Starting Up and Fund Raising - PDF - Oct 2017

STARTING UP
AND
FUND RAISING
A guide book to help first-time entrepreneurs
become better prepared for business and funding
PRAJAKT RAUT
Notion Press
Old No. 38, New No. 6
McNichols Road, Chetpet
Chennai - 600 031
First Published by Notion Press 2016

Copyright © Prajakt Raut 2016
All Rights Reserved.
ISBN 978-1-946390-67-7
This book has been published with all efforts taken to make the
material error-free after the consent of the author. However, the
author and the publisher do not assume and hereby disclaim
any liability to any party for any loss, damage, or disruption
caused by errors or omissions, whether such errors or omissions
result from negligence, accident, or any other cause.
No part of this book may be used, reproduced in any manner

whatsoever without written permission from the author, except
in the case of brief quotations embodied in critical articles and
reviews.
A collection of my learnings, perspectives and
insights from my experiences as an entrepreneur and
entrepreneurship evangelist
“Entrepreneurship is living a few years of your life like
most people won’t, so that you can spend the rest of
your life like most people can’t.”
Anonymous
Contents
About the Author xiii

Why this book and how to use it xv
Entrepreneurship – Living a Life You Love
1. Life is short. Startup 1

2. Starting your entrepreneurial journey –
some food for thought 3
3. Some learnings from my entrepreneurial journey
and from startups that I have engaged with 7
4. Most people don’t start up because they are not
‘ready’ 9
5. Ideally, aspiring entrepreneurs should work for
a start-up AND a large company before starting
up on their own 13
6. When you are ready to start up, what are the
top questions you should be asking yourself? 15
7. What are the Qualities of an Entrepreneur? 16
8. Some Watchouts 21
9. What are the Most Common Reasons for
Startups to Fail? 23
10. What can you Learn from a Failed Startup? 26
Finding a Co-Founder(s) and Advisors
11. Find a Co-Founder – Find a Co-Traveller 33

12. Who Exactly is a Co-Founder? 36
13. Founding Team Members are Different from
Founders 37
x CONTENTS
14. Is it ok to have a part-time co-founder? 38

15. The Success or Failure of a Venture can Often
Depend on the Quality of the Relationship
between the Co-Founders. 40
16. How do you Decide who becomes the Ceo from
Among the Founders? 42
17. “If I have the skills to build an MVP myself,
should I hold off on a Co-Founder to Raise
Capital and make some early hires?” 44
18. How should equity be split between founders? 45
19. What happens to the shareholding of a founding
team member in case he/she decides to quit
the company? 46
20. Handling disagreement between founders 47
21. Importance of an Advisory Board 49
22. How should I get someone to join as an Advisory
Board Member? 52
23. How much equity should I offer an Advisory
Board Member? 55
24. What can advisory Board /Board Members
do for you? 56
25. What’s the appropriate way to Terminate an
Advisor Relationship that isn’t adding value? 57
Idea Selection and Assessing

the size of the Opportunity
26. Idea Generation 61

27. Fall in love with a problem, not with an idea. 67
28. The Importance of Market Research 69
29. Why Customer Discovery is Critical to a Venture 73
CONTENTS xi
30. What are some Important Questions to ask in

a focus group research for evaluating an idea? 86
31. Is it advisable to proceed if there’s already a
venture based on a similar idea that you have 89
32. Is it okay to aspire to be a Leader in a
Niche Segment? 92
33. Estimating the size of the Market 93
34. Some points to consider when Estimating
Market Potential 97
35. How do you Estimate your Revenue and
Growth? 99
36. What is the Right Revenue Estimate
for a Startup? 102
37. Making Assumptions for Your Business 104
38. What is Proof of Concept 109
39. How is “proof of concept” different from
“Minimum Viable Product”? 112
40. Why winning a few Customers is not Proof
of Concept 113
Funding for startups
41. Points to remember when raising funds for

your startup 119
42. Angel investors, VCs and other funding
options for startups 120
43. What do you need to have in place as a
Startup in order to successfully raise
a seed round? 127
44. What parameters do investors use to decide on
an investment? 131
xii CONTENTS
45. The process of pitching to investors 134

46. “How do I convince investors to invest in
my start up” 138
47. How to write a Powerful Elevator Pitch 141
48. How much money should you raise for
starting up? 146
49. How to find the Right Angel Investors? 150
50. How is the Valuation Decided for a startup? 154
51. Managing Investor Relationships 157
Writing Your Business Plan
52. What is a Business Plan 162

53. How much detail do VCs want to see
in a business plan 167
54. Should there be a ‘Plan B’ for a B-Plan? 169
55. A Good Idea or a Good Plan? What do Investors
Invest In? 170
56. 7 Simple Steps for Writing a Business Plan 171
57. Revenue Streams and Business Models 173
58. The Importance of Business Metrics for Startups 175
59. If no business plan works out as planned,
why do investors insist on a business plan? 177
Concluding Remarks
1. Take that leap of faith 183

About the Author
Prajakt Raut - Entrepreneur and

entrepreneurship evangelist
Prajakt is the founder of Applyifi.com. Applyifi

helps startups raise capital from angel investors,
angel investor groups and VCs.
Prajakt's personal goal in life is to encourage and assist a
100,000 people to become entrepreneurs. Prajakt mentors
and advices startups on building stronger business plans.
Prajakt was previously the head of operations of the largest
angel investor groups in India, and co-founder of Orange
Cross, a healthcare services management company.
Prajakt had started a printing business when he was
17, and later was part of the founding team of a CRM
solutions company, which he exited in 2004 and took
a 3-year sabbatical to be the Asia Director for TiE (The
Indus Entrepreneurs), a global non-profit organization
focused on promoting entrepreneurship.
xiv ABOUT THE AUTHOR
As the Asia Director for TiE, Prajakt was primarily focused

on helping entrepreneurs in India connect with the then
emerging early-stage investor community. In that role,
Prajakt helped create interconnectivity between overseas
investors and Indian entrepreneurs.
Between 1990–2000, Prajakt spent 10 years in
the marketing & advertising industry, working on
communication and marketing programs for leading
Indian and global brands.
Prajakt is well connected, and respected in the
entrepreneurial eco-system in India.
Why this book and how to use it
There are now more ways than ever for startups to find
and connect with investors, through in-person events
and online deal-closure platforms, but this also means
that investors are seeing more companies than ever before
- it is important for entrepreneurs to catch their attention
as they may only have one chance to make a good first
impression.
Many startups start reaching out to investors before they
know how to make a sound and compelling investment
case for their business - and how to articulate that.
Often even strong entrepreneurs with good ideas never
get a foot in the door, or catch an investor's attention
because they have not been able to present a compelling
case to investors.
Investors want to see a well thought out plan for your
business. And how well your pitch deck or intro video
communicates a well-thought-out plan is what can get
investor attention.
That’s why I wrote this book to help startups in this crucial
step – in helping them refine their plan, understand the
investor’s perspective and help them articulate their
investor pitch in a manner that gets investor attention.
The book is also intended to help founders understand
how to think of the building blocks for their business.
Entrepreneurship is a tough and challenging journey. The
chances of not succeeding are significantly higher than
your chances of succeeding.
xvi WHY THIS BOOK AND HOW TO USE IT
For a startup to be successful 20-30 things have to go

right. But for it to not succeed, just one of those many
things has to go wrong. Product, value proposition,
customer segment, pricing, revenue streams, business
model, distribution, communication & brand personality,
positioning, funding & finance, user experience, customer
service, team & people resources, processes, etc. etc. are
things that need to not just work well, but work in sync
with each other for a startup to be successful.
Knowing about what issues to think about, and having
some competence to think through them, or garnering
resources & people who can guide you through them,
is no guarantee of success. But not even knowing about
ALL the aspects that you might need to think about in a
venture is most likely to be a foundation for failure.
This book’s attempt is to help entrepreneurs think through
different aspects of their business, so that they do not miss
out on thinking about the various aspects that will need
to work well, and work in sync to give the startup a better
chance of success.
Wrong assumptions kill more businesses than bad
products do. As a startup you work on assumptions, and
gradually start proving them, and making adjustments
as you start getting validation on the assumptions.
Assumptions are not wild guesses. Assumptions should be
based on a thought-through assessment of the options,
and then choosing from among the many options the one
that seems practical enough to support your aspirations,
mission and goals.
Your ability to assess an opportunity or a challenge
increases as you learn from others who have had some
experience in the space. This book’s attempt is to provide
WHY THIS BOOK AND HOW TO USE IT xvii
you inputs on what areas to seek answers & guidance/

mentoring on, and provide examples that could help you
ask more, and more relevant questions.
I have written this book for aspiring and recent
entrepreneurs. In my view, the best way to benefit from
the book is to first dissect each topic in the context of
your life, your aspirations, your circumstances and your
business and then make a list of questions to seek answers
& perspectives on. Assimilate the various options, and after
considering all possibilities and options create a plan for
your startup. And then again discuss the plan and options
with others. The more you think through the different
aspects, the more you discuss with people, and the more
you are able to get validation on your assumptions, the
better your chances of success.
I wish you all the very best in your entrepreneurial
journey. And remember, you never fail as an entrepreneur.
Sometimes you succeed, and sometimes you learn.
ENTREPRENEURSHIP – LIVING A LIFE
YOU LOVE
1. Life is short. Startup
I have often heard senior professionals tell entrepreneurs

that they wish they had the guts to leave their jobs and start
up on their own. But I have yet to hear an entrepreneur,
irrespective of whether their venture is doing well or
struggling, tell any professional “I wish I had your job”.
The reason is easy to understand. Entrepreneurs start
ventures largely in their areas of interest or passion. It’s
always a great feeling when your work is also what you
love to do. A job may or may not provide that option.
Entrepreneurship does.
But just doing what you are passionate about is not
the only reason why entrepreneurs are generally more
excited about their work. In some cases, rare though, you
may get to do what you really are passionate about in a
job too. The big difference however is that while in a job
you are living either someone else’s dream or a company’s
objectives, in your own startup, you are driving your own
vision, goals, dreams and aspirations. Every small step in
an entrepreneurial journey feels like an accomplishment
and gives you the satisfaction of having reached a new
milestone.
And while the entrepreneurial journey is not always
smooth and often fraught with risks, challenges and
failures, the entrepreneur’s passion for the concept and
the domain provides the person the patience and courage
and the will to push ahead and sometimes, even if the
venture fails, gives the person a personal high of having
tried something.
2 STARTING UP AND FUND RAISING
Most importantly, irrespective of what the outcome of an

entrepreneur’s venture – whether it fails or succeeds –
the entrepreneur always wins, because even the failures
teach you so much about business and life. They prepare
your foundation for another leap. Another shot at glory.
Most entrepreneurs make entrepreneurship a life-long
journey. If one venture fails, they try another. If the
entrepreneurial experience had not been a satisfying one,
they would have given up and taken up a job.
Passion about what you do is a necessary ingredient
for entrepreneurship. Because, without passion and
commitment you are unlikely to find the will to push
through challenging times.
And challenges there will be many and at many different
times of the venture’s life. That’s why I tell entrepreneurs
– don’t start a venture because it was the first opportunity
that came across, or because you saw someone else in that
space do well. Don’t just think of the obvious business
ideas that seem to be doing well around you. Don’t go
after a fad or a sector just because it is seeing a lot of
action and investor interest. Do it only if your interest lies
in that sector, and in what you want to do in that sector.
2. Starting your entrepreneurial journey – some
food for thought
In my view, easier availability of early-stage capital,

public celebration & adulation of entrepreneurial heroes,
a well-deserved respect for entrepreneurism and also
society’s willingness to accept failures in entrepreneurial
ventures make it easier for younger people to consider
entrepreneurship as a career.
I share below some observations that will hopefully
provide some food for thought before you embark on your
entrepreneurial journey.
A great idea or concept is not the same thing as
a great business.
Once you identify a concept that has a meaningful value
proposition to your potential customers, you have to
think of how you can build a strong, sustainable business
around that concept. Think hard about concepts like
revenue streams, business model, go-to-market strategy,
resource requirements, etc.
Don’t ignore challenges. Think hard about all
possible challenges and then find a way to mitigate them.
Entrepreneurs tend to overlook the challenges when they
are driven either by a desire to be an entrepreneur or
when a concept stokes their interest.
Write a business plan. i.e. YOUR plan for YOUR
business. Often, entrepreneurs assume that a business
plan is to be written only when you seek venture capital
or debt. However, a business plan is nothing but your
plan for your business. Create a document that will help
you think through the steps you need to take in your

entrepreneurial journey. And that’s your business plan.
Do not bother about templates. A business plan is not
about templates or formats. It is an articulation of your
story about how you plan to go from point A to point B
and then onward to points C and D in your journey. And
as you think through various aspects, including costs and
revenues, the plan will start getting more robust.
Don’t focus on the excel sheet. Focus on the business
model. A 5-year excel sheet projection is just that – an excel
sheet exercise. It is neither a reflection of the potential
nor a reflection of your ability to meet that milestone.
However, an excel sheet making exercise provides you a
reference point to consider different possibilities of scale
and help you plan the intermediate steps in reaching those
milestones. I.e. it is not important to detail the calculation
for a Rs.98.74 cr. revenue by 2020 as it is important to be
able to state “We believe we can be around a Rs.75 cr. to
a Rs.100 cr. enterprise by the 3rd year of operation and
here is how we plan to go towards those milestones.”
It is ideal to gain experience about building
and managing businesses before you create
your own enterprise. Most successful entrepreneurs
have built businesses after gaining significant experience
across functions in different organizations. Though often
celebrated, entrepreneurial successes of people with no
prior work experience are a rarity.
Think big if the opportunity exists. Your ability to
scale should be restricted only by your aspiration and not
by capital. In today’s environment, it is far easier to raise
early-stage capital than ever before. If your concept is
right, if the market potential is large and if you have the
PRAJAKT RAUT 5
capacity and capabilities to deliver on that potential, you

will find the capital to fund your dream.
One of the most common observation of investors, both
domestic and foreign, is that entrepreneurs (especially in
India) are afraid of thinking big. Entrepreneurs tend to
think that it is prudent to be very conservative in your
projections, especially if you have no past record to
prove your scaling-up capabilities. However, if you are
seeking venture capital for your venture, the scale of your
aspirations will have to be large. Of course, the aspiration
to scale has to be based on a validated assessment of the
potential and backed by a strong, sustainable plan to
deliver on that potential.
Make your own decisions but listen to what
more experienced voices have to say. If a number
of investors reject your proposal, it should be a signal
for you to consider what aspects of the model seem to
worry investors – relevance of value proposition, market
potential, business model or your ability to deliver on the
potential. Once you have identified the issue or issues,
you need to revisit that in your plan and see what changes
you may want to make in order to address any flaws in
your plan.
Just because you do not get funded does not
mean it is a bad idea or your plan is wrong. Often,
especially with new concept, it is difficult for investors to
take a bold step. Often entrepreneurs are able to create
new markets based on their insights and conviction about
the opportunity. Others may not be able to see the vision
as the entrepreneur is imagining it. Hence, just because
others reject your idea does not necessarily mean that this
is not worth pursuing. But do also consider the points of
skepticism as it will only help you iron out issues that you
may not have thought about.
If you still do not get funded and do believe it is a concept
worth fighting for, you need to find innovative ways of
building a proof of concept.
Find mentors and investors with belief in your concept.
It is also important for you to find investors who have
a strong belief in the domain that you wish to be in
and convince them about your ability to deliver on that
potential.
Importantly, don’t be a lone ranger. Connect with
other entrepreneurs. Seek guidance. Ask those ahead in
the entrepreneurial journey to share their experiences.
Network and seek mentoring from accomplished and
successful entrepreneurs.
To end, I would like to clarify that entrepreneurship to my
mind is not just about starting or owning an enterprise. It is
about an entrepreneurial spirit that inspires individuals to
take ownership of an assignment or area of responsibility.
It does not matter whether it is in your own enterprise or
whether in an organization where you work or whether
the organization is a commercial enterprise or a not-for-
profit entity. Do well in whatever you choose to do. Do
it diligently, honestly, ethically and with enthusiasm and
commitment.
And THINK BIG.
As the advertisement of a spirits brand said ‘Its your life,
make it large’.
3. Some learnings from my entrepreneurial
journey and from startups that I have
engaged with
Well, there are some lessons that I have learnt in my own

entrepreneurial journey…. and as an entrepreneurship
evangelist, have had the opportunity to observe many
startups start up, and fail, including my own.
Here are some observations:
Don’t underestimate the costs and time that you
will require to meet your milestones – often entrepreneurs,
enthused by their deep passion and conviction in the
concept, expect things to happen sooner than it would,
and they usually expect to achieve it with lesser resources
and lower costs than it would actually require. Running
out of cash, especially when things are moving in the
right direction, is the single biggest horror that a startup
or early stage company can face.
Plan for the worst-case situation… not just the
best case. Most entrepreneurs prepare a business plan,
which look at the most glorious of outcomes. While that
is a possibility, it is prudent to think hard about what
aspects could go wrong, and think of a plan to mitigate
those disasters. If the venture does well, enjoy the ride, be
sharp and steer it towards success. However, if you have
planned well for disasters, you will be able to manage the
startup even during times of significant challenges.
Ensure that co-founders are aligned on the
vision. Ensure that all founders are seeing the same big
picture. Be aware of each other’s views on key decision
points in the journey (e.g. what would you do if you were

to get an offer to sell of for $ 10ms… what if the offer was
$2mn?).
Talk to customers. Don’t plan on the basis of your
enthusiasm and conviction. Test the concept with
customers/consumers. Even before the product is ready,
have conversations with potential customers/consumers
to get their feedback and thoughts on what they would
like to see in such a product or service.
Be very, very careful about whom you hire as
your first employees. Make sure that they are in it
with some level of conviction and passion for the concept.
Only commercially inclined employees will not have it
in them to pull through the ups and downs, the course
correction, and the challenges of the early stages of your
journey.
Keep your costs low. Be frugal. Plan your cash flow
and fund flow requirements well. Make sure you are well
funded. Don’t assume that you will be able to raise the
balance amount as you proceed along in your journey.
4. Most people don’t start up because they are
not ‘ready’
Most of us have a streak of entrepreneurism within us.

