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The Road Less Travelled.

Summary: Finding funds for your bright business idea is not difficult. Here's how you can get it right.

How many times have you hated the clockwork regularity of your working life, the hard work you put in making money for others, secretly wishing you had your own business venture? If the answer is often, you have been bitten by the entrepreneurial bug.

Starting out on your own has never been easy. However, there are a number of funds and support networks-such as Mumbai Angels, India Angel Network and Aavishkaar-that promise to make the ride smoother.

If you have a good business idea, getting funds from investors or venture funds was never easier than it is at present. "We look for passion, energy and commitment of the entrepreneur. Academic qualification, past experience and ability to convince are also the key criteria for funding," says Prashant Choksey, co-founder of Mumbai Angels, which funds start-ups.

"Having a good idea is not enough. How much preparation you have done, your confidence, scalability of the business, all these are important too," says Vineet Rai, co-founder of Aavishkaar, a venture fund which invests in businesses that focus on rural India.

KEY INGREDIENTS

"For funding an idea, we see if it can make money, is scalable and can give us an exit in up to six years," says Choksey.

Investors look at growth visibility and feasibility. They should be convinced about your unique selling proposition The Unique Selling Proposition (also Unique Selling Point) is the marketing concept that was first proposed as a theory to explain a pattern among successful advertising campaigns of the early 1940s.  (USP USP - unique sales point ). The key point investors who fund start-ups look at is returns. They help the business grow in its initial stages but also like to have an exit option.

Once investors are convinced that your business is sustainable and can grow, they look at the core team to check if it is competent enough. "You can have a brilliant idea but we may still not fund it if the team is not good enough," says Choksey.

"While having prior experience in the business is an advantage, it is not the only criterion. If the person is able to convince us that he has the ability to do the business, we may fund his venture," says Rai of Aavishkaar, which funds education, health, clean energy, agriculture and financial inclusion projects in rural areas.

Investors also look for commitment. If your idea is to set up a business and later sell it off, this will alarm most investors.

In a nutshell, investors look for commitment, USP, scalability, execution ability and sustainability of the business.

SELL THE IDEA

While making a pitch to investors, make sure the presentation is not too verbose Wordy; long winded. The term is often used as a switch to display the status of some operation. For example, a /v might mean "verbose mode." . It should describe things in as few words as possible so that those listening do not lose interest.

ABOUT BUSINESS PLANS

While you must give a clear picture of your products and services, the possible difficulties in implementing the plan, the details of how you intend to take the business forward, plus the industry you operate in and the kind of competition you face should also be covered.

In addition, you must have a detailed knowledge of the size of the market you will be compete in, distribution and marketing strategy, potential customers and likely competitors.

FINANCIAL FORECAST

Investors will also like to know the revenue and profit forecast for the next five years along with likely expenditure and revenue. You must also try to give them an idea about when the business will break even, that is, it will stop making losses.

HOW FUNDS ARE RAISED

Investors usually fund by way of equity, taking up a significant minority stake. This can be anywhere up to 49%. However, it depends on the valuation. Most investors prefer to buy a lower stake as it enables them to exit the business easily.

"We generally like to take a minority stake. However, it depends on valuations," says Rai of Aavishkaar. "We generally fund anywhere between Rs 1 crore n. 1. Ten millions; as, a crore of rupees (which is nearly $5,000,000) s>.

Noun 1. crore - the number that is represented as a one followed by 7 zeros; ten million
 and Rs 35 crore," says Rai. Mumbai Angels Network invests up to Rs 2 crore.

The idea is valued based on the business, the product, the promoters, etc. "Valuation is like an art. We do the valuation based on the type of business, the product it makes, the credibility of the promoter, his projections and past transactions, if any, in a similar business," says Prachi Mathur, associate vice president, Intellectual Capital Advisory Services advisory services

advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal
 Pvt Ltd, which gives advisory services and facilitates investments by companies, non-profit development agencies and governments working in developing markets.

WHOM CAN YOU APPROACH?

Start-up entrepreneurs often ask family members or friends for money. But not everyone has a rich family or a friend. Angel investors, who usually invest a lower amount than venture funds, come to the rescue in such situations.

Angels typically invest their own funds, unlike venture capitalists, who manage the pooled money of others in a professionally-managed fund. Angel capital fills the gap in start-up financing between "friends and family" who provide seed funding and venture capital.

Although it is usually difficult to raise more than a few lakh lakh
Noun

(in India) 100 000, esp. referring to this sum of rupees [Hindi lākh]

Noun 1. lakh - the cardinal number that is the fifth power of ten
100000, hundred thousand
 rupees from friends and family, most traditional venture capital funds Venture Capital Funds

An investment fund that manages money from investors seeking private equity stakes in small and medium-size enterprises with strong growth potential.

Notes:
 are not able to consider investments under $1-2 million. Thus, angel investment is a common second round of financing for high-growth start-ups. Venture funds are registered with the Securities and Exchange Board of India Securities and Exchange Board of India (SEBI) is a board (autonomous body) created by the Government of India in 1988 and given statutory form in 1992 with the SEBI Act 1992. Its head office is in Mumbai, and other offices in Chennai, Kolkatta and Delhi. .

CASE STUDY 1 Organisation: Rolocule Games, which produces interactive game software for iPhones and iPads Founder: Rohit Gupta, an MS in computer science from Columbia University, New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
, and a BE from Pune Institute of Computer Technology Pune Institute of Computer Technology, (PICT) was established in 1983 and is one of India's leading institutions of education and research in the latest in the current technology. . After BE, got a job in Infosys, where he worked for two years. Got fascinated by graphics but did not find any institute in India which offered courses in latest gaming technology. Went to study at Columbia University, which offered a course on gaming. Returned to India after a brief stint with Electronic Arts, the world's leading developer and publisher of interactive entertainment and games software. Start: Gupta started Rolocule in April 2009 with a capital of Rs 1 lakh given by his father. Developed first squash video game, Touch Squash, for iPhone. Past experience: At Electronic Arts, he was in the team that worked on the game "The Sims 3". Funding: Got Rs 20 lakh from IIM-Ahmedabad as the winner of a contest, Power of Ideas. Negotiating with investors for more funds. Break-even: Rolocule breaks even for the game within a few weeks of launch. Investor link: Rolocule has to send statements to investors on how the last quarter went and on plans for the next quarter. Advice to entrepreneurs: "Go and start on your own. See if the idea is feasible. If it works, many investors will come to invest in your firm." CASE STUDY 2 Organisation: Culture Aangan Holidays, which offers home stays in Sindhudurg. It plans to offer services in Rajasthan by May 2012. Founder: Rashmi Sawant, an arts graduate with a diploma in travel and tourism. Start: Sawant started Culture Aangan in 2005 to aid rural development and later developed it into a full-fledged business. Past experience: Nil Funding: Company raised Rs 80 lakh via five-year optionally convertible debt to be paid off or converted into equity in 2010-11. Started with a capital of Rs 26 lakh. Break-even: Expected in 2013-14 Investor link: Sawant is required to keep investors updated on major events and send them quarterly reports. Advice to entrepreneurs: "Always go for mentoring. It's important to have a good mentor. It took me ten steps ahead. Now, we also focus more on marketing and public relations public relations, activities and policies used to create public interest in a person, idea, product, institution, or business establishment. By its nature, public relations is devoted to serving particular interests by presenting them to the public in the most "

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Publication:Money Today (New Delhi, India)
Date:Apr 1, 2012
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