These VCs and founders share the secret art of raising money

Left to right: Parag Dhol of Inventus Capital Partners, Vivek Durai of Termsheet.io, and moderator Sanjay Nath of Blume Ventures.

Unless you have bootstrapped your way to freedom, many founders will need to raise outside capital to get that hockey stick growth curve everyone dreams of. Last week at Tech in Asia Bangalore, a panel of India’s top venture capitalists and founders tried to shed some light on early stage funding.

What are investors looking for

“The only validation in my mind that anyone can provide is the customer. The guy who cuts the check. That’s the guy who provides the value. The rest doesn’t matter, it’s an opinion,” explains Parag Dhol, managing director of Inventus Capital Partners. Early stage founders should be focused on their customer and the product. “Don’t care about the competitors,” Parag clarifies.

At the angel stage he says people are investing in you, who you are, who your team is. “Your pitch should be, ‘Why am I uniquely positioned to solve this problem.’” In your presentation you will want to include your credentials and how long you have thought about the problem.

Parag Dhol of Inventus Capital Partners.

“Don’t run after VCs if your product is at a stage where you need to run,” says Vivek Durai, CEO of Termsheet.io. The product should be at a stage where you have a conversation with investors. You should have a sense of the customer and a sense of what leads to growth for series A.

For series B, Parag shares some numbers for software as a service companies they have funded. Until recently they looked for US$2 to US$3 million in annual recurring revenue (ARR), but that has changed to US$4 million to US$5 million. He emphasizes that these metrics can shift upwards or downwards depending on the reality of the marketplace and that for series C, AAR may need to be seven to ten times series B amounts now.

Check yo’ self

Regardless how much your company is making, Parag believes that, “Series A and series B is where you keep your ego in check.” It is important to not get stuck on terms in the early stages. “You have got to get your deal done, you have to get your company funded,” he exclaims, “That is your responsibility to yourself, your employees, and your existing investors.”

Vivek Durai, CEO of Termsheet.io.

“Entrepreneurship is not a social activity,” Vivek warns. “Unfortunately it has become one. It is a loner’s game.” It doesn’t matter who has raised what. “You do what is necessary for your product, for your vision. You get the right set of people to support you on that journey. You don’t look left, right, or too far forward.”

Once founders have come up with their vision they should fix it and focus on what is in front of them. He praised a company he recently met which has made four electric scooter models in seven months. “That kind of focus will get you funding from anyone,” proclaims Vivek.

I choose you

“Find an investor where there is chemistry,” says Parag. “You are marrying that person for the next seven to eight years. Is it someone you want to talk to weekly, or more?” Investors should understand your business.

No means yes