Many of us dream of becoming entrepreneurs and starting
a venture. Often we have ideas that we think we should
pursue, and which we think we can build a successful
business around.
But most people don’t start up. Something holds them
back, and they find several excuses for not being able
to. How often do we hear people look at some successful
company and tell their family & friends “I had exactly the
same idea a few years back. But I did not start a business
then. I wish I had.” Most would know friends who have
had this exact feeling of regret because the very idea that
they did not act upon is now a successful company.
Typically the top three excuses for not starting up tend

to be:
• I don’t have the capital required to start a business
• I don’t know anything about running a business
• I am afraid that I might fail
It’s easier to start a business today than ever before!
Well, the good news is that the change in the business
environment today has erased the validity of all the three
excuses that prevent most people from starting their own
ventures.
Why ‘I have no capital’ is not a valid excuse any more…

Cost of starting up and doing business has come down
significantly. Till a decade ago, even making a simple
website would cost a few lakhs. Now, with easy-to-use
technology platforms like WordPress and other online
tools, it costs virtually nothing to build a website.
With the emergence of co-working spaces, shared offices
and incubation centres, entrepreneurs do not even need
the capital required earlier to set up an office. All you
need is a laptop and you can plug and play.
With digital and social media, it is possible to launch,
market and promote a venture with very limited capital.
Earlier, marketing required large budgets and specialized
agencies and service providers.
The support services eco-system – lawyers, accenting
firms, HR firms, marketing support firms, design services,
packaging, warehousing, etc., etc. – has evolved and
have created offerings that are suitable for startups. This
means that aspiring entrepreneurs can start with just the
core team to reduce fixed costs, and leverage the services
of these specialized service providers when required.
Most importantly, access to capital is much easier
now. Collateral-free funding is available to aspiring
entrepreneurs who have the creativity and passion and a
good business plan. Till a decade ago, unless you had a
house or jewelry or some other asset to give as collateral,
it would be virtually impossible to get finance. In the past
few years, with the advent of angel investors, venture
capitalists and venture debt, it has become possible for
people with ideas to get funding to convert those ideas
into a business.
PRAJAKT RAUT 11
That opens up entrepreneurship as a career option to

anyone with ideas and aspirations.
Why ‘I don’t know anything about running a business’ is

no longer a valid excuse…
Basics of business can be learnt. There are a number
of forums available where first-time entrepreneurs can
learn and understand what it takes to ideate, plan and
operationalize a business.
Organizations (in India) like TiE (The Indus Entrepreneurs),
Sheroes, NASSCOM, The Hub for Startups, etc., conduct
awareness programs and workshops to help first-time
entrepreneurs learn from those with entrepreneurial
experience.
Additionally, there are a number of online forums where
specific skills and different aspects of entrepreneurship
can be learnt.
Specialized help is available: There are numbers of
specialized agencies that provide strategic inputs as well
as operational support, for services that are essential but
not core to the business you are in.
Why “I am afraid that I might fail” is no longer a valid

excuse
Failure is part of the entrepreneurial journey. If you do
not fail in your first venture, you will fail in one of the
subsequent ones. The point is not about seeking something
that is fail-proof. The point is about being prepared for
the risks, and accepting failures as part of the plan.
My argument is that even if your venture does not succeed,
entrepreneurship prepares you better for the future
– whether it is the next venture or back to a job. (Ask
any HR person or a CXO and they will tell you that, all
things being otherwise equal, they would prefer a failed
entrepreneur over a career professional because the failed
entrepreneur is most likely to know more about ‘business’
and life than the career-professional).
Ask any entrepreneur and they will tell you that
entrepreneurship is a high that you will enjoy despite
all the ups and downs that it brings. It empowers you. It
gives you a sense of purpose, a direction and a positive
restlessness that makes you believe that you can contribute
a lot more to this world. And really, there is no excuse left
not to start up.
5. Ideally, aspiring entrepreneurs should work
for a start-up AND a large company before
starting up on their own
I think it is a good idea for aspiring entrepreneurs to get

some experience of working with a startup as well as some
experience of working in a large company.
Here’s why:
Working with a startup and working with a large company
offer very different learnings and experiences for an
aspiring entrepreneur.
For example, working in a startup helps an
aspiring entrepreneur understand how to make things
work in a resource constrained environment; how to
hire people when you are not a known brand; how to be
flexible and nimble, etc. Working in a startup also helps
aspiring entrepreneurs understand how business models
evolve; how a gradual ramp-up is implemented; how a
business plan has to be adjusted; how quickly things can
change… and how assumptions are tested and hence,
adjustments made in goals, strategy and implementation
plans.
On the other hand, working in a large company helps
aspiring entrepreneurs learn about the power of processes
and systems; the challenges of working at scale; the way
to handle HR issues when there are multiple layers in an
organization when, (unlike a startup), you don’t know
your colleagues by name. Working in a large company also
teaches aspiring entrepreneurs about focus, being goal &
objective oriented and about increasing profitability. At
scale.
In effect, both environments – large companies and

startups – offer experiences that are varied and very useful
when you yourself will start your own venture. However,
irrespective of what type of organization you work in,
my advice to aspiring entrepreneurs is that they should
keep their eyes, ears and senses open to understanding
the overall ‘business’ of the company rather than just the
function they are assigned to.
Also, if you are clear that you want to be an entrepreneur,
I would recommend you to take up a sales job. Any
company, any where… take a job that requires you to
go out in the field, meet customers, pitch your product,
negotiate and sell.
Selling teaches you many things about the practicalities
of business life. Rejection by customers teaches you
to be modest about your assumptions on conversions.
Dealing with rejection teaches you to deal with failure
and challenges.
6. When you are ready to start up, what are the
top questions you should be asking yourself?
From a business point:

• What are we doing (Concept) and why is this
important (What need or opportunity does it address)
• Who will use this
• Who will pay for this, to whom and how much and
how often (Customer segment and business model)
• How big is the opportunity (Market size)
• How am I going to do all this (The operating plan)
• How big can I make this business (The potential)
• Can this be a profitable business Is there enough
margin (The business case)
• How much money will I need to get started (Funding
needs)
• Do I have that money? Where will I get it (Funding
sources)
From a personal point:
• Why am I doing this (motivation – to make money, to
change the world, to do ….)
• Are the people I am doing this with (my co-founders)
the ones that I feel really, emotionally close to (If not,
it probably won’t last)
• At what milestones will I say “I am successful”
• What will be the parameters for me to give up and
move on
• How much time can I pursue this without a salary
• What alternate opportunities am I giving up to do
this… and why am I happy doing it
7. What are the Qualities of an Entrepreneur?
Large aspiration:
Clearly, unless the aspiration is large, it is difficult to create
something that is valuable. Large does not necessarily
mean large just in revenues. It could be large in impact
as well.
Optimism:
An entrepreneur must be high on optimism. Simply
because they need to have a motivating purpose in order
to convince others to join them in the journey. However,
there is a fine line between optimism and arrogance. An
entrepreneur needs to have the humility to test his/her
optimism by cross-checking with others.
Confidence:
Without confidence, all ideas will remain just that – ideas.
Taking the first steps, going ahead despite being aware of
the challenges, and being wise about taking precautions
against these challenges, are traits of successful
entrepreneurs.
Entrepreneurs however are not blind risk takers.
Successful entrepreneurs understand the risks and take
necessary steps to mitigate those risks. Confidence in their
approach is what helps them deal with the challenges and
risks better.
Persistence and resilience:

Plans will usually not go as you want them to. Hence,
resilience - the ability to try again and again - and
PRAJAKT RAUT 17
persistence in pursuing what you believe to be appropriate

will help entrepreneurs sail through tough times.
Entrepreneurial history is full of success stories of those
who stayed long enough and treaded along patiently.
Irrespective of all the obstacles and setbacks that come in
your way, it’s important that you don’t take your eyes off
your goal.
Often we see startups make the mistake of changing their
business models or price-points or customer segments, etc.
quickly, if they do not see quick traction in the market. But
how can you be sure if by changing often you are being
nimble and agile, or if you are making the mistake of
changing too soon without giving the concept/model the
time it needs to settle into the market? There is no right
answer to this question, and my goal was to just alert you
to this point so that you could assess the situation deeply
before taking a decision to change or retain.
Likewise with customers. Being persistent in chasing them
even if they have not bought after the first attempt is often
a game changer. Not that I am saying go to them with the
same solution again and again. That may not be prudent.
But if you go to them with solutions that could be useful
to them, there is a possibility of getting an opportunity.
(I am told that one successful brand took almost 3 years
to close a contract with one of the largest IT companies
in India, and that was one of their initial contracts that
helped establish them in the market).
Patience:
Success is not overnight, and the graph of growth is
NEVER a line going up rapidly as you see in many
projected revenue charts. There are ups and downs in the
journey. Every entrepreneurial journey will have its ups

and downs.
Be patient. Do not be in a hurry to win the world. Keep
a 3-5 year horizon to build a strong foundation. It could
be a 10-year horizon to be really successful. It takes time.
There will be occasions when there will be a lot of self-
doubt. But assess if the long-term direction is right, even
if it is taking longer than earlier assumed.
Remember, the moment you stop believing in your
dream, so will others – your employees, your customers…
everyone around you…. And that is a sure shot route to
failure.
However, also be practical in assessing the merit of
continuing. If you see that the business case or the customer
adoption is not encouraging, or other assumptions around
the business indicate that this concept is unlikely to work,
assess carefully if there is merit in continuing. But if it is
only a timeline shift, be patient. Rearrange your plans,
adjust the time period and patiently implement well on
the ground.
Every entrepreneur has to understand ‘sales’: By
sales we don’t mean just transactional sales. We mean the
ability to convince others about the concept, the value
proposition, the plan etc. An entrepreneur does not sell
only to customers. He/she has to ‘sell the concept’ to
investors, vendors, partners, early employees, parents,
early customers etc.
However, an entrepreneur may not enjoy doing customer/
consumer sales, or may not be good at cold calling, or
negotiating, or paper work, etc. And that’s OK. As long
as you acknowledge what you can and cannot do, or are
not keen to do, an entrepreneur could be excused from
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the sales function. However, in the initial phases of the

startup, there will be none better than the entrepreneur
to passionately communicate the value proposition of the
product/service, and give the potential customers the
confidence that his team will deliver.
Hence, in the initial phases, entrepreneurs must lead the
sales process, or at least be the face of the organization,
even if another employee is leading the sales efforts
operationally.
Moreover, whether the entrepreneur does the actual sale
process, or has a team that does sales, one of the founders
MUST be responsible for meeting the sales numbers.
Equally important is good communication skills.
Unless you are able to explain and pitch the concept
clearly to the various stakeholders, it will be difficult for
them to align themselves to your vision.
An entrepreneur has to be good at implementing
ideas. Everyone has ideas. But the trick is to successfully
implement those ideas into a thriving business. An
entrepreneur must have a deep understanding of the
‘business’ around that idea.
Also, I strongly believe that an entrepreneur must have
the courage to face failure and challenges.
Entrepreneurship teaches you a number of things about
life in general. It is an immensely satisfying journey, even
if you do not reach your intended destination. However,
the journey is often very, very challenging and it takes a
lot of patience, persistence and perseverance to succeed.
I tell aspiring entrepreneurs to not get taken up by stories
of instant success. Those are rare. Instead look at the
1000s of others whose ventures did not succeed. Or did

not succeed as aspired.
Even those who succeed often take a lot longer than they
had planned for, and it is often a lot tougher than they
had imagined. But it is a ride worth taking.
8. Some Watchouts
I urge everyone with the desire and aspiration to become

an entrepreneur to assess the risks in the context of your
own circumstances very, very carefully. Doing a startup is
challenging. And it requires a lot of hard work. Most often
a lot, lot more than you would usually put in when you
are in a job.
Not everyone is cut out to be an entrepreneur. I have
listed some of the qualities above. Even if you have the
qualities, the aspiration, the burning desire and a great
concept that has potential, I would urge you to think very
carefully about how your decision to startup is likely to
affect your life, and the life of your loved ones. If you have
families to feed, loans & EMIs to pay or are expecting
higher financial needs in the near future then carefully
assess if the timing is right for you.
Of course there are a number of stories of how people have
battled against all odds to succeed as entrepreneurs, and I
hope you will too. But proceed with a lot of thought and
after assessing the circumstances that you are currently
in.
If you have family that depends on your income, ensure
that you talk to them and help them understand the
challenges you might face and the sacrifices that you
request them to make. It is tough.
Starting up will consume all your available time. Hence
also assess very carefully, again in the context of your
circumstances, whether you will have enough time to
devote to this. (e.g. if you are taking care of an elder or
are a soon-to-be parent, you will have to assess if you will
have the time to pursue the venture at this stage, or is it

more prudent to postpone it for a while).
There will be well-meaning folks who will discourage
you. The point is not to ignore them. It is important to
explain your decision to them and seek support, and even
if you want to proceed despite their opposition, they have
a right to know your thoughts. Support of family & friends
is crucial. Without it, the challenging times can be quite
daunting and stressful.
Not for one moment am I being discouraging. All I am
suggesting is that the more you assess all the risks and
implications, the better prepared you will be to deal with
those.
I also advice all aspiring and first-time entrepreneurs to
overestimate the costs and underestimate the revenues
when thinking of the potential of your venture. If you
do that, you can only be happier if your revenues turn
out to be higher than estimated and costs lower. On the
other hand, if you make unrealistically high assumptions
on revenues and low on costs, if that does not happen
you are in trouble. When working on your business plan
and assessing the potential of the business, work ALSO
on the worst-case situation. Most entrepreneurs tend to
work on a plan that gives them an excel-sheet high on the
potential of the business. However, planning for the worst
case scenario – really, really worst case scenario – gives
you a good view of the downside and implications.
Remember, entrepreneurship is NOT about risk-taking. A
good entrepreneur is one who assesses ALL possible risks
and works on a plan and strategy to mitigate those risks.
The point of this chapter is not to pull you down. It is to
help you be better-prepared for your journey.
9. What are the Most Common Reasons for
Startups to Fail?
In my observation startups fail because of any one, or a

combination of some of the factors below:
• Poor implementation (usually due to poor
planning of operational aspects of converting the
idea into a business on the ground)
• Assumptions on costs, adoption rates, revenues,
operational efficiencies, etc. prove to be wrong
• Overestimating the meaningfulness of the value-
proposition to the intended target audience: Often
entrepreneurs assume that customers will line
up to buy their product or service. They do NOT
foresee challenges in acquiring customers or
clients. And going wrong on this front shakes the
very foundation as the startup, as the rest of the
assumptions (on revenues, capital requirements,
etc.) are made on this basis.
The only way to address this is to validate your
value proposition and price points, and take a
realistic view of how the market will react to your
concept. (How the market will react is usually a
lot different than the entrepreneur’s assumptions,
which is based on enthusiasm about their own
idea).
• Founder disagreements
• Company running out of money… or founders
unable to sustain low take home for much longer
than they had estimated
• Failure to get funding or follow-on funding or

Underestimating how much time it takes for
funding: Often entrepreneurs start looking for
funding a month or two before they run out of
cash. Funding rounds (especially institutional
rounds) typically take 3-6 months for the
transaction to get completed.
• Not recognizing that it is not easy to attract and
retain talent. And that a CEO needs to spend a
whole lot of time in building a team.
• Poor product-market fit
• Not having process discipline, including financial
discipline: Measuring progress provides early
warning signs.
• Poor product / service (though I have rarely seen
companies die because the product or service was
bad)
More often than not, it is either because of poor quality
implementation or because the team’s assumptions on
costs and revenues were inaccurate, which meant that
they either run of out money a lot quicker, or the business
case becomes weaker and as a result they run out of
energy, enthusiasm and eventually capital to sustain the
operations.
I therefore always recommend to teams to overestimate
on costs and underestimate on revenues in their excel
sheets. When working on your excel sheets, try to work
out the worst case scenarios (as those may turn out to be
true as well) and build your foundation to deal with the
worst case scenarios too.
Think of what your response and plan is going to be in
different scenarios – the very optimistic, optimal as well
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as the very worst case. Either of these scenarios could

play out, and if you visualize them earlier you will be
adequately prepared for any one of them. (Even if your
actual sales are much higher than you had planned,
unless you are able to quickly adjust your plans and create
resources, infrastructure, processes and people to deal
with the growth, the business will flounder).
10. What can you Learn from a Failed Startup?
Studying a startup that was not successful can teach you

many valuable lessons.
Here are some things that you could learn, if you introspect
deeply and think about why a startup failed:
About the product/service:

Was the product or service relevant to the consumers/
customers? Was the experience of using the product/
service good? If the answers to these questions are
negative, you could learn about what could have been
done better in designing the product/service.
Was the value proposition meaningful:

I.e. was the product/service addressing a genuine need?
Was it solving a problem for consumers/ customers;
was it making their life simpler; or simply offering the
product/service at a lower price than competition or was
it fulfilling an emotional need (e.g. status in the case of
premium products). If the answer to these questions is
negative, you need to introspect and figure out whether
the consumers really had a need for the product or did the
startup ‘manufacture’ a need because they invented some
product/service.
Was the positioning right:

When I was younger, a new brand of packaged burgers was
launched under the name ‘Big Bite’. It was an awesome
product and priced just right. But, it was actually a mini
snack… not actually a big bite. However, consumers,
including me, had seen the product being advertised as
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a ‘BIG BITE’ and expected a ‘BIG BITE”…. and we were

disappointed at seeing the actual size of the snack. Now, I
feel that if the company had called the snack a ‘Mini Bite’,
the product could have been a huge success. This was, to
my mind, a big lesson on a great product at a good price-
point getting killed because of over-promise and incorrect
positioning.
Was the communication clear:

Sometimes, even with a great product which addresses
a real need if the brand communication is unclear, the
company just does not get enough sales as it would have
with more appropriate communication. Often companies
underestimate the power and importance of quality
communication.
Was the pricing right:

At the concept test stage, it is critical to test the product/
service at different price-points and via customer research
surveys (even if not in the actual market place).
Were the processes appropriate for the venture:

Operational issues and their mismanagement is one of
the most common reasons for startups to fail. Often we
see startups do well at the initial phases but falter when
it comes to doing the same business at a different scale.
Introspecting on whether aspects of operations planning
could have been different can teach some very valuable
lessons for the future.
Was the team right:

Did the team have competencies that were required for
the venture. If they did not, did they know what they did
not know and therefore were they able to reach out to

advisors, mentors and consultants or experts who could
have helped them in their journey.
Sometimes despite having a great team, the team
dynamics do not work right. It is also important to have
one of the founders declared as the CEO. There has to be
one person who is calling the shots and where the buck
stops. If there are 2-3 or more founders, each one with an
equal say in the direction and decision-making, it often
leads to chaos. Introspect and see if you went wrong on
the people front.
Was the company adequately funded:

Many a startups burn out despite a good product/
service because they run out of funds. The enthusiasm
and confidence makes many founders more optimistic
than practically possible, and this means they end up
raising lesser capital than was necessary for the business.
Evaluate if the venture was funded right.
Changing the business model often:

One of the most common mistakes entrepreneurs make
is to make changes in strategy and direction too often
and without giving enough time for one strategy to be
implemented. Often this change is considered as being
nimble, and is assumed to be the nature of a startup.
However, while it is easier for startups to change direction,
it should be a very well debated and a thoroughly
considered decision.
Either ways, failure teaches you that you do not have the
right to take success for granted. It teaches you that your
assumptions and your beliefs may not always be right and
that you should validate them. It teaches you the value
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of being frugal, and that being resource starved actually

could lead to more innovation & creativity. It teaches
you that planning is important, and failing to plan is
planning to fail. Failure makes you stronger. It gives you
the confidence to face bigger challenges than you have
had previously. It often helps you in gauging who your
real supporters & friends are.
Failure forces you to introspect and think about what
went wrong, and make an attempt to do things differently
when you embark on your journey again.
FINDING A CO-FOUNDER(S)
AND ADVISORS
11. Find a Co-Founder – Find a Co-Traveller
In my view, it is extremely helpful if you find a co-founder

when starting an entrepreneurial venture. Apart from
sharing the work and responsibilities, a co-founder can
be the motivating companion and the emotional support
that you will need when your business is going through a
tough phase. And all businesses go through a tough phase.
Also, a business needs different types of skills and
competencies. The ideal composition of a founding team
is when the founders bring complementary skills to the
venture. Complementarity of skills is better than all co-
founders with similar skill sets and experiences – one
engineer + one marketing person + one designer. E.g.
someone from marketing/brand management, someone
from the fashion industry, and someone from operations
management/procurement will make an ideal founding
team for an apparel startup.
An ideal founding team is one that covers all the important
components of the ‘business’ around the idea or concept
that the startup is working on. Focus on the critical areas.
Get people who can multi-task. Get people with some
experience in different aspects of business, and not just
their immediate area of expertise.
Passion and commitment is critical at a startup. When
finding a co-founder or early team members, also evaluate
‘why they want to join you’ rather than just ‘what are their
qualifications and experiences and what do they know
that will be useful to my startup.’
Ideally, apart from people with varied skills and
competencies, it is also useful to have in the founding
team people with different personality types – someone

who depends on gut feel for decision making will find
it extremely beneficial to have as a co-founder someone
who takes measured, well-thought out decisions, and vice
versa.
While there is no ideal size of a founding team, 3 founders
is generally considered to be a good number for a variety
of reasons. Having more than 4 founders can often lead
to overlap of competencies, and therefore chaos. [Though
there are great examples of companies like Infosys which
had 7 co-founders.]. Often investors are vary of large
teams as then all founders are starting off with much
smaller equity than they otherwise would have in a
venture with 2-3 founders.
It is usually better to find a co-founder within your circle
of known folks. However, if you have tried all of that
and are unable to and if you must cast your net wider,
LinkedIn is what I would bet on to ‘narrow down choices’
and then target specific people for a ‘conversation’.
If you connect with someone whom you think could be a
good co-founder, once you have a match of excitement for
the idea and a sense of commitment, I would encourage
you to have long and detailed conversations of various
scenarios about the business to ensure that there is broad
agreement on the vision, direction, aspirations, values,
expectations, goals – personal and professional, family
circumstances – financial and personal, etc.
Of course, in all of this, the chemistry has to match and
you need to be able to tolerate each other’s working styles.
(Generally it is good to work with someone you know
because you are likely to be aware of their personality,
working styles, weaknesses, etc. and therefore the
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chances of stress due to ‘new discoveries about your

cofounders personality’ is likely to be lower).
Essentially, if you decide to co-create a company with
someone you have not known before, you should try to
speed up the process of getting to know as many aspects
of each other’s personality and aspirations that may
impact the business in some way.
12. Who Exactly is a Co-Founder?
A co-founder is someone who has equal skin in the game,

and has similar incentives to make the venture a success.
Co-founders should feel the ‘ownership’ of the venture.
A co-founder is someone who accepts the emotional
and intellectual responsibility to convert the idea into a
business, and who commits to live through the challenges
that any entrepreneurial journey faces.
They may or may not have equal share of the equity in a
private limited company or equal share of the partnership
firm, but it has to be reasonably distributed. I.e. one
person having 95% equity with two other two individuals
having 2.5% each does not make them co-founders in
spirit, even if they have that designation on their business
cards.
13. Founding Team Members are Different from
Founders
Remember, not everyone who joins at the beginning of

your journey needs to be a founder. They can be called
‘Founding Team Member’ (It does carry some weight in
a person’s profile but it is not the same thing as a co-
founder.).
Founding team members are often the ones who are
willing to take an early bet with you, and hence expect
to be rewarded with some equity so that they also get to
benefit from the upside if and when the startup succeeds.
On the other had, a co-founder is someone who accepts
the emotional and intellectual responsibility to convert
the idea into a business, and who commits to live through
the challenges that any entrepreneurial journey faces and
who has a reasonable equity in the company 20–50%.
In my view, it is critical to find co-founders who have the
same passion for the concept. This is necessary because
when the startup is going through challenging times, it is
most tempting with someone who is less passionate about
the subject to step out.

