Published on July 20, 2009
IVCJ Conference for Private Equity for IT & ITES Early Stage Financing 29th April 2009, Taj Lands End, Mumbai Atul Khekade Director – Netz Capital
Company Stages Idea $10K - $50k Business Plan Seed/Pre-Early Team Working Model 0.5% $2M - $5M VC Operations PE IPO Exit >$5M Acquisition
Fund Structure Idea •Scalability •Portability •Interface •Operational Efficiency •Market Size •Biggest Competitor Team Technology Infrastructure Early Promotion <$5K <$10K <$10K <$5K <$30K •Early Customers •Self Sustaining Operations - $1M Revenues •Gearing up for Next Round
Fund raising Challenges (In recession time) • Scalability • Operational Efficiency/Low fixed costs • Revised Exit Strategy/Profit making as first priority • Recession Proof Check • Serves a very basic need at ½ x price • Serves emerging/recession free markets Additional Evaluation • Long term viable and economic model Criteria • VC/PE Limitations • Scarcity of Capital • Bad M&A and IPO market • Painful Term Sheet, giving away majority control
Strategy: Winning or Surviving? In tough times • Highest quality, fair price • Fair quality, ½ x price • Fixed cash outflow model • Negative cash outflow model • Self funded Growth • Partnerships/Franchising • Budget as per market price • Bootstrapping / Re-inventing the budget • Advertising • Public Relations • Find Employees • Find/Nurture Entrepreneurs • Sales start after operations • Sales first
Moving to the next round of Capital • Is it absolutely necessary? • A successful company is the one that makes more profits – not the one that raises more capital. • Thought about raising capital from customers? – Long term commitments – Pre launch sales – Clearer revenue picture of the future. Raised $100M as Tata raised $5 Raised $6.2M deposits from million on nano from 125,000 customers forms wiki users
Seeding the Leader LEADER Process Consistency Business Model Vision Early Role Model Customers Organized Sales Process Media Presentation Friendliness Skills
Growth - A reality? • Recession – Greatest Opportunity to rise • Opportunity for cheaper alternatives of existing products Real Estate Automotive Travel Food Energy Entertainment Cost effective •Second hand •Full service Franchising Green Energy •Cheaper housing cars to low frill sources theatres airlines •Electric cars •Movie rentals •Airlines to •Car Rentals trains
Exit Strategy • Profit Making as soon as possible • Surviving till the markets recover – Undervalued M&A – Undervalued acquisition bids
Valuation • “It is better to own 10% of a $100 million company than owning 80% of a $5 million company” • Company’s leader deserves controlling interest • Valuation Criteria – Revenue – Competitor’s revenue – Early entrant? Or crowded space? – Early customers – Market size
Thank You • Atul Khekade • Info @ netzcapital.com • +91 98203 72810
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