Through the ‘winters’ of funding season; an entrepreneurial journey
In my early days as an aspiring entrepreneur during the summers of 2013, I regarded the founders of companies who managed to raised funds as heroes. They had valor to win battles and treaded a challenging path of building to-be-great companies. With a winning attitude entrepreneurs who made things happen by breaking their sweat were definitely my heroes.
And so are the young entrepreneurs today. They work day in and day out, assembling brilliant teams, working out of overcrowded co-working spaces, surviving like misers and trying to prove their mettle. I see nothing wrong with these young men trying to create a difference as their predecessors did. So what’s the fuss about? The markets, unlike yesterday, have become unfriendly. Funding ‘probably’ came easy until the last year and thus created an environment conducive for aspiring entrepreneurs. And they jumped all-in. The young entrepreneurs continued to ride upon the liquidity of funds flowing left, right and center and eventually got hit by the truth of the rigorous process of raising funds.
I belong to that crowd who got hit by the colossal change in markets when survival became strenuous. Among many reasons for such a change, the nature of losses made by highly funded companies made the investors re-assess their practices and take cautious strides. So, what is it like to be a founder of an early stage startup tackling the ‘winters’ of funding?
I began my hunt to raising funds for GrabOnRent from the 1st week of our launch (September 2015). We were an operations heavy startup that required an early investment. Having saved a few lacs of rupees, courtesy an exit from my previous firm, we injected the ignition fuel to kickstart the operations. We surely knew it would not sail us through for more than three to four months. We required to raise for simple reasons such as paying for employees‘ salaries, logistics services, office rent, electricity, travel and more importantly for marketing.
The market had started to tremble starting mid-late 2015. The news of devaluations and startups closing down had started to appear in the national dailies. We confidently took it in a stride and reached out to a hundred investors. Things did not go as we had planned; we got lousy responses. We realized that early stages of a startup were very risky for investors to bet upon easily. We were asked to showcase early revenues instead of just a week-old business.
This was the core learning: Truth = paying customers. Every investor patiently noted our vision and questioned the very basics: building demand and supply in coming months and how we could grow from 0 to 1. We went back to investors after running an impressive first month. The same cycle repeated. I had gone through infinite rounds of iterations in our business pitch and solving investors’ concerns time and again. Their questions were ever increasing and so were the clouds of uncertainty over the market.
With many rounds of discussion, we deciphered on what exactly were they judging us on; the criteria were simple as a.) Potential in your sector, b.) how sorted are YOU and c.) how much does your team trust in you. Number of meetings does not matter as much as clarity with which you present your thoughts does. It is rare to providing a definitive answer to every single unheard question; pitching is a process. You keep killing questions, meeting after meeting. If you ask me whether an IIT-IIM tag matters? My answer to that is a straight yes. It does matter. But only to give you a good kickstart but not to close a deal. Let us be honest — there’s no denying that having a good educational background can give you wings, but may not give you a farsightedness, or a kickass co-founder or a temperament to fight the odds. You need to build it. Period.
Having discussed our plans with a healthy number of investors by November 2015, we got our first affirmation. Cheers! We informed our friends and family that the monetary woes should soon be over. In our own world, we celebrated the pre-success of a soon-to-be huge business. Well, for a fact, we closed our round in June, 2016. Does that surprise you? It should. It eventually took us 10 months to close the round.
We committed a series of errors too, knowingly or unknowingly. First, we changed the amount to be raised during the days of discussions with various investors. It was quite an immature move if I look upon it now, but back then we were pumped-up by the people, from whom we sought guidance, to raise more and more since the clouds were still dark. Second, we tried to raise from multiple groups of investors. This was by far the most crucial factor that delayed the deal. We tried every tactic we had learnt over the years to preserve the company’s interest. As the time passed by, we had to succumb to a few conditions to save company from dying. We unfortunately lost two of the groups in the transit due to reasons beyond our control. Third, it became evident that VCs were not the best bet for an early stage startup such as ours; angels and seed funds definitely were. For a simple reason that they possess a lesser or a single decision maker leading to considerably lower time to close a round. We followed the fad where jumbo VCs too participated in a seed stage deal.
All this while it was terribly difficult to keep the melody playing inside the company. In order to keep the show running, we had to constantly invest money for ten months. The co-founders borrowed money from their friends (who never said no), family (who were the happiest wellwishers) and all sorts of reliable and unreliable sources. It wasn’t sufficient though. Bills piled up, employees’ salaries were delayed for three straight months, logistics partners had stopped providing trucks for our orders’ deliveries and we defaulted on electricity bills. I started to avoid receiving phone calls during weekends — that is when billers used to call up. Being a co-founder it was all the more devastating to see myself losing command over actions and speeches. We did not pay our office’s rent for over 4 months and also survived threatenings from the office landlord. It was haunting for the startup to live with little or no funds. People all around us visibly began to lose trust.
Our sole focus was on to secure money quickly. Investors were ruthlessly systematic. This kept adding financial pressure upon the company. Most of the startups in my circle had either died or had pivoted during this period. Infact, three of our competitors who started at a similar time as we did, had shut shops. The ever increasing problems did unrest each one of us.
Well, above all, there were a few learnings which we might have never grasped in treading a successful runway. First is patience. Patience to the level where problems and happiness seem synonymous. Bring ’em on and you know there will be a solution. Clean! Second was realizing the importance of smart people around you who could absorb pressure. Nothing beats a hard working gang who can apply brains when it matters. Third, the most courageous decisions are taken when you stand at the verge of losing. No one can explain this.
Yet, we managed to pull off brilliant things. 2500+ happy customers in ten months while being bootstrapped, helping our merchants to double up their monthly revenues, conducting Customer Happiness Drive to understand our customers better and growing at 20% MoM. Most importantly, the founders were supported by a crew of self-inspired individuals who walked besides us in the toughest times and helped us script the fate of the company.
And yes, we also closed our Pre-Series A round of funding in June, 2016.
Standing today with a healthy sum of funds in our kitty, we are all-in to tackle the challenges that await us. Efforts will be aligned towards growth instead of firefighting the billers. With recharged valour, we’ll rise higher with sheer hard work by believing in our abilities to steer the ship. Things will happen, and they will happen soon. With our aim being clear and gunpowder stuffed; it’s time to pull the trigger. Customers will become the king, employees the dearest and investors our friends.
Let us all dare. Dare to win.