14. Is it ok to have a part-time co-founder?
Generally it is a bad idea to have a part-time co-founder,

unless the person is doing part time only because the
person needs some income to take care of basic expenses
and the startup is currently not in a position to cover the
cost of living.
I.e. it is OK to have a part-time co-founder whose
commitment is 100% and he/she is spending time doing
other things out of compulsion, and not to hedge bets.
Investors also do not like teams with part-time founders
if they are doing it to hedge bets, or if this is one of the
things they are gong to pursue. For investors if one of the
co-founders is a partner/director in another business, it
is usually an outright no. And that’s because, if someone
who is core to the project is not willing to dive in fully, why
should someone else (investor) accept the risks associated
with the venture. Also, all businesses have challenges
and require the founders to do the firefighting on an on-
going basis. In the case of a part time resource who is also
involved in some other venture, if there is a challenge in
both ventures simultaneously, which venture will he/she
focus on?
If the founders are part-timers out of choice and not
compulsion, it reflects lack of faith in the potential of the
venture, and hence it is almost always difficult to convince
good people to join the company. Why would anyone take
a career opportunity risk if the founders themselves are
hedging their bets.
Of course, it all depends on what equity you are offering
that person as a ‘co-founder’. In some cases, people have
PRAJAKT RAUT 39
given a ‘vendor’ or an expert very nominal, ESOP level

equity but called them a ‘co-founder’ to allow them the
bragging rights of the same.

15. The Success or Failure of a Venture can
Often Depend on the Quality of the Relationship
between the Co-Founders.
Finding a co-founder is pretty much like finding a spouse...

at least in the sense of the seriousness and the thought
that will go into the decision-making. And despite all the
precaution and thought, there is no guarantee that things
will work out well. You can only hope, and give it your
best, assuming that the other person gives his/her best
too.
Accepting someone as a co-founder is probably one of the
most important decisions in your entrepreneurial journey,
and often in your life journey too.
A co-founder is NOT just another co-worker. Even if the
share-holding is not equal among the founders, a co-
founder is going to be an equal partner in the decision
making, strategy planning, dealing with the challenges,
carrying the load, putting a 100% into the venture, etc.
Find a co-founder with similar aspirations and motivations.
This is critical, and in my mind, a non-negotiable
condition. People with differing levels of aspirations are
likely to try and pull the company in different directions
as the startup progresses.
Find a co-founder that you will feel comfortable sharing
your joys and sorrows with. Find someone who you can
count as your friend.
Find a co-founder that your spouse is comfortable with.
Especially if the co-founder is of the opposite sex. Your
spouse being uncomfortable with co-founders may
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directly impact the company as also could cause stress in

your personal life. Avoidable.
Go by your gut feel. See if you feel nice about the person.
Most importantly, do not accept anyone unless you think
that he/she is a GOOD HUMAN BEING. Everything else
is secondary. If you have heard negatives on ethics,
value-system, social behavior, ideologies etc. – AVOID
proceeding further. Do not get tempted by professional
performance.
16. How do you Decide who becomes the Ceo
from Among the Founders?
Well, there is no real logic that can be applied in addressing

this question, but a person who understands the dynamics
of business better, is good at sales (or presenting
and communicating the story), good at operations
management and can be the face of the company to the
outside world is a better choice and in the best interest of
all, including other co-founders.
Of course, the person who is designated CEO should
have what it takes to be a leader, and have the aptitude,
the passion and the desire to steer the company in the
direction agreed by everyone.
A co-founder who becomes the CEO needs to understand
that he/she is NOT the boss who can have special
privileges… and that he / she is merely the chief executive
who has the responsibility for making critical decisions
and making sure that the company is on track to meet/
beat targets.
In a startup, a CEO should take up the ADDITIONAL
responsibility as a CEO along with an area of the startups
business that he/she should take ownership of. E.g.
the CEO may take up the responsibility of handling the
sales function or operations management or driving the
technology piece, etc. But the responsibility of being the
CEO is over and above that functional responsibility.
It is also important to designate one person as the CEO
from among the founders, as the rest of the team as well
as external stake-holders (investors, vendors, partners,
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etc.) need to know where the buck stops and who would
be the decision maker when one needs to be made.
In most cases though, especially when a few friends get
together to start a company, who will be the CEO is a
tough decision. In such cases, it is best to have a healthy
debate within the team and select a CEO.
While it is a difficult question, often leading to stress
among the team, it is critical to address that and take
a decision. Especially if the startup is going to seek VC
funding, there will have to be one CEO who is leading
the team.
17. “If I have the skills to build an MVP myself,
should I hold off on a Co-Founder to Raise
Capital and make some early hires?”
A product is NOT a business … no matter how good that

product is. A business has to be built around that product
or concept.
So, if you are good at product development, perhaps you
need some support on the marketing/sales/commercial
side of the venture.
Also, with most investors you are likely to have a better
chance of getting funded if you have a co-founder.
Remember, investors invest in the business case around
a concept or product, and the ability of the team to
implement on the potential of the product in the market.
A good product is a good starting point, but not a necessary
condition, and certainly not a sufficient condition for the
success of a venture.
18. How should equity be split
between founders?
How much equity each founder gets in a startup has to be

decided after serious deliberations on a number of factors.
This is especially true when two or more friends (and
worse, relatives) are coming together to start a venture.
Whatever the split, assuming that equity should be split
equally between all founders is an incorrect starting point.
Each team will have their own dynamics, and emotional
as well as rational reasons to decide the split of equity
between them. I would urge them to consider the
following factors:
• Importance of the person’s function to the team
(e.g. technology, marketing, etc.)
• Criticality of that person being in the team
• Is he/she the only person with that skill set in the
team
• The seniority of that person in professional life
• What is the person giving up to come to this
venture (opportunity cost)
19. What happens to the shareholding of a
founding team member in case he/she decides
to quit the company?
Ideally, the founder’s shares should vest over a 3-4 year

period. This is not just in the interest of the investors,
but also protects the entrepreneurs in case one of them
decides to leave.
In simple terms, if there is a 3-year vesting period, then
every month the promoters get 1/36 part of their equity.
For example, if there are 4-founders, and one of them
who has 18% equity decides to leave the startup after 15
months because the venture faces significant challenges,
then in a 3-year vesting period clause, the leaving founder
will get to keep only 7.5% of his 18% equity, with the
rest of the equity now available for the company and the
board to offer to another person who may be brought in
as a co-founder or at a management level to fill in the gap
left by the leaving founder, or to be distributed back to
the other founders and/or shareholders (e.g. investors,
advisors)
In case the equity that has not vested to the leaving
promoter is not given to a new person, then in the case
of an event like a M&A that equity is distributed to all the
remaining shareholders, including the promoters in the
proportion of their holding in the company, or as defined
in the share-holder agreements.
20. Handling disagreement between founders
One of the common reasons for issues in startups is

disagreement on the way forward. Typically these issues
and disagreements come up at two inflection points –
1) Either when the startup is doing very badly and
tough decisions are to be taken e.g. to further
reduce the already low salary
or
2) When the startup is doing really well and tough
decisions are to be taken e.g. to sell out and take
the cash or to stay on and grow even more.
How does one address this? Well, one way is to anticipate
it and have a discussion amongst the co-founders on
how different situations will be handled. This discussion
should happen at the beginning of the journey and NOT
when the situation arises.
What will be the decision in case of difficulties? What will
be the decision in case there is an option to sell out?
Some questions I ask our portfolio companies to discuss
among themselves are:
• Who among the founders will be the CEO, and
why (If you do not decide at the beginning of the
journey, this can be a tricky one to settle.).
• If required, would you be open to a professional
CEO.
• If someone offers to buy you out for x amount in
a year, what would you do… sell out or not sell?
What if the amount offered was y instead of x?
• What will be your measure to say that the venture

as ‘failed’ and give up
• What is your plan B?
• How long can you go without a salary (or survival
level salary)?
It is not important for all founders to have the same answers
to all questions, but it is critical that they understand
what the other founder’s views on those questions are. If
the views are divergent and at conflict, then they need to
have a chat at that stage and either adjust their views or,
in some cases, may need to take a harsh decision to not
pursue the journey together.
It is best to know the differences in views on critical points
at the beginning of the journey than at a later stage.
One way to protect the venture in case of conflict is to
vest the shares of the founders – typically over a 4-5 year
period.
21. Importance of an Advisory Board
Creating a strong advisory board is one practical way of

filling in the competencies gap that a startup may have.
Most startups are resource-starved and hence not in
a position to employ people for the various skill sets
required for building the business. This often means that
the entrepreneurs end up doing the thinking on the most
critical aspects about the business EVEN IF THEY ARE
NOT THE EXPERTS ON THAT PARTICULAR SUBJECT
OR AREA OF ACTIVITY. E.g. a team of two founders with
experience in technology and marketing respectively
would also ATTEMPT to think on their about areas
like production, procurement, logistics, supply-chain,
customer support, etc. Each of these is a specialized area
and would require someone with years of experience to
provide a perspective on the opportunities and challenges.
Thinking and planning and implementing on things that
you are not an expert on is obviously not going to work
in most cases. Think of it this way… If you were starting
a cardiac care hospital, and because you are a startup and
cannot afford a good surgeon, would you go ahead and
operate on a patient if you were not a cardiac surgeon?
Well, you won’t because that would be a dangerous thing
to do!!!
Exactly for the same reason, like cardiac surgery requires
a surgeon with specialized expertise, different aspects of
a business like supply chain, marketing, sales, technology,
etc. should be ideally thought through and managed by
some folks with some experience in those areas. But with
the cash and resource constraints of a startup, it is not
practical to fill in every competency gap with the most

appropriate personnel.
Creating an advisory board allows the founders to get the
brain-power, guidance and insights from senior function/
domain experts, without having to actually hire senior
resources to handle those functions. E.g. a startup may
require some serious help on the supply-chain or sourcing
side, which the founding team may lack. In such a
scenario, getting as an advisory board member someone
with 15–20 years experience in the domain would work
well for the startup.
Advisory board is a tool that is not used effectively by most
startups. Having strong advisory boards helps startups
think through their businesses with the perspectives and
wisdom of experienced individuals.
Why would someone accept to be on the advisory board of
a startup? Well, this is where the ability of the founders to
sell the vision of the company comes in handy. Of course,
you should have a large, aspirational vision to begin with.
No one is going to be excited with someone trying to
build a company that does not even aspire to be a market
leader, or at least a dominant player in the market.
If you have a large vision and if you aspire for your
company to have a large impact on that industry, and
if you communicate that with passion, the right people
would often consider being on the advisory board.
If you come across as THE team which can do it well,
many of the people you approach for an advisory board
position would not want to take the risk of turning you
down as they may regret later in case you become super
successful. Because if you do, they would like to have the
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bragging rights to say that they had a role to play in the

success of your company.
Of course, it is good to compensate the advisory board
members with some equity, as you are not likely to have
the resources to remunerate them monetarily.
22. How should I get someone to join as an
Advisory Board Member?
An advisory board member can be someone who provides

the deep domain expertise or function experience to a
startup, and fill in the competency gap that the founding
team currently lacks.
Before creating an advisory board, the founders should
make a list of the skill-sets that would be required for
building a company around your concept/idea. E.g.
in an e-commerce venture, areas like supply-chain,
procurement, logistics, customer support, marketing,
customer acquisition, digital communication, etc. would
be critical, of course in addition to technology & GUI and
of-course the expertise about the domain in which you are
planning your venture.
Once you have identified the skill sets required, you should
identify the competencies that the current team has, or
could get from among those individuals you can regularly
tap into e.g. a senior friend or a relative who has agreed
to help you. That leaves you with the competencies that
you would need to seek external advice and assistance on.
You should then identify the folks who you think could be
ideal as advisory board members for your startup.
Here are some things that you might consider for your
advisory board:
Engage the folks for ‘what they can do for you’
and not for ‘who they are’. I.e. even if your uncle is
the chairman of a large corporation, it makes no sense
to have him on the advisory board if he is not from a
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relevant domain. In other words, you do not need a ‘show

& tell’ board but an advisory board who can assist you
with specific things that will add value to your company.
When you approach someone to join your advisory board,
plan well in advance what you are going to pitch to him
or her.
Understand what their motivations and drivers
are and then see if there is something that you can excite
them with. In many cases, the excitement of assisting
a startup is interesting enough for people to sign up as
advisors… of course, if the startup comes across as ‘high-
potential’.
Set the expectations right and get their
commitments up front. Be clear in communicating
what you plan to do and what you expect them to
contribute with. Be transparent about the challenges and
honest about the roadblocks.
Define the interaction frequency and process
of interaction. Clarify what the preferred mode, time
and day of interaction would be. Some people may prefer
on-mail interactions with occasional in-person meetings,
while some may prefer face-to-face meetings. Some may
prefer meeting on weekdays in office, while some on
weekends at home.
Offer some equity. While many may not seek and some
may not even accept, it is appropriate to offer nominal
equity to your advisory board members.
Formalize the relationship. Document the
engagement. Set a formal advisory board meeting date,
even if on a conference call. Set a clear annual calendar
of engagement and interactions. Provide monthly reports
with at least a quarterly conference call with all advisory
board members together, even if you meet / interact with

them individually separately.
23. How much equity should I offer an Advisory
Board Member?
Well, there is no standard on this one. But often the

number ranges between 0.25% to 1% (or even higher),
usually depending on the level of involvement, the value
that the person brings to the startup, etc. It can even be
higher in case the person more actively involved. (Avoid
giving equity for ‘access’ i.e. do not give away equity for
someone who promises to introduce you to customers or
investors. Give equity only for someone who is willing to
give advice and assistance.).
The important point is NOT to make it transactional and to
keep it as an honorarium. This ensures that the engagement
is for the right reasons i.e. because the person, like you,
is excited about what you are doing. And because the
aspiration should be to build a large company, if you are
super-successful, even a 0.25% equity will offer substantial
upside to an advisor or board member.
Some things to consider when distributing equity to
advisory board members:
• Provide a vesting clause i.e. the equity should vest
– i.e. be due – after a period of 6 months. This
allows both – the startup as well as the advisor
– to test the relationship and see if they are both
enjoying the interactions and are seeing value in
continuing the relationship.
• Treat all advisory board members as equals. Even
if someone is more senior or accomplished than
others, as your advisory board member, they are
equals.
24. What can advisory Board /Board Members
do for you?
Apart from guiding you on areas in which they have a

competence and experience in, advisory board members
can assist a startup in the following ways:
Make introductions to the relevant folks in your industry.

E.g. vendors, customers, media, and other stake holders.
One way to leverage your advisory board members is to
request them to mention your company on their LinkedIn
profile, especially if they are active on social media.
Bring the domain expertise

Advise you on strategy, validate your plans and challenge
your assumptions
Help you interview staff.

This can be especially useful when younger founders have
to interview senior folks who are older than them.
Speak on your behalf at events – this can be
extremely powerful
Monitor your progress – provide early warning
signals when things are not going right
25. What’s the appropriate way to Terminate an
Advisor Relationship that isn’t adding value?
(This was my response to a question on Quora.).The person

had provided this additional information: We do 24 month
vests and are about a year in with someone who just isn’t
adding much value. We don’t want to burn the bridge but
feel it necessary to unwind the relationship.
My response
Different people will have different styles, and different
personality types will deal with these situations very
differently.
My style is to have an honest conversation. State your
expectations, highlight where the delivery has not
been as expected, assess if the reasons were within the
individual’s control, and provide an opportunity for the
person to respond. And ask the person what you think is
a fair way forward.
In most cases, if you present a fair assessment of how
things are going, the person may himself/herself offer to
step aside. Of course, if the person is not agreeable to
stepping side, then you need to do what is in the best
interest of the company.
Of course, it is also possible (and often that is also the case)
that the company itself was not able to leverage the advice
and inputs of the mentor/advisor. And that is also a reality
that needs to be dealt with. If that situation is unlikely
to change, even then having an honest conversation and
saying “I don’t think we are geared to make full use of all
the good advise you give us. We are just too bogged down
with other priorities, which I understand you may or may

not agree with. But for now, we have decided to focus on
those. How do you suggest we move forward? Can we
disengage for a bit and see if there is merit in reengaging
when we are in a better position to benefit from your wise
advice?”.
(And of course, the shares vested till then should be given
to the advisor).
IDEA SELECTION AND ASSESSING
THE SIZE OF THE OPPORTUNITY
26. Idea Generation
Often I see aspiring entrepreneurs come up with business

ideas that are around concepts that are ‘currently popular’
(e.g. dotcom in the late 90s, e-commerce in 2013-14, etc.).
And while those may be useful trigger points, unless you
have a passion for that sector and an interest in building a
business in that sector, it is not a prudent route to pursue
if it is only an opportunistic view.
The reason is simple. Unless you have the passion for
the sector and an active interest in it, you are unlikely to
find the emotional strength to continue when the going
gets tough and challenges hit the venture. (And rarely do
businesses have a smooth ride to success.).
My suggestion to aspiring entrepreneurs is to think hard
about what you are personally interested in – what you
are passionate about. Think hard about what would give
you the most joy. And also of what does NOT excite you
at all. (E.g. if you are not fond of operations, then perhaps
an operationally intensive business like logistics may not be
the right sector for you, even if the opportunity is screaming
itself out).
After you think about it, and have a list of options, narrow
the list to a few that pass a certain set of filters that you
may want to apply. I’ve listed below some of the filters that
you may want to think about (These are just illustrative.
Make your own list based on your own circumstances,
priorities and aspirations.)
• Time to market: e.g. a mobile app takes a few
weeks to hit the market, while a hardware product
company may take a few quarters, or even years.
• Capital required: Some businesses are

