Bits-n-Bytes of start-ups and their funding rounds
The best thing I find about entrepreneurs is that everyone has a different story, a different journey. The kind of repetitive stuff is very less. Be it their success or failure, it’s distinct from the previous ones, in terms of scalability, in terms of impact or even in terms of learning.
In my experience of working full-time for 3 different start-ups and freelancing for many others, I have seen companies going for their IPO within 5 yrs of operations and at the same stage I have seen companies shutting down overnight. It’s never a straight line equation and there are a lot of unseen dynamics that play a major part in a company’s success or failure.
In this article, I will try to answer the five most basic questions about startups:
- How are startups different from well-established companies?
One of the major points about startups is, “Being newly founded does not in itself make any company a startup. Nor is it necessary for a startup to work on any latest technology, or take venture funding, or have some sort of ‘exit’. The only essential thing is growth. A startup is a company that is designed to grow fast. And everything else we associate with startups follows from growth.”
So we can say that growth is the only major matrix that distinguishes startups from the other companies.
2. Is startup-funding a prerequisite to success ?
We have some fine examples of companies who didn’t appreciate the concept of raising funding from Venture Capitalists, rather they Bootstrapped in their initial phase and have developed into industry leaders today. To name some such companies, Github, GoPro, FreshBooks, and Braintree are worth mentioning.
Funded or not, there are a handful of significant costs that all startups will have to pay for, even in the early days:
a.) Ongoing product development
b.) COGS (Cost of goods sold)
c.) Hiring
d.) Physical Premises
A self-funded (or bootstrapped) company has little choice but to pay for these costs out of revenue, creating a real-life Catch-22 situation: you need revenue to fund product development, and product development to generate revenue.

3. Startup funding rounds
In the most simplified form, Venture funding works like gears. A typical startup goes through several rounds of funding, and at each round you want to take just enough money to reach the speed where you can shift into the next gear.
Few startups get it quite right. Many are underfunded and some very few are over-funded, which is like trying to start driving in the third gear.
4. Looking through the glass of an Entrepreneur
You might have heard this many times, that “Not everyone can be an entrepreneur”. So we will discuss the kind of skill-set that one requires to be entrepreneur (obviously there are exceptions to it).
There are some common challenges that every entrepreneur has to pass through to convert their idea into reality:
a.) Communication skills
b.) Networking
c.) Commitment to learning
d.) Creative thinking
e.) Tenacity
This list is endless and it’s always good to have a broad skill-set. But the above-mentioned are the must-have before you jump into entrepreneurship.
5. How to pitch your idea to investors
In the importance hierarchy, this point should be at the top of this list, but note that preparing yourself for pitching doesn’t make any sense till you have clarity over the above points in mind.
- Angel investors invest in the entrepreneurs: More than in their ideas, investors likes to invest in you. So be prepared, be confident while pitching. No matter how good your idea is, the confidence of an entrepreneur matters the most to an investor.
- 10 minute elevator pitch: This sounds cliche, but always works. Can you, in less than five minutes, explain your project, return-on-investment, and your exit plan without missing any essentials. Ask yourself before you enter that room.
- Save the details for later: No need to go in-depth in the first meeting itself. Be it a round table conference or a private meeting, you should be able to honor your audience interest on the go, and wrap your presentation up in next two minutes in case they don’t seem interested.
- Do your investor research: Thorough research about the people you are presenting to is always a plus. You need to be aware about what kind of investments those people have made earlier. How well do they know the industry you are asking them to invest in.
P.S: You might need to tweak your presentation a bit for different sorts of investors. There is no harm in being upfront about this thing. - Show the exit: Here’s the clincher on a killer pitch: an exit strategy. No matter how good your idea is, investors always wait for your exit plan. So don’t leave them tripping in that virtuous loop, give them a clear picture of what you plan to do with your company, five years down the line.
Always remember, no matter who you are or where you belong to, the world is waiting for your great ideas. Cheers !!

