From raising funds to improving investor sentiment: Here’s what top VC firms, startups think

By: | Published: May 3, 2018 2:36 PM

Over 30 percent of the respondents said ‘Strategic Fit’ was the most important factor while boarding a lead investor, followed by ability to do follow-up funding (19 percent), strength of institution brand (15 percent), Commercial terms of the deal (10 percent), Network (10 percent), individual partner expertise (9 percent), and personal relationship (9 percent).

From raising funds to improving investor sentiment: Here’s what top VC firms, startups think

Any entrepreneur can tell you that raising funds can be the most typical part of starting your own business. While the competition for raising funds is increasing by the day, your chances – as an entrepreneur, raising investments become slim. Of course, finding an investor is not impossible, but one of the best decisions an entrepreneur can make is to find multiple ways that will contribute to their financial stability.

In a report by Innoven Capital, with inputs from Amplifi B2B SaaS accelerator, Blume Ventures, Calcutta Angels, Kae Capital, Microsoft accelerator, Mumbai Angels, Oracle Startup Accelerator, Tracxn and others, stated that 54 percent of respondents who attempted to fundraise in last 12 months had a favourable experience (up from 37% in 2016) while 56 percent feel that it will be challenging in 2018.

Raising Funds

Further startups pitched to an average of 6-10 investors before raising any sort of investment, the report stated. Startups that felt that they had a favourable experience raised their funds were either backed external investors, or internal investors. Others who raised a sub-optimal rounds from external investor/s, raised a bridge round, had a bad experience over the last year.

How much funds are startups looking to raise?

Startups backed by an incubator or an accelerator stated that they were looking to raise about $8 million, while companies that were bootstrapped stated that they were looking to raise $68 million, startups that have already raised Angel/Seed round are looking to raise $144 million and PE/VC backed startups stated that they are planning to raise over $480 million over the next 12 months.

The most important factor in selecting a lead investor

Generally, Lead investors want at least half of the round — and will prefer to take the entire thing. If they don’t want the entire thing, they will help you find followers. They generally believe your stock is worth more than what they’re paying. Like great entrepreneurs, they are mavericks. The survey further asked its respondents “What is the most important factor in choosing a lead investor?”

Over 30 percent of the respondents said ‘Strategic Fit’ was the most important factor while boarding a lead investor, followed by ability to do follow-up funding (19 percent), strength of institution brand (15 percent), Commercial terms of the deal (10 percent), Network (10 percent), individual partner expertise (9 percent), and personal relationship (9 percent).

What is most likely to improve investor sentiment in India?

With government regulations and other factors falling in the way of investors, the survey further answered ‘What will improve investor sentiment in India’. Over 33 percent of people believed more exits is the way to go, followed by better business models, more innovation, foreign investors setting up India centric funds, more domestic VCs, and finally, Unicorns raising funds at a higher valuation.

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