asset light, some are not. Some could attract
investments from VCs while some will not.
• Market potential: Some markets address a
larger market opportunity, while some concept
address niche segments. Both have their own
merits and challenges. You need to assess these
before you take a decision.
• Travel/non-travel: Some businesses may
require you to travel e.g. enterprises sales
to customers in overseas markets. (So if you
are a new parent, you may have to weigh the
implications before taking a decision to proceed).
• Scale: Some businesses are boutique businesses
[small businesses] e.g. strategy consulting, design
consulting, etc. while some businesses can scale.
• Competition: Some sectors have lots of
competition but there is space for more (e.g.
restaurants), some sectors are crowded with
competition and it is a difficult one to crack
(e.g. education content for schools) and some
businesses have limited competition. Some sectors,
e.g. e-commerce are winner-takes-all businesses
where 2-3 top brands dominate the market and
others struggle to survive. In the ‘winner takes
all’ kind of businesses unless you are a dominant
brand, survival itself may be challenging.
• Recognition & respect: Some businesses are
more likely to give you a shot at personal glory
than others.
• Intellectual stimulation: Likewise.
The point is to do risk-reward & feasibility analysis so that
you make choices that are aligned to your circumstances.
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Of course you can proceed even if your choice is not

aligned well with your circumstances, aspirations and
limitations. However, doing the analysis will alert you to
the challenges and implications, and will help you to be
better prepared.
Once you have thought about all this, let these simmer
in your mind. Let some time pass after your initial
evaluation. Then revisit that evaluation and see if you still
feel strongly about them. If not, go back to the drawing
board, including adding some new ideas into the pool.
If you have a couple of ideas that seem to be good
contenders for the finals, run it past a few people, get
their views and perspectives and then take your final
decision based on your gut and instinct.
It is not unusual for many aspiring entrepreneurs to be
excited with a number of ideas or concepts, and they may
genuinely believe in the potential for each one of these
ideas to be successful. And that potential may be real too.
However, eventually you will have to make a choice and
decide to focus on only one of these ideas to build your
startup around. Doing even one thing is hard enough.
Pursuing multiple ideas at the same time increases the
chances of failure, as your attention, resources and capital
will be stretched inadequately across different ideas
Here are a few thoughts on how to make this rather tough
decision. Of course, your decision will be a combination
of various factors, and often will require revisiting the
parameters that you used for your decision-making.
1. Personal passion is critical
If the startup is not in an area of your personal passion,
you are less likely to fight your way through these tough
times and are more likely to give up.
The commercial potential of an idea can sometimes

mislead you into believing that you are deeply interested
in that domain. It is important therefore to evaluate what
you are really, really, deeply and passionately interested
in. Here’s how you can possible identify the areas of your
interest.
Leave the ideas aside, and think of what you would want
to do in life if you had enough money and not have to
work for a living. That will give you clues on what excites
you the most and what your real areas of passion are.
2. Evaluate the business case for each idea
It is critical to evaluate the business case around each of
your ideas and then take a view on whether the financial
upside of the venture is exciting you enough. Each
individual may have their own level of aspirations and
desire for scale and wealth.
Consider factors like market potential, possibility of
scale, what is required to scale – e.g. does the venture
require proportionate scaling of resources & capital
to scale (e.g. BPO or a LPO) or would it be possible to
scale exponentially without exponentially scaling up
manpower (e.g. software products), what areas are most
likely to receive VC investments, what domains are likely
to see higher valuations, etc. i.e. consider all the factors
and evaluate how much you would be worth in 10 years if
each of these ideas were to succeed as you plan. You are
most likely to get a different figure for each one of your
ideas, based on the business case for these concepts.
Start with the value proposition and evaluate if that is
meaningful to a certain set of people. Do some Q&A with
potential users if they will use it, and ask how much they
are willing to pay for it.
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Then check if the cost of delivering that value proposition

is lower than the cost that the customer is willing to
pay. And if the answers are positive, then assess if there
are enough number of customers that will make this a
meaningful sized business for you, and for your investors
if you are thinking of raising funding from investors.
3. Evaluate the external environment for each
idea
Evaluate things like ‘how important is the problem’ or ‘how
real is the opportunity’ that this concept is addressing,
which of these ideas have less competition, which of these
concepts address an immediate/felt/expressed (e.g. cure
for cancer… to exaggerate the point) need and which
of these concepts will require hard-selling of the value
proposition to potential customers/consumers (e.g. a
mattress that helps you sleep better).
Also, evaluate aspects peculiar to your circumstances e.g.
which of these ideas can be implemented from where
you live and which of these concepts may require you
to relocate. Then decide on the basis of your personal
circumstances and preferences.
4. Which of these ideas have an opportunity
for you to be a dominant/ respected/known
player
What skill sets & competencies and other resources do
you have that will give you a higher chance of success in
the venture?
While the potential may exist in all categories, some
sectors may not be ‘startup friendly’. E.g. infrastructure.
Evaluate if some of these concepts are likely to see
competition from existing large brands. E.g. “Can Google
do this?”.
5. Evaluate if you ‘like doing’ what the venture

will require you to do
Example: You may be passionate about healthcare.
However, creating and managing a chain of clinics
requires you to be competent in on-ground & distributed
operations management, which is different from the
operations management competence required for an
online medical records platform.
6. Evaluate the risks
While you play for the upside of a venture, also evaluate
what the downside is. Some concepts if they fail will mean
closure of the business. While some concepts, even if they
do not become run away successes, may be sustainable as
a smaller venture than you originally planned. Evaluate
your risk appetite and evaluate which concepts are more
suitable to your personal circumstances.
Finally, after you evaluate all these aspects, you probably
should let your intuition lead the decision for which
idea to go with. Despite all the above, evaluate if this is
something that you really, really are excited about doing.
If not, no matter how strong the business case, it is just
not worth it.
27. Fall in love with a problem, not with an idea.
Here’s why. If you get excited about an idea and decide

to start a venture around that idea, that concept and the
business around that concept may or may not work in the
market place.
However, if on the other hand if you focus on a problem or
an opportunity, then it allows you to address that problem
or opportunity in multiple ways and allows you to explore
different ideas and concepts to solve that problem. I.e.
your success or failure does not depend on the success or
failure of that one idea.
Let me illustrate with an example:

If you were excited with the idea of creating healthy
but tasty fast food counters in colleges, it seems like a
reasonably sensible idea that may have a good business
case. The success of this will depend, as with most ideas,
on the quality of the execution, pricing, brand personality,
the quality of the snacks, competitive environment, the
team’s ability to execute in a multi-location set up, etc.
However, if instead of healthy but tasty fast food outlets
in colleges, you were to own the problem/opportunity of
“making fast food healthy” or “making healthy food tasty
and appealing to young people”, you could have many
more concepts and ideas to choose from… you could do
one or some of the following:
• Of course you can start food outlets in colleges
• You could supply pre-packaged meals (to
colleges and hostels, even offices or paying guest
accommodations, etc. on monthly contracts)
• You could start cooking classes to teach how to

make healthy food tasty
• You could create an online portal for healthy but
tasty food
• You could create a brand of healthy fast food that
is sold at retail outlets and online
• You could create an online show or a TV show
around healthy cooking
• You could do a catering service for birthdays and
parties that serves healthy and nutritious meals
• You could do ALL of the above under one company
or as separate companies or with one company
with multiple subsidiaries.
Of course, doing everything together is not practical. It is
prudent to focus on one thing at the beginning and make it
successful, and then when you have the resources and the
foundation to leverage adjacent or related opportunities,
you can then diversify into different businesses.
In short, when you take a step back from the idea and
think about the problem or opportunity that that idea
was solving, it expands the scope of what you can do and
gives you a variety of choices to execute on. And your
success or failure does not depend on that one idea that
you originally had in mind.
28. The Importance of Market Research
“Research is formalized curiosity. It is poking and prying

with a purpose. ”
Zora Neale Hurston, American author
Scene 1: A couple of years ago

You have a great idea for a new product!! It ‘feels’ like the
answer to everyone’s problems! You are confident that it
will definitely be a big hit! So you get your team in place,
develop the product and launch.
Scene 2: Cut to the present

The ‘great’ and promising product fails to take off! There
are just not enough takers!
What possibly went wrong?

The consumers just didn’t connect with the product or
the price point was wrong or the brand personality did
not appeal or the communication was not clear or the
distribution was poor or the value-proposition was not
meaningful!! Something did not work the way you had
imagined it.
But it’s too late now. Wish you had known this before!
Many a great idea and innovative businesses have failed
because the entrepreneurs simply relied on their gut…
and did not bother to check with consumers/customers/
users.
Every organization, whether an existing business that is
looking at launching a new product or a startup that is
banking on that one great idea, needs to do a thorough
analysis of what the market needs, and at what price-

point and how that can be effectively positioned &
marketed. I.e. every company introducing anything new
in the market needs to validate all aspects of the business
on which you have made some assumptions on what the
outcome will be. [E.g. if you think the product will have
3% conversions at Rs. 100 per piece from those who see
the add, and 15% conversions at Rs.50 per piece, that’s an
assumption that needs to be tested].
Market research is that important tool that can equip the
organization with data and information that can help
determine the strategy and reduce the risks. It can help
you make informed decisions.
It can help you gain valuable insight into what the
consumer wants – type of product, pricing, value
proposition, communication clarity, brand personality,
etc.
If you are looking for investors to fund your business,
plans based on market insights have a better chance of
being considered seriously than plans that are based on
pure gut feel and no market insights. Market research
does NOT have to be a formal research done through an
agency. Just talking to a reasonable number of customers
is also a fair market research. [E.g. if you are selling ERP
solutions for travel agents, then talk to at least 100 of
them in the segment you want to tap. If you are selling
an enterprise solution to very large enterprises, then
talking to 4-5 might be enough as access to more will be
difficult. However, if you are doing a mobile app, then
testing it with a 1000 or more people might be possible,
and therefore expected].
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How should you do it?

Market research is nothing but an information gathering
exercise. It could mean conducting feedback/informal
chats with your customers or potential customers. You
could conduct interviews, quizzes, surveys, questionnaires
and the like.
In more formal and professional ways, you could hire
experts who conduct detailed research, follow media
reports and use marketing information systems to capture
and analyze key data.
Research could be qualitative as well as quantitative. The
more accurate the data, the better positioned you are to
understand what the market needs.
When should you do it?

Market research should definitely be done prior to
launching a new venture or product or before changing
some aspect of the business – e.g. changing a feature or
a service or the pricing. But as in-market scenarios are
changing very fast., market research should be an ongoing
process built into your organization’s ethos and work
culture, such that there is a constant flow of information
about how you are placed in the competitive market.
Time and effort invested in adequate market research will
help take proactive steps rather than reactive decisions,
and remain at the top of the game.
Long-term success-oriented approach to business:

Market research will help you to prioritize and select
growth-oriented, practical and achievable opportunities.
It will help you identify the target market for your
endeavors.
In addition to customers, talk to different stakeholders

and influencers:
• Talk to potential investors – ask them about
your business case, their overall interest in such
concepts, experiences and learnings from past
investments in such concepts, etc.
• Talk to experienced entrepreneurs – ask them
about challenges, watch outs, learnings from their
experiences, etc.
• Talk to potential employees – ask them if they
would join, if yes what would be a meaningful
compensation (salary, equity or salary + equity)
• Talk to lawyers – they often can give you interesting
insights about challenges or watch outs
• Talk to some accelerators/incubators/mentors –
ask them if your plans look practical, and your
assumptions look plausible
In short, talk to anyone whose perspective on the concept
or the business around the concept will help you make a
better-informed decision
29. Why Customer Discovery is Critical to a
Venture
This is a summary of my talk at the Startup Weekend Next

pre-accelerator program in Gurgaon on 29th March 2014.
(For the purpose of this article I am using the word customer
very broadly – for this article I refer to as customers all
entities that will either use, or pay for or influence the
purchase of your product or service).
Wrong assumptions kill more companies than bad

products do.
Inaccurate assumptions about who will buy, how much
will they buy, how often, how much will they pay, etc.
can put a business in a completely different path than
estimated by entrepreneurs in their business plan.
While most entrepreneurs spend quality time in designing
the product or service, they do not spend adequate time
in understanding WHO EXACTLY their customer is.
Entrepreneurs often ‘guess’ who their customers would
be, and what their behaviour would be towards the
product/service. And because this guess is often based on
the entrepreneur’s own enthusiasm about their concept,
it can be significantly different than the reality. Often,
inaccurate assessment of the customer segment and the
reasons for them buying the product/service are fatal
mistakes for startups.
Start talking to customers (potential users, influencers,

and buyers) BEFORE you start fine-tuning your concept.
Most certainly talk to customers before you develop your
MVP.
The most common mistake that many startups make is to
embark on a deeper customer discovery process AFTER
they finalize their concept. Often startups start with broad
assumptions on what problems their potential customers
are looking solutions for, and start designing and refining
the concept. Then they go ahead and develop a MVP,
or sometimes even the full product, and then check if
customers feel as excited about their concept as they do.
Well, if the assumption of the real problem is correct, the
solution is a success. However, your assessment of the
problem could be slightly or significantly different than
the way the customer sees the problem. And that could
be a fatal mistake for many startups. It can sometimes
kill the company, and in most cases at least delay getting
to the right problem-solution fit and then the product-
market fit.
PRAJAKT RAUT 75
(Even when you talk to customer after designing and

refining a concept, many entrepreneurs find it difficult to
let go of the concept if the customer interactions do not
support the entrepreneur’s enthusiasm about the concept.
They try to tweak the concept a bit here and there - tweak
the price-points or features or value-proposition - as it
is emotionally very, very difficult to discard a concept
after you have spent days designing and refining it, and
eventually falling in love with it. They therefore some
try to ‘modify’ the concept in a manner that they THINK
will work based on what the customers have told them.
It may work. Or it may not. But if the entrepreneurs had
not invested so much emotional energy into designing
and refining the concept, they may have found it easier
to embrace the customer’s problem rather than falling in
love with your proposed solution.
What entrepreneurs should therefore do is ask customers

what they need BEFORE DEVELOPING YOUR CONCEPT
FURTHER.
Customer discovery is important because it guides you in
designing your entire business, including your product
and value-proposition.
Often customer discovery is seen as a process of identifying
who and where your customer is so that you can target
your media spends and marketing efforts better. Well,
while that is certainly one of the uses of understanding a
customer, it is NOT the most critical one.
Discovering who your customer is will help you design
your ENTIRE BUSINESS, including the product and the
value-proposition. Here’s how:
Customer discovery helps you define the problem that

your startup solves:
Understanding who the customer is will help you define
very, very clearly what problem you are solving for them.
E.g. a tier II city person’s primary reason for buying
garments online could be that they may not have access
to as much choice as folks in metro cities may have, while
the primary reason for buying online for a person in metro
cities could be convenience.
Similarly, if you are selling hospital management
software, the need of a single hospital brand will be
different than the needs of a small chain of hospitals,
and likewise a national or an international chain of
healthcare company is likely to have quite different needs
and challenges. Since they are all looking for solutions to
different problems, or at least their prioritization of which
problems are more important are likely to be different,
grouping them as ‘Mid & large sized hospitals’ may not be
very useful in understanding what specific problems hurt
your customers the most.
Customer discovery helps you design the solution:

If you have a clearer understanding of the problem you
have to solve for your customers, you will be able to
design your concept far more clearly.
E.g. In the case of a mobile app for music, if your
customer’s need is to ‘get more music free’ your concept is
likely to be quite different than if their need is to ‘discover
independent artistes that they are unlikely to find on
iTunes and other regular music stores’.
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Selecting which problem to solve will help you design not

just the product but who the stakeholders and vendors
and partners would be. It will also help you define where
you are likely to find these partners… and doing business
with record labels who have access to 1,000s of popular
artistes will be quite different than doing business with
1,000s of independent artistes. Which means you are
likely to need a very different set of people and resources
to deal with these two different segments. Which means
that your cost structures are likely to be different, and so
are you efforts and therefore your timelines for launch,
growth of music on your platform, etc. are likely to be
quite different.
As you can see, in this case while the core music app may
remain the same, the business around that app will have
to be thought of very differently depending on which
problem you choose to solve. (And of course, if you choose
to address both the problems, your business design will
be totally different too… and that is also the reason why
it is prudent, and often practical, to choose to address
ONE problem for ONE customer to begin with rather
than trying to do multiple things for multiple people. Its
hard to get one thing done well… imagine doing multiple
things at the same time.).
Likewise, if your concept is to provide online learning
solutions for companies, even within the same customer
group (e.g. companies in the 100– 500 people size range)
different companies may have different needs. Some may
want access to external content with guarantees of quality
and availability, while some may just want a platform to
deliver their proprietary content delivered by their team
members.
In both cases, while the technology solution may

remain the same, the overall solution around it, and the
underlying resources infrastructure, processes, partners,
people needs, etc. will be very, very different. In one case,
the company’s business will be ‘to provide technology
platforms for delivering learning content’ while in the
other case the company’s business will be to ‘connect
learners in the company to high-quality subject matter
experts’. As you can see, in this case, even with the
same product, the business of the company has changed
completely just because they were able to clearly define
the different needs of different customer segments.
Customer discovery helps you design the product:

How your product will be designed and what features are
important, and which are not, are dependent entirely on
who your customer is and what their needs are i.e. what
your product does is dependent on what problem you are
solving for the customer.
E.g. in the example of the mobile app for music, the
functionality of music discovery will be significantly
different if they decide to solve the ‘let me find new
independent artistes that are not available with record
labels’ problem than solving the ‘let me get more music
free’.
In case they decide to solve the ‘help me find new music’
problem, then the search functionality will most likely be
different with user ranking and votes and ‘people like you
also like’ type of features, which may not be necessary if
the startup decides to address the ‘Help me get popular
music free’ problem.
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Customer discovery will define your business case:

Defining who your customer is, and how critical that
problem is for them will define how much you could
charge them, and how often they will buy/use your
product.
E.g. A single hospital may not be able to pay you much
for your hospital management solution as a large hospital
chain would. However, the decision-making in larger
hospital chains is likely to be much longer than the
decision making in the single-hospital. Also, the model of
engagement could be different. A single-hospital may be
willing to buy on the basis of an online demo, while a large
hospital chain may want you to make presentations to
various committees, do a pilot and then buy the solution.
Both these options will have different cost structures and
revenue potential, and therefore will have very different
business cases. As a result, your cash flow needs and fund
flow needs will be significantly different depending on
which segment you choose to target.
(In the above example, can you target both? Of course
theoretically you can. But selling to a single-hospital
brand will need different sales teams with very different
competencies, and experience, than the sales team that
can deal with senior management of a large hospital
chain. So while it is possible that your solution addresses
the same problem for both customer segments, it may not
be possible to leverage the same sales team and customer
support teams to service both these customer segments).
Of course, in the case of physical goods and stores, the
look & feel, quality of materials used, location, etc. will be
different depending on which segments you service. And
therefore your underlying cost structures will be different

too.
Customer discovery helps you define how you plan your

operations:
As seen in the case of the hospital management software,
how you sell, where you sell, who sells, how the pre,
during and post customer experience is, how your CRM
is designed, processes, packaging, logistics, collaterals,
media & PR plan… all this will be dependent on which
customer you choose to service.
E.g. if you are selling educational solutions (say a math
revision software), you would sell it to schools or you
could sell it to parents or you could sell it to parents via the
schools. In all the three cases, while the product remains
the same, your business case, pricing strategy, distribution
strategy, packaging, customer support team, sales team,
marketing campaign & budget, etc. will all be very, very
different depending on which customer segment you
choose to target.
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Customer discovery is about getting a deeper

understanding more about why your customer will buy.
And also why they may not buy.
We often hear entrepreneurs describe their customers as
‘Women aged 25–35’ or ‘Small & Medium Companies’ or
‘Teenagers in tier 1 cities’ or ‘Housewives in tier II and tier
III cities’.
While these broad segments can be a good starting point,
entrepreneurs need to dig far deeper into the segments
to understand their customers. Apart from demographic
segmentation, it is important to understand the behavioral
triggers that will determine whether the customer shares
your enthusiasm for your product or service.
How do you go about digging deeper?

