithms or any numerical method or DCF method at startup level. Work out all the money you need to reach from founding to Series A. For this entire amount founder should surrender not more than 25 % equity. In worst case 30%. This simple method establishes the valuation of startup.
#4 Greater is the equity an investor takes in round 1 greater will be her gain.
Ans: Pearl explained clearly that if the investors in round 1 extract blood out of founders, it leaves the CAP table ugly. The future round investors when they come they find that founder doesnt have enough reason to see the company succeed.. If the founder is not driven , he will not drive the company. The sickos keep parroting the cliche’ to the entrepreneurs :” Do you want 90 % of small company or 5 % of very large company? ” If the founder doesnt have any significant stake or say in the company only luck can save it. She eleborated that Investors across the world kill more companies than Entrepreneurs.
#3 How much percentage of fund we must give to the middle man ?
Ans : Pearl and Gaurav both clearly stated that this broking just doesnt work. The investor wont know the founder well and the founder doesnt know the investor well. Its one of the worst kind of relationship which brings good fortune only to the broker. She advised steering totally clear of the touts.
#2 What accelerators are good ?
Ans: As a fund , Superfuel is looking for the companies which have come out of accelerators. They believe that accelerators help your idea succeed faster and also fail faster. They believe not all ideas are meant to succeed. A lot of ideas must fail to let really good ones succeed big time. On asking what are good accelerators, they said the accelerators which are not attached to institutes.
Surprisingly, while there is so much noise about startup ecosystem in Pune , there is not a single accelerator available in the city .
#1 What tips the funding decision in favor of entrepreneur and better valuations?
Ans: When investors look at an opportunity , they look at how much of risk has been eliminated by the founding team. Does the founder have a big personal brand ? For a startup, the brand is its founder and for a founder her brand is a successful startup. Now if you have a brand in a particular domain , say media or technoloogy or sales , you have a better chance at raising fund at right value. Example : Sabeer Bhatia had little trouble raising fund for a bad idea named Aarzoo.com
More precious wisdom flowed during the meet but I am a man of poor memory and only recollect the significant ones. If you attended the event and have more pearlism , please do share