One good way is to brainstorm, debate and deliberate on
this within the team, and ideally with folks who have some
understanding and experience of selling to customers in
that broad segment.
A good starting point is to first list out all possible
segments and then break them into smaller segments
based on demographics e.g. if your broad target group is
young adults, would there be a difference between young
adults from financially well to do families than those from
financially challenged families? Both may need a different
solution to two different problems, or they may have the
same problem but how you service their problems could
be different.
E.g. in the financial services industry, a ‘bottom-of-the-
pyramid’ customer (e.g. the need of a construction worker
staying in a makeshift and temporary accommodation at
the construction site will be ‘a place to keep/store my
money safely and easy access when I need it’. With the
same bank, a professional working in a MNC may be
looking to switch from his bank because he is looking for
‘a bank that provides a great online interface and a great
mobile app’. Same core product… different needs because
the customer segments are different.
Even within the same segment, customer needs could be
different. E.g. for a mobile banking app, a professional
who trades regularly in the stock market may want a
different set of features than a professional who does
not trade in the stock market. Understanding needs of
different people can help you design
a. Either a different solution for different need
groups or
b. Design your product to allow a ‘customize your
app as per your needs’ feature or
c. Have a bunch of features that are relevant for
different needs groups but have a communication
campaign which highlights the critical needs of
different types of users.
Why is it important to understand why customers may

not buy?
Let me illustrate with an example. One social impact
venture had innovated on a business model that allowed
them to provide branded & packaged food grains, pulses
and sugar at much lower prices to financially weaker
sections of the society. They would go to slums with their
vans and from the vans sell the goods, thus reducing the
costs associated with a fixed shop.
While concept tests with customers proved conclusively
that if the goods were available at lower prices, they
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would definitely prefer it over un-packaged food grains,

pulses and sugar from the local corner grocery store.
However, when they implemented the solution the sales
were much, much lower than what their research had
indicated. On digging deeper they realized that while the
reason for why they would buy was clear, the company
had not checked the reasons why people would not buy
the product.
On further investigation they figured out that poor people
often bought on credit, which the local grocery store
provided and these folks supplying on vans were not able
to. Moreover, apart from credit, the local grocery store
would also extend some small loans during emergencies,
and because of this dependency the customer was
unwilling to switch to buying from the grocery van, even
though the products were better and cheaper.
During their research the company had not asked the
customer what would prevent them from buying these
products. If they had, they would have had to do a different
business model, and perhaps a different communication
campaign.
Often startups with better products than leading brands
are not able to make a sale. They wonder why they have
not been able to sell as many products as their initial
research indicated they could. The problem may not be
with the product but with the fact that customers may not
be comfortable buying from a startup that they are not
sure about. Especially in the case of enterprise customers,
the challenge for startups is to get customers to even try
the product to prove that it is better than the competition.
Enterprise customers are reluctant to buy because they
seek dependable after sales support, training, etc. which
larger, established brands are able to assure better than

startups.
How do I discover who my customer should be?

There is no one right way to discover who your customer
could be. Also, it is not necessary that there is ONE right
customer segment. You could have an option between
multiple segments that make a good business case to
pursue. And that’s a good thing. Strategy is about then
choosing ONE option from among the various options
available to you and then aligning all your resources in
line with that chosen strategy.
To check who your customer could be, try to understand
what problems are important for which customer
segment. The more critical the problem, the better your
chances of your solution being bought. Of course you
have to check other factors like competition addressing
that segment, the size of that segment and does it make a
good, profitable business case.
DO NOT ASK QUESTIONS LIKE ‘IF THERE WAS A
SOLUTION LIKE <CONCEPT>, WOULD YOU BUY?. This
is the WRONG way of testing whether the concept works
as you are likely to get a false yes or no answer.
Instead, try probing if the customer really has the problem
you assume they had, and if they do, what is the severity
of the problem and what they are currently doing to solve
that problem.
E.g. if your product is a hospital management solution, it
is of no use asking hospital administrators “If you had a
hospital management software, would you use it”? They
may say ‘yes’, or they may say ‘no’… after all in that 30
seconds after asking that question how much rationality
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can they bring into the answer. However, if you were to

ask them “So, can you tell me the 2-3 most challenging
things about managing a hospital?” the administrators
are likely to spell out all the issues they have in doing
their work. If the problem you are trying to solve does
not get mentioned in the list of top 2-3 problems for your
customer, you can assume that it will be a difficult sale
and that the customer is not likely to be as excited about
your solution as you had hoped they would.
If on the other hand the customer does mention the
problem you are trying to solve as an important one, then
you should check what they are doing currently to solve
that problem. If they are doing something, no matter
how rudimentary (e.g. using excel sheets to manage the
functions and shifts in a hospital), it means that not only is
the problem important, it is severe enough for customers
to find a solution for it.
In summary:
Identifying who your customer is BEFORE you design your
concept, and certainly before you develop your product or
service, is critical. It can be the difference between failure
and success of a startup.
It is important to clearly know who will buy your product,
why they will buy it, how much they will buy, how often
will they buy, how much will they pay for it, … and why
they may not buy even if it addresses their problem. Not
knowing this is like cooking a meal without knowing who
is coming for dinner.
30. What are some Important Questions to
ask in a focus group research for evaluating
an idea?
In a focus group, for evaluating the potential of an idea,

your goal should be to test all the assumptions that you
have for your venture. Apart from the concept itself, there
will be several assumptions on the ‘business’ around
that idea which you will need to validate (e.g. pricing,
availability, brand personality, etc.)
Here are a few things that come to mind:
• How deeply does the consumer/customer
feel about the problem that your idea
is solving: The more pressing the problem,
the more relevant your idea is likely to be for
consumers.
• The concept – the power of the idea itself: Do the
consumers/customers see the value proposition
in what you offer?
• Do people like the way your idea delivers
the solution: I.e. does the product work for the
consumers/customers as you had expected it to?
• Look for insights: Listen to what people are
telling you about the problem that your idea is
solving. See if your product does a good job or
a great job at delivering the solution. See if the
response is a ‘nice’ or a ‘wow’ as these subtle
differences will determine factors like conversion
rates, adoption rates, usage patterns, etc.
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• The business model: A business model is

about ‘who will pay how much and to whom’.
Each element of this should be tested in the
concept test. i.e. are the consumers/customers
seeing the value proposition as you meant it to
be, how much are they willing to pay – is there
price sensitivity, and if so, how much.
Concept tests help you validate your assumptions with
qualitative inputs from the conversations with relevant
groups. You have to be super-careful to ensure that your
group selection is accurate. Else you may get an inaccurate
reading. E.g. if a particular profile of respondents do not
respond well to the concept, should you try the concept
with another segment – is a call that you may need to
take depending on what you are doing. (When you want
to quantify the concept and potential, you will have to
rely on a broader quantitative research that covers a
larger sample that is representative of the audience you
eventually intend to address.)
Anyway, even with focus groups there is a
distinction between listening to what focus
groups say and watching what your customers do.
Listening to focus groups is like watching a recipe being
demonstrated on a TV show, and watching customers in
the place/situation that they will use your product is like
tasting the food so you know what went into it. (When
you watch a cooking show on TV, you usually try to do
exactly how they tell you to. However, if you were to taste
the food, then you will make the adjustments according to
what you know your guests / family will prefer).
In my view, while focus groups and other forms of
qualitative and quantitative research are good techniques
to get directional inputs, for startups and early-stage

companies, it is important for the founders to be immersed
in the user/customer understanding process.
Startups usually redefine a market or sector. They
usually think (or should think) of things that they can
do differently than currently being done. Hence, users/
consumers may or may not have a good handle on the
subject as they would not have the vision of the future
that the entrepreneur has painted for himself/herself.
Research is good to validate hypothesis and assumptions.
e.g. to check what you think is a need gap or pain point
that is really true for users/customers. Not to find if they
need or want the stuff you intend to put out.
31. Is it advisable to proceed if there’s already a
venture based on a similar idea that you have
Well, as with most aspects of entrepreneurship, there isn’t

one right answer to this question.
Whether it is worth starting another venture in an area
that already has other players will depend on a number
of aspects about the environment that you are going to
operate in. In some cases if there are already established
players it may be difficult for you to create space for
yourself, and in other cases, especially if there are larger
players in the eco-system, a startup that does reasonably
well could have an opportunity to be acquired, or even do
things differently and displace the existing leaders. (E.g.
Android too was a struggling startup once).
I have outlined a few thoughts, but there will be many,
many more aspects that others will have a perspective on.
Any case, evaluate all aspects that come to your mind, and
assess based on your specific circumstances, aspirations,
confidence and limitations.
Size and nature of the market opportunity

Is the market large enough to support multiple players?
Is the nature of the industry predominantly fragmented
(e.g. restaurants – many can co-exist) or is the industry
dominated by a few large brands (e.g. e-commerce).
Do you have the experience or competence that
makes you particularly suitable to lead a venture
in that space? Does your experience provide you
some valuable insights into the market?
Even in a market with some established brand leaders it

may be possible for an entrepreneur with deep industry
experience to create a successful brand.
E.g. in a crowded space of organizing/aggregating
healthcare in India, someone with deep healthcare
industry experience with an existing network and
understanding of the challenges and opportunities can
create a very successful venture, even if the existing
players are dominant in the market.
In fact, because of the person’s understanding of the
industry’s challenges and opportunities, and BECAUSE
there are a few large brands whose market share the
venture can snap at, it may be an easier task for this
experienced entrepreneur to consider a venture in that
space.
Doing it differently
Even with existing players in the market, it is possible to
create a distinct identity for the brand. Either on a service
differentiator (same product, better service e.g. private
banks/airlines versus public sector banks/airlines in India)
or on a concept/value proposition differentiator (same
concept, differently positioned) or a price differentiator
(lower price/higher value or even higher price/premium
positioning) or targeting a different target audience
(younger or older or different income bracket, etc.) or
even a brand personality differentiator.
How satisfied are customers with existing options

If there is a serious level of dissatisfaction among
customers/consumers, and complacency among
established players, there will be good opportunities for
newer ventures to capture that market.
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Where do you do it?

Let me illustrate with an example. In India, there are 100s
of companies that have attempted to do ERP for doctors
or Clinic Management Systems (CMS). Almost everyone
failed. Most attempted these in either Delhi NCR or
Mumbai and a few in Bangalore and Hyderabad. Clinics
in these cities are fed up with startups coming to them to
be beta customers and are unlikely to entertain them as
most past experiences have been a waste of time – either
the product was bad or the startup shut shop.
However, there is a large untapped market in tier 2 cities
across India where no one has approached those clinics
with a CMS. If you target that market, you could have an
opportunity.
Nett: Just because there are existing players, small or large,
is not reason to not pursue with a similar concept. But you
have to assess the competitive risks very, very thoroughly
and will certainly have to build in differentiators in
your product/service or pricing or positioning or brand
personality or business model or market, etc.
32. Is it okay to aspire to be a Leader in a
Niche Segment?
Targeting a niche segment almost always seems like a

winning strategy. There is always a temptation to carve
out a niche when a category matures or seems to be
growing well.
However, just because you have identified a good niche
does NOT mean that it makes a good business case, no
matter how sharply defined that niche is.
Often entrepreneurs make the mistake of getting excited
about playing in a niche, and assuming that they can
be leaders in that niche simply because they are super-
focused ONLY on that segment. The truth however is that
just because you focus on a niche does not mean that
others who service broader segments are not at least as
good as you, at servicing that niche as well.
Focusing on a niche makes sense only if that niche
represents a fairly large market. Also, if servicing this
niche initially helps you build competencies which can
be leveraged across a broader segment, there is really no
merit in building a ‘business case’ around that niche.
Also, you could have multiple brands targeting different
niche segments, with the common competencies deployed
across all the segments.
33. Estimating the size of the Market
Note: Before I begin, would like to clarify the difference

between market potential and revenue estimate. I
have often seen entrepreneurs use the two terms
interchangeably.
Market potential is about estimating the size of
the overall market opportunity. It is a sum total of the
POTENTIAL revenues of ALL players who are addressing
that opportunity if ALL the potential customers bought.
I.e. If you were selling ‘affordable’ golf kits for first-time
golfers, then you could estimate market potential as
follows (all numbers are indicative for illustration and do
not represent actual market):
• There are about 20 million golfers across the top
10 golfing markets in the world. Additionally,
about 100,000 new people take up golf every year
across the top 10 golfing markets in the world.
• About 25% of these find the cost of golf kits
expensive. If you take this as the addressable
market at USD 400 a kit for 5 million buyers, we
are addressing a USD 2 bn market opportunity,
even if you look at only those who find the price
of current golf kits too high.
• Additionally, the ‘high-quality at lower price’ value
proposition is likely to attract regular and casual
golfers too i.e. 20 million golfers. This open up a
USD 8 billion market among existing golfers. And
that’s a market growing at 15% pa.
• However, given that most people who want to
play golf do not take it up because the current kits
cost upwards of USD 1500, we believe that a USD

400 kit will explode the market and we would
be able to encourage 10 times the number of
people to start playing golf. I.e. by redefining the
price-point, we can create an additional market
potential worth over USD 500 mn.
• I.e. with an ‘affordable, high-quality golf kits’ as
a product, we will be playing into a market that’s
roughly USD 8–10 billion in the top 10 golfing
markets of the world.
Revenue estimate is about how much of this
market potential do YOU plan to target. Here’s
how you could think about it:
• We intend to launch this product in Japan, the
world’s largest and fastest-growing golfing
market. There are 3 million active golfers in
Japan and over 50,000 new golfers are added
every year.
• We believe with an affordable golf kit, we could
double the size of the golf market in Japan.
• In year one, we intend to attract 5000 customers,
going to 20,000 customers in year 2 and selling to
100,000 new and existing golfers in year 3. These
will be in the top 5 golfing markets in Japan. In
year 4, we intend to take the concept to US and
Europe, with a target to sell over 500,000 kits in
year 4 across all markets we are present in.
• Thus, our revenue estimate (at current prices) is
USD 2 mn in year 1, USD 8 mn in year 2, USD
40 mn in year 3 and USD 200mn in year 4. (in
comparison, the leading golfing kits brand is
doing USD 2 bn in revenues currently)
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Estimating the size of the market, and then predicting

how much revenue the startup can achieve and at what
the growth rate is indeed a tricky exercise. But going
wrong on this could either kill your company, or if in a
rare case you have underestimated your revenues, you
may end up raising more capital than necessary and thus
diluting more equity at an early stage of the venture.
It is therefore very, very critical that entrepreneurs focus
on working and reworking on the market size and revenue
potential based on sound assumptions and with minute
detailing.
Many startups make the mistake of taking broad-brush
reports from large consulting or research firms, and
estimate the size of their market on the basis of those
reports. Often we hear entrepreneurs mention, “According
to Gartner, healthcare is a 80 bn USD industry with a 23%
growth rate”. Now, while this could be broadly true, for
an investor, and even for the startup, these figures have
little relevance. Here’s why…
In most market segments, the investors would be broadly
aware of the scale potential. At a startup stage, investors
will most likely invite a startup for a meeting only AFTER
they have assessed that the concept does address a large
market. Hence, stating the obvious, especially in segments
that are very obviously large does not add any value. E.g.
For a education sector startup, highlighting in minute
details the number of number of schools, number of
students and growth rate in India is wasting precious time
in the first meeting with investors. Assume that investors
who are meeting a startup in the education space know
the potential of the opportunities in the domain.
Investors don’t get any comfort from market estimates

from industry research data. They want entrepreneurs
to build up their estimates ground up based on their
insights and conviction on how their concept will alter
the dynamics of the market they wish to operate in.
How then do you estimate the market potential?
Simply, by being specific about your segment and making
some assumptions on the specific segments and the
revenues per customer/consumer. E.g. If your concept is
about premium home tuitions, instead of saying education
in India is a USD 18 billion market, it will be prudent to
state “With over 250,000 students in the top 10 cities in
schools with fees above Rs.10,000 a month, at Rs.2500
per student, the market potential is roughly over Rs.500–
Rs.600 cr. P.a. At an all India level, the same translates to
a market potential of well over Rs.1000 cr.”

34. Some points to consider when Estimating
Market Potential
Clearly define what problem you are solving… and for

whom – this will give you a good idea of the number of
customers with that problem in the geographies that you
plan to be available in.
Estimate the practical reach e.g. while there may be a
100,000 people in your target audience spread across 50
cities, you may want to take the top 5 or top 10 cities
and see how many people you have within your target
audience. This of course gives you the total market
potential IF 100% of potential customers were to buy.
Now, apply some filters i.e. ability to pay, ability to reach
via media, etc. E.g. while there may be 60,000 potential
customers in the top 10 cities you identified, and you may
be planning to use a combination of media, if the total
reach of these media vehicles is 50%, the total potential
of the market is really 30,000 customers.
You could also apply some price filters to test the elasticity
of the demand in comparison to price. I.e. work up
alternate scenarios to reflect the increase / decrease in
demand in case the price were to be moved up or down…
and then evaluate which scenario makes a better business
case. [Note: For different situations you may have very
different parameters for a good business case. In some
cases, rapidly acquiring customers, even if margins
are lower, would be a key criteria (often relevant in
categories it is important to achieve scale to be relevant
– e.g. e-commerce - lock in potential customers on whom
profitability can be increased later.).
Now, if the product is of a repeat purchase nature, you

would need to make some assumptions on the number of
times the customers would buy the product / service in a
year. In doing this, it is critical to map the reality or in case
of new product categories, to do some qualitative and/or
qualitative research to validate your assumptions on the
number of repeat purchases within a year.
All the above will need to be worked and reworked at
different levels of assumptions often to arrive at what
seems like a practical market estimation.
35. How do you Estimate your Revenue and
Growth?
This is a rather tough part, but it needs to be tackled. Often

you would not have any scientific basis, and therefore
would have to start with some assumptions. How practical
and reasonable those assumptions are will determine how
accurate your revenue and growth estimates are.
However, in the early phase, especially in new categories,
it will be difficult to know what the right assumptions
could be. Hence entrepreneurs should work on various
scenarios and think through how they would deal with
different situations in terms of revenue and growth. More
importantly, they should measure what is happening in
the market so that they can use in-market data to make
adjustments in their plans as they get data and insights
from the market.
Many entrepreneurs make the mistake of projecting
revenues as a percentage of the market potential. Often
we hear entrepreneurs state “Even if we were to capture
just 2.5% of a Rs.1000 cr market, we are targeting
a revenue of Rs.25cr in year 2”. This is obviously an
oversimplification and without any basis for how the sales
plan will be implemented.
The prudent way of arriving at an estimation of revenue is
to build a business case ground up. I.e. how much revenue
are you expecting per customer, how many customers
can you get, how much does it cost to get each customer,
etc. At the startup stage, it is important to do a month-
by-month detailing of how you see the customer base
increase based on what specifically you plan to do in your
marketing & sales plan. Needless to say that this is not a

one-time exercise, and you will keep reworking on this till
the business case starts making sense.
While doing month-by-month revenue estimation, if you
have multiple revenue streams, then make the revenue
estimates for all the revenue streams, which then total up
to make the overall revenue for the company. E.g. if you
are starting a chain of restaurants, you may want to break
up the revenue by breakfast, lunch, snacks and dinner as
these would cover different dynamics of your restaurant
business. Similarly, if you were doing an ad-supported
Freemium product online, you would like to estimate
your revenues from ads on the free downloads and the
subscription from the paid downloads separately.
Do remember that this is just a guestimate… i.e. a well-
thought-out estimate. This is just a reflection of how YOU
expect the market to behave. And because there are no
guarantees that the world will behave as you predict it to,
it is prudent to be very, very conservative with the revenue
estimates. Do not stretch the revenue assumptions in an
excel sheet. There is no point in winning the battle of
making revenue higher than costs in an excel sheet. What
you put in the excel sheet exercise has to be something
that you feel has a reasonable chance of working in the
market.
Note: In many a startup scenarios, revenues may NOT be
the key parameter of progress. E.g. in a startup which is
establishing a new technology, proving the concept and the
business model may be the main objectives in the startup
stage.
Do remember that your growth and revenue numbers
should be mapped to the marketing plans and marketing
investments, and should be rooted in reality. “We are
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smarter and we know social media marketing really well

and hence our customer acquisition cost is much lower
than others” is not a statement that investors would
be keen to bet on [though if you state that they would
be keen that you demonstrate your skills in lower cost
customer acquisition.
As one of my mentors had said “See the film in your mind…
for a startup, it is critical to be very clear on what specifically
is going to happen on the marketing front, product front
and sales front in which month and therefore what revenue
and customer numbers that will likely translate into”.
Some advice:
• Try to achieve higher conversions than comparable
others in the market, but estimate much lower
conversion numbers in your excel sheet planning.
This way, even if you do not do better than market
average, your plans don’t go awry.
• Validate your assumptions – validate your assumptions
– validate your assumptions…. Again and again and
with multiple sources. Going wrong in assumptions
can be disastrous, even if the rest of the components
of your business do well. E.g. if you assume a 0.5%
conversion, but it actually turns out that you get 0.3%
conversions, you may be off by a considerable margin
in your profitability and may also run out of cash
sooner.
• Identify the key matrices that you need to measure.
E.g. Gross margins, cost of customer acquisition,
headcount per ‘unit’ [i.e. could be a set of customers],
etc.
36. What is the Right Revenue Estimate for a
Startup?
Well, there is obviously no right or wrong revenue estimate.

It is often a reflection of the vision and aspiration of the
entrepreneurs.
However, among the many mistakes that a lot of
entrepreneurs make while estimating revenue, the two
top ones clearly are:
1. Estimating too little
2. Estimating too much
Here’s an oversimplification of how you could think about
the revenue targets that you aim for. Obviously, this is an
oversimplification but it does give you a good view of
what you could potentially aim for.
The hypothesis of this oversimplification is that investors
like to back potential market leaders. If so, assuming
the market potential for the concept you are pursuing is
around INR 1,000 cr., and given that in most categories
the market leaders will have anywhere between 25–40%
market share, it will be good for you to at least aim to be
a Rs.250–Rs.300 cr. company in a reasonable time frame.
This at least gives you a good shot at being amongst the
top 3-4 players in that category.
On the other hand, if in a market with a potential of
Rs.1000 cr revenue, your startup aims to have revenue
of Rs.50 cr. in the next 4-5 years, you are most likely to
be a marginal player and hence will not be exciting for
investors.
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If on the other hand, if the market potential is INR

Rs.10,000 cr, a Rs.2500–3000 crore revenue aspiration
within a reasonable time period will be reasonable IF
you want to seek VC funding. Of course, if you are not
seeking capital and if you are bootstrapping, and intend
to continue doing this as a self-funded venture then any
revenue estimation that makes sense to YOU is the right
one. But if you are seeking to attract VC money, you will
have to aspire to be among the leading players in the
market.
Do also remember that in some categories there is a
‘winner takes all’ scenario. E-commerce in some categories,
especially in generic / multi-category retail, is a one/two
horse game in many markets.
37. Making Assumptions for Your Business
As an entrepreneur, one key role is to plan the journey of

your venture. And for doing that you have to visualize what
the future looks like. You have to look at the immediate
future, the mid-term as well as the long term. And of
course, that means that you have to make assumptions.
As you will agree, there is no guarantee that life will play
out the way you assume it to be. And hence it is important
to think of different permutations and combinations with
different assumptions. E.g. if you are estimating sales
volumes, work on the assumption sheet at a very granular
level. Rather than saying “Of the 1000 customers we tap,
we will be able to convert 50”, it will be better to break
each variable and then put different numbers for each.
Let me illustrate with an example template:

Number of customers we
connect with
Percentage of customers we
get a meeting with
Therefore total number of
customers we meet
Percentage of customers who
move to next stage
Total number of customers
who move to next stage
Percentage who convert
Revenue per customer
Total revenues
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In this sample template, all the areas in grey are places

where you will need to make assumptions. And it is
therefore prudent to assess what the business will look like
at different levels of assumptions. In the same example,
you could make it even more granular i.e. add a few rows
above and estimate how many customers you will be able
to reach out to in the first place. E.g. “For every 100 cold-
calls we make, 15% will ask to send a mail with our value
proposition”.
Likewise you will have to make assumptions for every
single aspect of your business. Product development, team
hiring timelines, communication design & development
timelines, cost structures (and this has to be super, super
granular), cost of sales (e.g. how many times do you have
to go visit the customer to close a B2B sale, and who will
go and how much does it cost you to close that one sale),
revenue potential, servicing costs, etc.
The issue that I have seen with most startups is that
they make very ambitious assumptions, largely due to
the enthusiasm and optimism around their concepts.
And while the enthusiasm and optimism is absolutely
necessary, I advice startups to make really, really modest
assumptions (usually modest assumptions play out in real
life than optimistic ones). The reason I ask them to make
really low assumptions on the excel sheets is because
that allows you to assess the worst case situation of your
startup. And leave the enthusiasm and optimism to play
out in the execution part so that you are able to beat your
excel sheet assumptions month on month.
How do you make any assumptions?

Well, start by understanding the subject well. Understand
the sector, understand the business dynamics in that sector,
talk to a lot of people who can provide a perspective,
study other companies (even if you are planning to beat
them hollow, understand what they do and what you are
going to do for your numbers to be better).
What are the different types of assumptions you have to

make for your venture?
(Note: This is NOT and cannot be a comprehensive
list. Every business, and every entrepreneur will have a
different set of circumstances and they will have to make
different types of assumptions that are relevant to their
context. E.g. someone who has become an entrepreneur
after being the head of Asia Pacific Sales at a global ERP
leader will have different access to decision makers than
someone who will have to start building that access, and
hence the assumption factors are likely to vary).
Areas to make assumptions under
• Is there a need for the product - what problem
are you trying to solve and how important is the
problem for the consumer/customer
• Product-Market Fit – how well does your product/
service address the consumer need
• Pricing – how much is the customer willing to pay
for the product/service
• Costs – how much does it cost you to deliver that
product/service (This is one aspect that most
people get totally wrong e.g. In the case of a
venture manufacturing t-shirts, they will assume
the actual cost of raw material, production,
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distribution costs, etc. However, they will often

miss out on adding the cost of dead inventory,
unsold goods, damaged goods, etc. Often they
will miss adding the cost of capital.)
• Traction – how many people will you be able to
enroll/sell/get to use or whatever you intend to
make the users/customers do
• Operations planning – how much time & effort
and how many people does it take to manage the
business (e.g. how many orders can one packing
person service in a day)
• Funding needs – how much money do you need
to start and scale this business, and what is the
overall business case in the mid to long term
And remember, there isn’t ONE right number. These are
after all just assumptions. Hence, it is important for you
to assess the risks and upside with different levels of
assumptions that lead to different outcomes.
If assumptions are partly dependent on research, how do I
do it if I am doing something totally different than what is
prevalent in the market? i.e. what do I do if the current or
past is not an indicator of my potential. Well, it is indeed
possible that the past is not what you want to base your
business on. You intend to disrupt the market. However,
the same variables (by and large) will apply in most cases.
The numbers may vary but you are likely to have the same
parameters e.g. in the above case - how many customers
can I reach, how many people will call us to meet, how
many will try the product, how many will place a trial
order, how many will give a regular order after trials, how
much will they pay, how many meetings will it take to
close the order, etc.
You may disrupt the numbers and get much better

results than how the market is currently doing. But there
will be some variables on which you will have to make
assumptions. Else there is no way you can plan. Even if
you are way off on your assumptions, at least you will
know how wrong you were, and hence you will be able to
adjust your future plans at least.
Remember, it is important to assume costs well because
costs will remain by and large the same even if your sales
volume drops to 50% of the assumption. (One of my
mentors had advised me “Double your cost assumptions
and make your revenue targets half. If your business case
works now, then go in the market and execute it on your
original plan of lower costs and higher revenues”. His
intention was to prepare us for the worst case, but try to
achieve the best-case outcome.
38. What is Proof of Concept
‘Proof of concept’ or POC is the process of validating your

assumptions around a certain concept or idea. It is testing
your hypothesis.
In the context of startups, it is most crucial to get proof of
demand. I.e. proof that is there a need for this product/
service, and are there enough people who will buy it’. For
startups, the most common hypothesis to prove is that
there is a product-market fit.
But POC is not just about proving the existence of demand
for your product or service. There are many assumptions
that need some validation. When testing the proof of
concept, you could be testing not just the product itself but
also a few other assumptions about the business around
that product. I.e. Product testing is just one of the aspects
that could be tested during a proof of concept test phase.
Below are a few things that are tested in a concept test

stage:
• The concept (e.g. shared ownership of high-end
motorcycles) – the power of the idea itself: Do the
consumers/customers see the value proposition in
what you offer?
• The business model: A business model is about ‘who
will pay how much and to whom’. Each element of
this should be tested in the pilot phase. i.e. are the
consumers/customers seeing the value proposition as
you meant it to be, how much are they willing to pay
– is there price sensitivity, and if so, how much. (In
the above example of shared ownership of high-end
motorcycles, you could be the ‘platform’ for owners

to share their motorcycles with others, or you could
be the service provider where you facilitate others to
co-own the motorcycle or you could be the end-to-
end service provider where you not just facilitate the
motorcycle purchase by multiple individuals but also
manage the machine and the program of sharing. In
either of the cases, will they pay one-time, annual fees
or monthly/quarterly could be different variations of
any of the business models.
• The assumptions for your business case: As mentioned
above, list all the possible assumptions you have
made in your business plan and see if there is a way
to validate those in your pilot.
• Understanding operational challenges at
scale: Entrepreneurs often tend to underestimate the
operational complexities and challenges of managing
a business. While startups often manage operations
with a limited number of people who are stretching
themselves beyond practical limits, it is not sustainable
in the long run. A long-term business case cannot be
made on the basis of the enthusiasm and give-it-all
commitment of the founding team. A business case
has to be based on what is practical and sustainable
with an average set of people managing your larger
teams
• Size of the market: I.e. how many people are there
who can buy your product/service in the markets you
want to address. Is this number enough for you to
invest your time and money into.
• Viability of getting this product in the market i.e. can
you service this market opportunity profitably.
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• Proof that the technology, product or service works:

of course, unless the product/service that you have
created is able to deliver on the value-proposition, it
is not going to be useful even if there is a crying need
for that product or service in the market.
• Proof of acceptance of the price-point by customers
• Proof that a different way of working can actually
work: e.g. Xiaomi’s way of entering markets by
bypassing physical stores.
39. How is “proof of concept” different from
“Minimum Viable Product”?
‘Proof of concept’ and ‘Minimum Viable Product’ are two

very different things.
As clarified in the earlier chapter, when testing the proof
of concept, you could be testing not just the product
itself but also a few other assumptions about the business
around that product. I.e. Product testing is just one of the
aspects that could be tested during a proof of concept test
phase.
Proving that the product works usually involves building
a prototype or a MVP. A MVP is an early version of the
product, finished enough to get a few early customers to
try the product and give you some useful feedback which
can be incorporated into the final product.
A MVP is just a version that allows you to inexpensively
check if consumers/customers are as excited about the
product as you are. On the other hand, beyond the product
and its appeal to users, a POC tests different aspects of
taking that product out in the market as a commercial
venture.
40. Why winning a few Customers is not Proof
of Concept
When I tell entrepreneurs that they need to validate their

assumptions for their business, they often tell me “But we
have already done that… we already have a few paying
customers… they have paid us $X for it and are using it.”.
Having initial customers is good and sure should be
celebrated, that by itself is not sufficient validation of the
business case for your venture.
A few customers buying (or even really using it if you
have given your product/service free to them) is merely
an indicator that at least some people have a need for the
solution that you offer for a problem that they feel needs
a solution. But that does not tell you
a. How many potential customers exist in a given
market
b. How much time will it take to make a sale and
what will be the cost of acquiring a customer
c. How much will most customers be willing to pay,
d. Does the product/service really solve the
customer’s problem and
e. Will the customers do a repeat purchase.
No. I am not being pessimistic. I am not demeaning the
massive effort it requires to get a product up and running
and then finding someone to use it and appreciate it.
All that is good. In fact, that’s great. But a few initial
customers do not give you enough proof to determine
how your business will operate at scale.
Below are a few questions about your business that you

need to have answers to in order to say with confidence
that a concept is validated (and no, none of these questions
are answered just by getting a few initial customers):
Do my potential customers really feel the problem that I

am trying to solve?
A few initial customers, especially in a B2B sales scenario
when the entrepreneurs are selling themselves (and most
probably to a bunch of customers they have slightly easier
access to) does not give insights into what percentage of
the intended target audience feels the problem that you
are trying to solve.
Often, in some cases you will find initial customers who
are the ones that are most frustrated with the problem,
and that initial success or quick sales closures may lead
you to believe that most customers feel the pain of the
problem as much as these customers do.
An example from my personal journey: I was previously
the co-founder of a healthcare services company. We
managed health & wellness programs for schools. When
we announced the concept, 10 -12 schools in our city
called us and some of them quickly signed up. We were
ecstatic and felt “Wow, this is bigger than we thought!!!
Forget trying to sell to customers… customers are calling
us!!!”.
However, the reality was that the customers who called us
were among the few ones who were ACTIVELY LOOKING
for the solution we were offering. Beyond these very few
schools who were actively seeking to outsource their
health & wellness program management, when we tried
selling to other schools we realized that they were not
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keen to take on the additional responsibility of managing

health issues in the schools and their policy was to have
a quick response mechanism to take the child/teacher
to the nearest healthcare facility in case of a medical
need (i.e. they did not want medical issues handled on
their premises). Selling to schools that were not already
looking for a solution that were offering turned out to
be a nightmare. (Well, while the company got to a level
of self-sustainability but we realized that it will never
really scale… and our aspiration was to scale. We shut
shop after 3 years of trying the concept… some may say,
and perhaps rightly so, that we should have shut shop
earlier.).
What will be my average sales cycle to close a deal?

Often in the initial phases the entrepreneurs are the ones
making the sale. And with their passion, and perhaps their
contacts & relationships, they are able to do a few quick
sales. But that is not replicable and scalable. Eventually
the business would need to rely on a sales team to make
the sale. And a sales person will not have the same level of
passion, insight, experience, stature or skill levels that the
founders had when they made the sale. Hence, the sales
person’s sales closing time may be several times more
than what the founders were able to achieve.
Unless you are able to get a realistic view of how much
time it will take to close a sale with the resources/team
that will be selling in the market, the venture is likely
to totally underestimate cost structures as well as their
cash flow needs, and thus their funding needs, and may
run out of money sooner than planned. (Quite a few
companies die because the team runs out of money just a
few quarters earlier than originally planned.)
How much will customers pay?

Often initial customers either pay too little or are given
the product free or pay the full price for a trial set of
numbers. And most entrepreneurs showcase those
numbers as ‘having proven the price point’. And as you
can imagine, that may not be the case. The pricing of the
product/service should be tested in an environment that
is replicable at scale.
What will be the repeat purchase rates?

In many businesses repeat purchases (or annuity contracts
in B2B customers) are critical to the successes of the
venture. A few early adopter customers who experiment
with your product are often merely checking if your
solution solves their problem.
And as with your product, they may be experimenting with
a few other options too (including indirect competition
to your products). Thus, unless you figure out a way of
how the customers are using your product, how much
internal resources have they committed to your solution
(in the case of B2B ventures), how well is your concept
addressing their problem, what does the management
think about this approach, do they have the money to do
this beyond the pilot, etc. you will be misguided by the
initial adoption.
Validate as many assumptions on your business as
you possibly can. Even if you do not sell to customers,
speaking to MANY to understand their needs & views on
your solution is better than a just a handful of customers
who buy/use.
FUNDING FOR STARTUPS
41. Points to remember when raising funds for
your startup
Raising your first round of funding is probably going to

be the toughest part of starting up. It certainly is for most
startups. And this is one part of planning for a startup that
entrepreneurs are most unfamiliar with, and therefore
they need to invest time and effort in understanding how
the process of raising funding for a startup works.
Quite often we see high-quality teams with brilliant
concepts/products/services come for pitch presentations
to investors without understanding how the business of
the investor works, and therefore often end up presenting
stuff that does not help investors make an investment
decision. (Even if the decision is no, it is best that you get
it out from them the soonest).
The first thing to recognize is that different ‘types’ of
investors – e.g. family & friends, angel investors, seed
stage funds, early-stage VCs, VCs and PEs - participate in
different stages of the venture’s journey. Hence, it is critical
to determine which kind of investor is most relevant for
you at the stage that your venture is at.
It is advisable that you raise monies from external investors
as late as possible. The ideal time to go to investors is when
you have a prototype or have tested the concept in the
market. While angel investors and seed funds do invest in
companies at concept stage, it is unlikely to happen if you
have not even tested the concept with customers/users or
have some evidence that the concept is likely to work in
the marketplace.
42. Angel investors, VCs and other funding
options for startups
To begin with, VC funding or risk capital (i.e. funding

where you get funds in exchange of equity in your
venture) is NOT the only way to fund a business. In fact it
is worrying to me that quite often aspiring entrepreneurs
believe that the first step to becoming an entrepreneur is
to get VC funding for the venture.
Even when it is the right time for startups to seek funding,
VCs or angel investors are not the only option. While most
entrepreneurs think of VC funding as the most obvious
way of funding their startups, there are actually many
different ways in which you can fund your startup.
Angel investors or Venture Capitalist - VCs

Angel investors or VCs are investors who give you capital
in exchange of equity in the company. They buy equity
in a company for a price and expect to make a profit by
selling it at a higher price. Just like it happens in the stock
market, but in this case because your company is not
listed, VCs make money by privately selling the stock they
hold in your company to someone else.
E.g. an angel investor may ‘exit’ by selling his/her stock to a
VC and later the VC could exit by selling the stock they hold
to either a Private Equity firm or to a strategic investor, or
in rare cases by diluting their holding during or post an IPO.
Different investors participate in different stages of a
venture. Angel investors invest at the very early stages -
when the founders have an idea or when the idea is being
or has been developed into a prototype. They provide
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enough capital for the idea to be tested and proven in the

market, so that another set of investors can bring in more
capital after the model is proven and when the venture
needs more money to take the proven model to a wider
base.
While angel investors are individuals who put their own
money into startups, VCs are firms who pool money from
other investors to invest in startups. They typically invest
after the concept has been tested in the market, and there
is demonstrable evidence of ‘product-market fit’.
Angel investors can help reduce your funding requirements
significantly if they assist you with things like customer
introductions, partnerships, infrastructure support etc.
Often an investor who takes up an active advisory role
can fill in a competency gap in the team.
Angel investors take the maximum risk, as even the
concept is yet to be proven, and hence the valuation they
get is much lower than what VCs would invest at.
VCs typically invest when the concept and business model
is proven, and additional capital is required to scale up
the venture i.e. take the proven concept and business
model to a larger geography and/or a wider base. i.e. VC
funding is usually for growing the business and scaling-
up.
Crowd Funding
Crowd funding is just another way of getting angel stage
funding. Instead of one or two or a group of individual
angel investors investing in the venture, in crowd-funding,
startups use online platforms to reach out to a larger
number of individuals who usually invest much smaller
sums to collectively provide the capital the startup needs.
The money that angel investors or VCs or PEs give is

collateral free. I.e. you do not have to mortgage your
house or something to get money from angel investors of
VCs. In case the company fails, investors lose their capital
and entrepreneurs do not have to return the capital.
This is the one and only reason why angel investors
and VCs will evaluate plans thoroughly before making a
decision to invest in a company. In effect, they are taking
the following risks about your venture:
• That you and your co-founders are a great team
that is capable of scaling up the business
• That your concept will work
• That the market is large and therefore there is
potential to build a large company
While angel investors and VCs provide capital without
collaterals, and thus allow you to start up without having
your own capital or collaterals for a loan, it is probably
the most expensive form of capital. That’s because you
are giving away equity in exchange for the capital you
raise. If your venture becomes successful and scales up,
the equity held by the investor could be worth much more
than what you might have paid out in interest if you had
taken a loan. However, since this capital is available to you
without collaterals, and since the investors are taking the
risk of failure, the higher upside they get on the successes
is fully justified.
Bootstrapping
Bootstrapping is the art of going as far as you can
without external funding. I.e. pooling together your own
resources, usually at a pre-concept stage or at a prototype
building stage.
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Often, people bootstrap their startup while still keeping

their job at some other company. Whether you should
bootstrap or go for external funding is a factor of how much
money you need, and for what. I.e. if you are building
a solar micro-grid, it is unlikely to be funded through
bootstrapping as it is likely to be a capital-intensive
business (though you may be able to do the prototype or
POC with bootstrapping). However, on the other hand,
a mobile app venture can most likely be bootstrapped…
often by using SAAS platforms, etc.
When to bootstrap
• When your concept is yet to be proven … and can
be proven with limited capital
• When you too are unsure if you would like this to
be your lifetime career and want to give it a shot
to check if this is likely to work
• When you have the resources to go past the
concept proof stage
When not to bootstrap

When the capital required for the proof-of-concept stage
is more than what you can garner from your current
resources
Even when you don’t need the capital, it is sometimes
good to pitch to investors as it gives you a good feedback
on your concept. If many investors say no, it may be
worthwhile evaluating the concept and relooking at the
plan before diving into the game.
You may want to consider the points below before you
take the decision to bootstrap:
• Evaluate whether your idea has a good
business case – speak to some experts, pay
attention to those who are not excited about your

idea. After all, even if it is not costing you a lot of
money, your time invested has a lost opportunity
cost if the venture fails.
• Prioritize: to bootstrap efficiently, you need to
make your limited resources go far. Take a call on
what is critical and what can be put off till you
receive adequate capital. (e.g. rent the AC and
furniture instead of buying it).
• Keep the expenses as low as possible. That
means having a very, very lean team. That means
hiring multi-taskers rather than specialists.
• Consider SAAS and outsourcing: Even if that
is not your most preferred option, you should take
a call on what is important. Is getting ‘something’
out in the market more important or getting ‘The
perfect product’ most important? SAAS platforms
may not give you the customization possibilities,
but often they can shave off a significant portion
of your funding needs, and time to market You
can always develop your own platforms after you
have proven the concept and the model.
Debt - In other words, taking a loan.

Institutional loans often require a collateral, which
many entrepreneurs may not have. Even if you have
the collateral, do a real hard evaluation if the business
model and concept is fully ready for you to take the risk
of putting up your assets as collaterals.
Friends & Family round

If all you have is a concept, and need some initial capital
to get started, your best bet is to bootstrap or to seek small
capital from family & friends.
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It is possible to do the first basic steps of evaluating your

idea – speaking to customers, doing your research, etc.
- even if you are currently working somewhere or still
studying. And once you have narrowed down on the
concept that you want to pursue as a venture, till you get
your thinking clear on this, if you need a small sum to
keep you going, your best bet is family & friends.
Investors – angels or seed funds – are unlikely to fund
you if all you have is an idea that you have to still think
through and act upon.
Points to remember in a friends & family round
• Treat the friends & family round as a formal fund
raising round too – pitch to the interested investors
as you would to a group of angel investors or VCs
• Complete the paper work and other formalities
too – issue equity shares
• Manage the relationship as a professional investor
relationship – send quarterly reports, have a
board, etc.
Strategic investors
• Larger companies for whom your concept is an
adjacent or related opportunity may find it interesting
to invest as a strategic investors.
• Adjacent opportunity - e.g. Educational content
platforms could be an adjacent opportunity for a large
company in the education space
• Related opportunity - e.g. healthcare services for the
poor is a related product for a microfinance company
A strategic investor, apart from providing capital, also
helps validate the concept for external investors thus
making it easier for raising the next round of funding or

for getting co-investors in the current round.
However, entrepreneurs should consider strategic
investment options carefully as they may often come with
some clauses that provide value to the investing company,
but may put restrictions on the market opportunity for
the startup. Mature and evolved corporates who make
strategic investments may not add restrictive clauses that
hamper the company’s growth, but that’s an area that you
should be clear about.
43. What do you need to have in place as
a Startup in order to successfully raise a
seed round?
For raising a seed round from angel investors or early-

stage VCs, the startup should have validated most of the
assumptions that would prove the business case around
their concept.
Of course, the basics need to be in place – the concept/
product/service needs to be good and solving a relevant
problem or addressing a meaningful opportunity, the
market potential should be large, the core team needs
to have covered between them the key functions of that
business, etc. etc. In addition to the basics, below are
some of the things that need to be in place before a seed
round.
Concept should have been tested:

The startup’s product /service/concept should have been
proven in the market. Some initial customers should
have bought the product and found the value proposition
meaningful. The product should have delivered on the
promise. The price-point should have been proven. Also,
the challenges that need to be addressed could have been
identified in the pre-seed stage. (While it is possible that
some of the above mentioned aspects are not proven, but
if they are easily addressable, that’s fine too.).
The ‘business’ around the concept should be clear:

In most cases, the business model is tested and adjusted
and retested in the pre-seed stage. Before seeking
institutional funding, it is ideal to have evaluated (perhaps

tested) different revenue streams, honed on to a business
model, the price-points should have been proven and the
unit economics should be healthy.
Validating the assumptions:

Before raising a seed round, it is ideal to have tested
the assumptions in the business plan (e.g. how many
people will convert, cost of customer acquisition, average
revenue per customer, repeat purchase rate, etc., etc.). In
fact, this is the area in which startups should pay some
solid attention to in the pre-seed stage of the venture.
Estimating people needs:

Before raising a seed round, the venture should have got a
good sense of what competencies are missing in the team,
and clarity on how those will be filled in (in some cases,
scaling up will require someone to be hired as the CEO
too).
Future plans need to be thought through:

When you start up, you may not have the largeness of
vision that will create a scale company. However, as
the venture matures, and as you start thinking of an
institutional round of funding, it is important for the
founders to have a vision for the future and the ability to
articulate this vision clearly to all stake holders (investors,
employees, customers, partners, etc.).
In many cases, the founders start defining or redefining
the addressable market and this usually means thinking
of a far larger scale than they would originally have.
The team should have been in place, or at the very least
identified by now, the elements that they will need to put
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in place to manage the venture at scale. E.g. procurement

& sourcing relationships or technology platform in a
e-commerce venture.
Jugaad to processes:
As the venture plans to secure seed funding, the founders
need to recognize the need to shift from a ‘fix on the
move’ mode to a process-oriented approach. They need to
recognize that as the team grows, they will need to rely
on processes and matrices, and the discipline to measure
performance and progress on well-defined parameters.
Identify one among equals:

When a few friends or acquaintances start a venture, they
usually split equity equally and divide the responsibilities
equally, and also designate themselves co-founders. All
are therefore deemed equal, and it is possible that they
are at the start.
However, a ship needs ONE captain. The team has to
identify a first among equals to lead the venture. Multiple
power centres in a venture leads to confusion and chaos.
Ideally, before the seed round, the team should have
decided who the CEO will be. (Most institutional investors
will insist on knowing who the CEO will be, and it is not
uncommon for founders to fight over this issue.)
Nett: the venture needs to be in a state where most of the
uncertainties have been dealt with (if not fully addressed)
and the venture should seem like a good business case
to pursue at scale. This is the time when seed-stage
investors would be willing to bet on the founding team’s
ability to take the initial learnings and reapply them at a
much larger scale. In the process, there will be some new
learnings and some new adjustments on the way. That’s
the reason why the quality of the team, their passion, their
ability to understand the innards of the business, etc. will
be key deciding factors for seed-stage investors, even if
the rest of the things mentioned above are all positive.
44. What parameters do investors use to decide
on an investment?
Different investors will have different criteria for selection,

and these criteria could vary by not just the amount of
capital they invest but also by the stage at which they
invest and the kind of companies that they invest in.
Most investor’s decisions are based on the following:

1. Is the potential large: Is this concept going to
address a significantly large market opportunity? Is
it possible to build a large, scalable business in this
category?
2. Does the concept/product/service have a
reasonable chance to be a dominant brand
in the category – concept addresses a strong need
+ product is good+ business model is practical +
competitive environment is conducive + market
conditions are conducive + business case is healthy
+ TEAM is awesome
3. Quality of the team: This is the most
important criteria. Investors are not looking for
experienced entrepreneurs. But they certainly look
for teams that understand the domain (even if the
team lacks experience, they want to know if the
team has spent time to study the industry), have an
understanding of business, have the competence to
execute, and most certainly have the commitment to
the venture.
If the above parameters are positive, then the following

few areas would be discussed:
Scale of aspiration of the team: Does the team have
the aspiration and hunger to be a market leader?
Revenue streams and business model: Are the
revenue streams well-thought out, is the pricing right and
is the business model practical?
Business case: Is the business case strong enough?
Remember, when pitching to an investor you are
competing not just with direct competition from your
domain but also with startups in other sectors with
interesting business plans.
Is the competitive environment conducive for the
startup to have a reasonable chance to create a successful
venture?
Are the go-to-market plans practical and well-
thought through? Does the team understand the
complexity of converting the concept into a large business?
Are the valuations within reasonable limits
(What is ‘reasonable’ will vary depending on different
parameters. We will cover that in a separate topic.).
Exit potential: How are we going to get a good return
on our investment. I.e. what is the exit option for us.
Overall, investors look for ’assets’ that can multiply their
investment - a great business case does not necessarily
mean a great investment case, and vice-versa. Also, a
great product is not the same thing as a great business.
All investors will reiterate that for them the quality of its
founding team is the most important factor in a startup,
and they will value it more than the idea or the size of
the market or the technology or the business case. With
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everything else being right – product, potential, plan,

profitability – if the team is not strong, investors will
hesitate to invest in a venture.
45. The process of pitching to investors
Entrepreneurs often underestimate the time it may take to

raise funds for a startup. Unless you get seriously lucky or
have easy access to a number of investors, it is prudent to
estimate anywhere between 3–6 months to get funding.
And that is if you have a good plan and a great team.
Well, its relatively easier with angel investors and much
easier with angel investor groups. That’s primarily
because they invest smaller amounts in a wider range
of companies, but also because individuals are making
decisions and hence do not have to go through more
complex processes of VC funds.
Here are a few steps that are involved and approximate
time it could take with institutional investors:
Step 1 Identifying the right A few weeks
investors
Step 2 Getting the first meeting, 1–2 weeks
including time taken for
trying to reach someone
to get meetings set up
Step 3 Meetings with the 1–4 weeks –
evaluation team depending on the
preparedness of
your business plan
Step 4 Presentation(s) to 2 weeks
Investment committee
Step 5 Term sheet 1 week – 4 weeks
– depending on
the negotiations
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Step 6 Term sheet agreements 1–2 weeks

Step 7 Due diligence and signing 1–2 weeks
of documents
Step 8 Funds hit your bank
Total time 10–15 weeks IF they agree to fund. If not,
the process is repeated again, often in parallel but
could be sequentially as well.
And these are fairly optimistic timelines with the investors
who finally fund you. There will be several you would
meet who may, out of genuine interest to invest, progress
the discussions but may not conclude the deal for several
reasons. And there will also be many who may decline to
but still will take 4–8 weeks to give “No” as an answer.
Given the lengthy process, the entrepreneur should try
to be selective about the investors they should approach.
Investors, especially VC funds, are clear about the kind of
companies, the stage and the domains they would invest
in, and that information is usually available on their
websites.
One of the first things that entrepreneurs need
to do is make a shortlist of who the ‘right’
investors would be.
To begin with, you need to decide if you are ready for
angel investors or for VCs.
When applying to investors, check their websites and see
if they have invested in businesses similar to yours and if
your domain is within their interest areas. E.g. if you are
a life-sciences company, there is no point in approaching
investors whose focus areas are Mobile & Internet and
Consumer Businesses.
Check if there are synergies between any of their portfolio

companies and your business, and if there are, then
evaluate highlighting the same during your presentation.
From among the many people at the VC, identify who in
their team is more likely to be excited about your idea.
This is easy to find because most VCs will have profiles of
their team members, including details of which companies
or domains that person is involved with.
Once you have identified the investor, and the person who
you are going to connect with, try seeking an appointment
by making a call to the office. Most likely, you will be
asked to send the presentation to a generic mail id used
for receiving business plans. Well, this is not something
that you can always avoid. The truth is that investors get
so many calls and mails requesting for meetings that it is
almost impossible to accept all requests.
In most VC offices, business plans received will be reviewed
with some level of seriousness, though most probably by
the junior most executives who may not necessarily be
experienced at taking a gut feel call on what seems like a
good business case.
If you are lucky to get past this stage, you will be asked
to come and meet (or via conference call). This is the first
line of filter in an angel group or VC fund, and an associate
in the team is expected to do a thorough evaluation based
on their internal criteria, and then if and found suitable,
is expected to move the deal up to an angel investor in
case of an angel group or a partner in case of a VC, who
can decide if the deal is to be presented to the investment
committee.
If you pass the first line of filter in a VC fund, and this
can take a few meetings, you would have to present to
the next level. This round, depending on the interest of
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the fund, could take a few meetings with revisions and

discussions on strategy, scale, funding needs, etc.
Once there is broad agreement on key areas, and if the
deal fits into the internal criteria of the fund, the deal
will be discussed at the investment committee meeting
where the terms of the term sheet will be outlined. And if
approved by the investment committee, they will give the
startup a ‘term sheet’.
After getting the term sheet, the entrepreneur is expected
to run it past someone who knows the legal stuff around
term sheets…. And when you ask someone’s opinion, the
person feels it obligatory to suggest a few changes. It then
takes a few meetings and discussions to finalize the term
sheet and sign off.
Some VCs would discuss the terms of the term sheet
offline over meetings and dinners, and therefore the
term sheet draft presented to the entrepreneur is one
on which there is an informal agreement on key points
like valuations, control, vesting, rights and downside
protection. However, the time taken overall would still be
approximately be the same.
Once the term sheet is signed off, the due-diligence will
start. Also, the startup may have to complete some tasks as
part of the ‘conditions precedent’ and that could be things
like filing for patents, getting an independent director on
board, getting customer contracts signed, etc.
After all this is done, the final signing of the documents
and receiving the cheque are the logical next steps.
46. “How do I convince investors to invest in my
start up”
Investors will invest in your startup if they are convinced

that their investment in your venture will multiply over a
3-5 year period. Therefore, to convince them to invest in
your venture, you need to excite them about the possibility
of multiplying their investment.
The concept has to be good, and it has to address a large
market opportunity, the value proposition has to be strong
and the product/concept/service has to be (or has to be
thought out well enough) to be well delivered. But while
these are necessary conditions, they are not sufficient
conditions for someone to invest in your venture.
Hence, while presenting, ensure that your pitch focuses
on what you intend to do, how you plan to implement
it, AND how you will make money from it, what your
scale of aspiration is and why you and your team is the
one they should bet on.
Most entrepreneurs make the mistake of diluting the pitch
with a lot of detail of the operations, which of course will
be of interest to investors… but only after and only if they
have an interest in participating in your journey.
Investors are interested in the business around the
product or service… not just details of the concept or the
product. A product is not the same as the BUSINESS for
the same. (Most first-time entrepreneurs make the mistake
of elaborating on the concept as the business). E.g. for
someone presenting for a e-tailing venture, the investor
would be interested in knowing your competencies
or plans on supply chain, warehousing, procurement,
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customer acquisition, etc. Not just about how cool your

web platform is or that “No one is currently addressing
this market and hence it is a good opportunity”.
Focus on key aspects rather than fluff around your
business case. In most cases you will get a 20-30 minute
window to present. You will have 10–15 minutes to make
your case with 10–15 minutes for Q&A. In fact, in most
cases, you would have either got their attention or lost
them in the first few sentences. Rehearse your opening
lines… once you get through this, the rest is the easier
part. If you don’t get their attention and interest in the
first few sentences, the rest really won’t matter that much.
Investors typically hate jargon and the following phrases:

• We have no competition: If there is no one else
doing what you are doing, how are the consumers
currently solving the problem? E.g. in a online food
ordering business, if there is no other brand does not
mean that there is no competition. ‘Calling up the
restaurants using menu cards available at home’ is
your competition.
• “We are cheaper, hence we have a stronger
value proposition”: Well, in many instances
what the entrepreneurs meant was that they will sell
cheaper… which is different than being a lower cost
producer. And, at least in my observation, most often
the assumption of ‘we are cheaper’ was based purely
on being a smaller company and not based on any
fundamental competence or process that allowed
them to retain the cost advantage at scale, if any at all.
I.e. just because you are selling at a lower price than
competition does not necessarily mean that your cost
of producing the product or delivering the solution is

lower than competition.
• “According to Gartner, the market is USD 80
billion by 2015”: Now, this has no relevance to a
startup. Startups should build their model ground up
and not top down.
Of course, they would be keen to know whether the
market is large and how large. But in most cases, industry
reports on the size of the industry is no indicator of the
size of the opportunity you are addressing. You should
focus on presenting your plans and what you intend to get
to in the next few years.
47. How to write a Powerful Elevator Pitch
An elevator pitch is what you describe about your venture

in a 1–2 minute window.
The pitch could be to a potential investor, or even a
potential client/ partner/ employee.
The purpose of an elevator pitch to an investor is to
excite him or her about THE CONCEPT AS WELL AS THE
BUSINESS CASE OF YOUR CONCEPT.
An elevator pitch should cover the following:
• What are you doing (concept/product/service)
• What problem is your concept/product/service
solving? And why is that an important problem
to be solved?
• Who will pay for the product? How much?
• What is your business model – B2B, B2C, B2B2C?
An elevator pitch is usually a short conversation, which
starts with a one-line introduction to your venture. This
one-line description is something that should excite the
investor to know more.
Once the investor is excited with a one-line descriptor,
the follow-up answer should cover a brief overview of the
concept, your aspirations, and most importantly, what you
expect from the person e.g. possibly a meeting to present
your concept.
Here’s an example of an ‘elevator pitch conversation –

Entrepreneur: “Hi, I am Subhash, the co-founder of
MusixStation (sample name), an online
platform for independent musicians
to upload, share and sell their music.

We are in beta stage. The results look
very good. We are now seeking a USD
250,000 in funding to go to a half a
million users. We are currently funded
through friends and family, including my
ex-boss who invested USD 10,000 in my
venture”
Investor : Looks good. Tell me more.
Entrepreneur : Thanks. We launched the platform a
month ago. I have two co-founders, one
of whom is a techie, the other a music
promotion professional. I have 3 years of
experience as a marketing professional.
The ex-CEO of one of the largest music
channels in India is an advisor to us. We
have what we think is a good business
plan, and a strong business case. Apart
from funding we need mentoring and
insights to help us convert our dream
into a very large company.
Investor : Good. How can I help?
Entrepreneur : Could we come over and meet you
someday? We have worked on a
practical business plan and would really
appreciate your advice, and of course
seek your investment.
Investor : Sure we could meet. Here’s my card.
Drop me a mail with a presentation and
the link to your platform. I will put you
on to someone from our office to set up
a meeting. All the best.
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How should you communicate your idea in One Minute at

pitch sessions and startup events that have a 1-minute
format?
Most entrepreneurs don’t do a good job of telling their
story well. Many spend time talking about non-critical
points i.e. points that were unlikely to help investors to
make a decision.
Some feel that 60-seconds is just not adequate time to
present your story, and it is an unfair to judge someone in
60-seconds. I don’t think it is unfair. Because the 60-second
pitch is NOT used to make the final selection. It is only for
the judges to filter out what they feel is not relevant, and
to therefore shortlist candidates whose stories you want
to hear in greater detail.
Here are some suggestions on what should be covered in

a 60-second pitch, with the objective of being selected
for the next round.
• Your name and your startups name
• What problem you are solving and for whom (i.e.
your value proposition)
• How are you solving the problem (your concept/
product/service)
• The size of the market opportunity – i.e. how
many people/organizations would find this value
proposition meaningful
• What stage are you at
• Team overview
• What are you seeking from the program (I.e. not
mentoring.. that is obvious.. but mentoring in what
specific area – technology, marketing, business model,
etc.).
Can all this be conveyed in 60-seconds?

I think it can be. Here’s how (am taking the example of
one of the startups that presented at one of the sessions I
was judging)
“Hi. My name is Subhash and I am the co-founder of ABC.
ABC helps brands put their messages on unconventional
mediums that are not available on regular media networks.
We are creating an online platform where individuals and
private companies can list their media assets, and brands
can bid for it and advertise on the properties on offer.
People can list their cars, balconies, banners at events in
colleges & housing colonies, cafes can list their coffee cups,
etc. Anything that they feel would be interesting for brands
to put their message on. You can even list your laptop as an
ad medium if you are a popular dude in college.
For example – Microsoft can advertise on the menu card of
restaurants across the country that get a lot of CXO crowd.
We believe our concept has a market opportunity of 50mn
individuals & companies with an average of 3 media assets
each. At Rs.1000 per asset, we are talking about opening up
a Rs.15,000 crore market. And that is just in India.
We are currently testing the concept offline. We have 6 brands
advertising on 30+ mediums offered by 15 individuals.
In fact, we earned gross revenue of Rs.8 lacs in the past 3
months. We charge 20% commission on the ad spend.
We are two co-founders, both techies with previous
entrepreneurial experience. We are also looking for a business
side co-founder, and we are also looking for advisors and
mentors from the advertising industry.
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From our investors we need assistance on the technology

platform, as well as mentoring on our go-to-market plans.
We believe you should consider us because we have a
powerful concept that has been proven in off-line pilot. Hope
to get shortlisted.”
48. How much money should you raise for
starting up?
Obviously, this depends on the nature of the business, what

is required to be done, you and your team’s capabilities,
the competition, etc. There is no ‘correct number’ on the
investment required as that number would be different not
just for different businesses but also would be different for
different execution strategies for the same business plan.
In fact, there are startups in the online space which have
done excellent progress with smaller angel investments,
while there are others which are scaling up nicely with
crores in funding, largely for marketing investments.
Broadly speaking, concepts that have been proven and
need great execution + marketing to build a scale business
will need to raise larger capital. Concepts that have yet to
be proven in the market place could do with lower levels
of funding in the initial stages. This is because you don’t
need senior employees and huge marketing spends at
pilot or proof-of-concept stages.
What is essential therefore is to have a realistic estimation
of the costs and investments required to reach the
milestones you have set for your venture.
Generally the reason for raising funds at any stage is to be
able to take the company to the next ‘phase’ of its journey.
I.e. to move it into a different orbit, and not to make an
incremental change in the status.
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Most startups would go through the following phases in

their journey:
1. Concept stage – i.e. when the idea is not yet developed
into a product or service, but the founders may
have done a fair bit of thinking on the concept and
understanding the business dynamics surrounding
that idea. This is the stage where the business case
is being evaluated and assumptions are made and
validated –by understanding the market and speaking
to customers, etc.
2. Prototype development stage – when the concept –
either a product or service – is ready for testing with a
limited audience – the startup may have a few initial
employees.
3. Early-stage – when the product or service has
started gaining some traction – there are a few early
customers/consumers, the product and processes are
being refined and fine-tuned and the building blocks
for growth are being built – a small team is getting
formed
4. Growth stage – when the startup has started getting
more customers, processes are getting developed, an
organization structure is getting into place and the
company is in an expansion mode – this is probably
the time when most companies would start getting
profitable
Pre-seed money would typically be raised at concept stage,
and should ideally last a little beyond the prototype stage.
In most cases, pre-seed stage money is used for the things
that will prepare the company to attract seed capital from
angel investors or from early-stage VCs i.e.
Understanding the business case by validating assumptions
In building the prototype or the first version of the

product – what is called the MVP or Minimum Viable
Product which will allow you to test your assumptions
in the market i.e. check if your customers find the value
proposition meaningful, if they feel that this product /
service does fulfill their needs, etc.
At pre-seed funding stage, a startup should keep capital
expenses very low – i.e. rent ACs, furniture, etc. rather
than buying. Operating expenses should also be kept low
– take lower salaries, work out of a shared office, multi-
task, etc.
Most often entrepreneurs go wrong in estimating funding

needs.
They are unrealistically conservative on costs, and
impractically optimistic about revenues. Underfunding
your venture i.e. raising lesser money than is practically
required can have serious consequences as you could
run out of cash sooner than expected, thus leaving you
without capital to continue the venture… or having to
rush to raise another round in a distress situation. (There
are enough examples of startups that could have survived
only if they had money for a couple more quarters, or
where the initial funding was over earlier than a couple
of quarters than originally planned and it left them with
inadequate progress to raise a further round.).
One question investors are most likely to ask you is
how much money you need in the round that you have
approached them for. While most entrepreneurs give
a one-figure reply, my preference is for entrepreneurs
to provide a perspective of what can be achieved with
different levels of funding.
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E.g. with INR 50 lacs [Approximately USD 80,000] we can

develop the solution on a SaaS platform, hire a base team,
and prove the model in one market. However, if we have INR
200 lacs as a commitment, even if the first tranche was the
original INR 50 lacs, we can accelerate the hiring and scale
up as soon as the key performance indicators were on the
right trajectory.
You need to bear in mind that if your business is successful,
you are most likely to need MORE CAPITAL. Most
entrepreneurs assume that very quickly their business
will be cash positive very quickly and that they are not
likely to require more capital beyond the first round.
Working on a realistic business plan is therefore critical in
determining how much money you are likely to need for
your venture.
49. How to find the Right Angel Investors?
Apart from individuals who invest in startups, many angel

investors are part of an angel investor network.
Angel networks help angel investor members co-invest in
startups that have been shortlisted.
Often, angel investors invest in sectors they are passionate
about, and therefore bring invaluable experience to the
startup through their participation as advisors and/or board
members. Angel investors, apart from capital, are expected
to help startups with advice, networking & introductions
and oversight of business. Some angel investors also go
to the extent of representing the startup in PR or meeting
important customers or in interviewing potential senior
employees. Most certainly, angel investors are expected
to assist the startup in accessing institutional capital for
subsequent rounds of funding.
Often angel investors have to be the adult supervisor -
alerting the founders when they seem to go off very
quickly and strategy or when they are trying to do too
many things rather than focusing on what is important.
When a startup is not doing well, angel investors have
an enormously important role to play in keeping the
founders motivated. Failures and challenges in a startup
can be a horrible feeling making you feel terribly lonely. A
good angel investor can make a big difference by even just
saying “its okay… lets focus on what’s do be done now ”.
Often character is tested in these kinds of situations.
That’s why I often tell entrepreneurs that, even when they
do not need the money, they should go and raise some
funds from good angel investors. Because it is not just
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about the money. It is about the person’s involvement in

your journey, and their support when you need it that
matters.
As angel investors, maturity in understanding the
investment process, especially while dealing with
challenging times for the startup, is invaluable. And
hence even when you get investments from angels who
are investing for the first time, it is prudent to have a co-
investment from a more experienced angel.
Some points to remember when selecting angel investors:
Evaluate what the angel investor gets to the table in

addition to capital:
How willing is the angel investor / angel investor group
to assist you in your entrepreneurial journey. But do
remember that this can be a double-edged sword. You
want the advice and guidance, but do not need operational
interference.
Does the angel investor’s vision match your vision,

aspirations and goal:
This is critical as a mismatch in goals and vision could
lead to conflict on the direction the company could take.
How ready is the investor to lose his investment:

This is a critical point. Angel investments carry the highest
risk, and investors in early-stage companies can lose all the
money they invested if the startup fails. While you would
aim for the best outcome, the angel has to be prepared for
the money he/se has invested in your company to be fully
wiped out if you fail. Hence, it is important that the angel
investor understands that they should invest only as much
as they can comfortably lose without losing sleep.
What is the network of the angel investor with the

institutional investors i.e.
VCs: Angel investors with deep connections with investor
groups and other investors are great help while raising
the next round of capital.
Do the paperwork well:

Even if it is limited paperwork, and significantly lesser
documentation than would be required in an institutional
funding round, do evaluate the term sheet carefully.
Even if the angel is not keen on proper documentation, do
insist on completing the paperwork. This is especially true
in the case of a friends & family round when the paper
work tends to get ignored.
Startups are usually not in a position to be choosy about
whom they can accept funding from, and quite often
after a number of rejections end up taking money from
whoever willing to fund them.
However, while signing up your investors, it is critical to
check the following:
Will you enjoy working with them?

While this is a difficult one to take an objective view on
when you really, really need their money, it is a critical
question to ask.
Attitudes to investee companies, style of working,
matching of personalities are critical components in
ensuring that investor & investees enjoy working with
each other. In startups, in my view, it is ideal that the
founders and investors have a friendly relationship. And
this does not mean not being professional… but an easy
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going, non-formal engagement is helpful in a startup

stage when a lot of things won’t go as planned.
Is the personality, ethics, value system, aggression,
compassion, etc. of the investors in line with the
personality of the founding team.
Different people have different styles of operating and if
these styles are in conflict, it may lead to disagreements in
how you handle the business, especially when the going
gets tough.
What’s their outlook to your business and are they willing

to wait out the difficult times?
While your investors and you may agree with the potential,
some investors have a ‘spray and pray’ approach. I.e. they
invest in many companies, especially in emerging sectors,
and see which ones quickly show signs of success.
They are quite happy then to disengage with the slow
movers and back the early-successes. In such situations,
if your startup does not really take off as expected, and
many don’t, you may be left in a bit of a tight spot.
Do they have the experience of working with startups at

your stage.
Different stages of a company require different
competencies and therefore different interventions from
the investors. Investors who usually deal with growth
stage companies may not have the patience or experience
in dealing with the nimbleness and direction changes that
a very early stage startup may need.
Of course, it helps to connect with companies that the
investors have funded and understand about their
experiences with the investors.
50. How is the Valuation Decided for a startup?
At the early-stage/concept stage, there is no formula or

logical way to arrive at a valuation. Valuation for startups
is a figure that is decided between the investor and the
entrepreneur.
Hence, you go by generally accepted benchmarks in
your country, and eventually conclude a deal at what the
entrepreneur and investor feel is a fair valuation.
What valuation investors may offer depends on a
variety of factors, including the quality & experience
of the team, the investors view of the potential of the
concept, the competition, how easy or difficult it is for
other competitors to enter the market, is there any IP or
defensible competitive advantage which this team has,
etc.
In all this, the quality of the team is the most important
consideration for investments. The same business plan,
with exactly the same details could get a very different
valuation for a team of college students executing it than
what an experienced team would get for the same plan.
Simply put, valuation is about how much the shares of
your company are valued at. In a private limited company,
ownership is decided on the basis of equity shares. The %
of shares you own defines the % of your ownership of the
company.
Let us understand with an example. I am of course over
simplifying for the purpose of ease of explaining and
understanding.
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Ramesh and Suresh start a company. They both own 50%

each of the company. A few months later, Ramesh and
Suresh approach an angel investor who decides to invest
Rs.50,00,000 in their company for which he takes 20% of
the company. In this scenario, the post-money valuation
of the company would be Rs.250,00,000 or Rs.2.5 cr. This
is because Rs.50 lacs got the investor 20% equity, so the
value of 100% is Rs.250 lacs or Rs.2.5 cr.
Stated differently, the company got a pre-money valuation
of Rs200,00,000 or Rs.2cr. In this scenario, Ramesh and
Suresh now own 40% each in the company, with 20%
being owned by the investor.
Later, the company decides to raise Rs.10 cr from a VC
who takes 20% of the company. In this scenario, the
post money valuation of the company is Rs.50cr. Stated
differently, the company raised Rs 10 cr. at a pre-money
valuation of Rs.40 cr. With this round, Ramesh, Suresh
and the angel investor each get diluted by 20% and hence
the capital structure or cap table stands as follows:
Ramesh 32%
Suresh 32%
Angel Investor 16%
VC 20%
In both the rounds, the money invested by the angel
investor and the VC has gone into the company and not
to Ramesh and Suresh.
Going further, the company does well and the VC decides
to increase their holding to 26% and offers to buy 6% of
the shares held by the angel investor for Rs. 10 cr. Now,
the valuation of the company is Rs.166 cr. Even at this
stage, when the valuation of the company is Rs 166 cr,
Ramesh and Suresh have not made any money. However,

the angel investor has had a successful exit with a 20x
return on his original investment, and still retains 10% in
the company.
At this stage, the capital table will look like this:
Ramesh 32%
Suresh 32%
Angel Investor 10%
VC 26%
At a later stage, Ramesh and Suresh decide to dilute their
holding and decide to sell 5% equity each to another VC for
which each get Rs.20 cr. At this stage, the 2nd VC decides
to also buy the 10% held by the angel investor for Rs.20
cr. Hence, now the valuation of the company therefore is
Rs.200cr, and the cap table will look as follows:
Ramesh 27%
Suresh 27%%
Angel Investor -%
VC 26%
VC 2 20%
This of course is a rather simplified version of reality, but
done only to illustrate the concept.
51. Managing Investor Relationships
Companies with a healthy relationship with their investors

are happier companies. An unhealthy relationship
between investors and founders can be quite stressful.
That’s why it is critical for startups and their investors to
work as a team and be on one side of the table.
While some responsibility of ensuring a healthy
relationship is obviously with the investors, founders also
have a critical role to play in this process.
Both, investors and entrepreneurs should build a strong
relationship based on trust. The entrepreneur should have
the trust that the investor is thinking of the best interest
of the company, and not just in his or her selfish interest.
Likewise, investors too need to have the confidence that
entrepreneurs too are working in the best interest of the
company and shareholders. This takes time to build,
and hence pre-investment discussions and relationship
building is critical in developing a strong, healthy working
relationship post the investment.
Clarity on goals and objectives

The starting point of course is to ensure that your investors
and founders are aligned on the goals & milestones and
objectives of the company, and the parameters on which
progress is to be measured.
Agree on the communication and intervention processes

Getting investor agreements on the periodicity and format
of reporting is helpful in ensuring that the intervention is
structured and planned. A monthly review is suggested
for startups, though founders may benefit from the
experience and the business relationships of investors and

hence may engage more frequently.
Communicate challenges and issues early on

No one expects to have a smooth journey and challenges
and roadblocks are expected in the journey. Your investors
are critical stakeholders in your progress. Hence, if there
are challenges and issues, often investors can assist with
solutions. Communicate early and be transparent.
Reporting and templates

Investors and founders should agree on the format for
reporting progress. Information that captures the key
parameters should be drawn and presented every month
to investors.
My suggestion is to provide a short summary of the health
of the venture, capturing critical aspects that will be
relevant to investors. I would suggest the following:
• Overview – a one-para summary of what has
happened since the last interaction (e.g. on
product, customers, people, brand, etc.)
• A para on how the business is progressing as per
the plan (including what is working well, and what
is not progressing well – could be on customers,
pricing, costs, people, cost of servicing, etc.)
• Highlight challenges or red flag any thing that
you see as issues
• Outline what you wish to achieve in the next
month (I have noticed that investors may not pay
too much attention to this para, as usually it is
transactional and mundane. However, if it is not
there, it usually creates discomfort. Just having
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even the regular stuff in this is reassuring that all

seems to be well.)
Another reason why I think a good, crisp report every
month is a good idea is because it allows you to also
reflect on the progress and helps you identify red flags for
yourself earlier too.
In most cases, investors want to help. These type of
reports provide investors a good view of where they can
help, and allows you to seek out their support when and
where required.
Have formal board meetings, including structured
meetings with your advisory board members.
Apart from it being mandatory governance requirements,
quarterly board meetings are a good forum to engage with
a wider group of stakeholders where progress, challenges,
issues and direction changes, if any, can be discussed.
WRITING YOUR BUSINESS PLAN
52. What is a Business Plan
A business plan is a ‘Plan for your Business’. It is not

a document that you make for the investors. It is a
document that you should prepare for yourself. Writing
down your business plan helps you think through the
assumptions clearly, and often writing helps you identify
impracticalities in the thought process.
Yes, for investor presentations too, a business plan is
necessary. Broadly speaking, a business plan should
communicate the following to an investor:
• What are you selling and to whom
• Who will buy and how many potential users/
customers are there. How much will they pay for
this? (Or how will you make money)
• How large do you see the company growing to –
what is your own aspiration for the company
• How are you going to implement it
• How are you going to make money
• Why are you the right team for the investors to
invest in
Your goal in the first presentation to an investor should be
to help investors understand why your venture is a good
case for investment.
The initial pitch presentation (this could be a PowerPoint
or a word document) should not be more than 12- 15
slides, covering the points mentioned below. In the initial
pitch deck, the details of execution and numbers are not
necessary. At the preliminary stage the review committee,
as well as investors, are keen to understand if the concept
addresses a real opportunity, if the business case is strong,
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if the team is well rounded & competent & committed and

the traction that the team has been able to achieve so far.
Components of a Business Plan

1. Cover slide
• Company name and logo
• Contact details (city, e-mail, mobile)
• Website url
• One line that clearly describes the concept/
product/service
2. Team
• Highlight what will each member of the team do
in the venture, and why he/she is best suited for
the role
• Indicate if the person is a co-founder or founding
team member or an employee – against each,
indicate the % of equity held (currently or planned
if not yet distributed)
3. What is the issue / pain point that your product /
solution addresses
• Explain why your customers need your solution
• Mention what they are currently doing and how
your product/service is a better solution
4. Product / Technology Overview
• Highlight the uniqueness of the product or service
or technology and NOT the technical details of list
of features of the solution
5. Business model and business case
• This is about how you will make money from this
business opportunity.
• This is NOT the excel sheet. In simple terms, this
is about who will pay how much and to whom for
your product, and how does the unit economic

work (i.e. how much money you make per ‘unit’
– could be product, per sale, per customer, etc.)
and how does the overall business case look like.
6. What is the size of the market opportunity?
• Be clear about who and from where are they
going to buy your product/service and how much
they would pay for it.
• Mention the size of the opportunity in the markets
you are planning to address (e.g. In India, there
are ____ number of parents who will buy our
service at Rs/$_____ per year. This translates into
a market potential of Rs/$_____ per year. In year
3, we plan to tap US and Canada, and the size
of the opportunity there is Rs/$_______ (No. of
parents ______ x Price per year_____)
This section is NOT about what your plans are, but
about what the size of the market is. This section should
therefore give a sense about how many customers are
there in your target market and at the price that you are
selling your product at, what is the revenue potential if all
of them were to buy (not that they will, but this is to give
an indication of what the size of the market is)
7. Current traction
• What have you achieved so far – product,
customers, revenues, etc.
• If you have, include photographs (e.g. if you have
physical stores or products that you manufacture
or screen shots of website/app).
8. Competitive landscape
• Who are you currently or in future likely to
compete against and what is your plan to win this
battle?
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• Explain why this is better than competition (a

comparison chart is usually not seen seriously by
investors because all presentations tend to show
a comparison chart that will be favorable to your
solutions/product)
9. Financials current and projections
• Summary of your business plan excel sheet for
3 years (Note: the detailed excel sheet is NOT
required. Just key figures at annual level for 3
years is sufficient for the preliminary evaluation.
If there is sufficient interest from investors in the
venture, then they will evaluate your excel sheet
and business case in detail)
• Break up your costs into Capex and Opex (In
Opex highlight major cost components – salaries,
marketing, etc.)
• Cover the unit economics i.e. how much revenue
do you get per transaction/customer, how much
does it cost you to service that customer/order
10. Funding needs, use of funds and proposed valuation
• Describe how much money you want to raise and
what these funds will be used for
• Mention if there are other co-investors (or others
who have already committed)
• Clearly indicate how long these funds will last
and what you will be able to achieve with these
funds (E.g. This investment of $______ will last us
for _____ months. With this, we will be able to get
to _______ customers and _______ in revenues)
• Clearly mention if you are going to require follow
on capital and if so, how much (e.g. post this, we
will raise a Series A round of $ _______ )
• What is the valuation you are seeking for this

round
• Mention previous investment history including
year, amount and investors.
In your pitch deck do you talk about future markets that

can be addressed by the product?
Yes. Your business case is based on what the potential
for your concept/product/core competencies are for the
future. You may have a focus on a particular segment/
geography/opportunity/problem at the beginning of your
journey, however, if the possibilities of multiple revenue
streams and adjacent or parallel opportunities exist, that
should be included in the pitch deck.
This can be added in the slide about ‘size of the
opportunity’, where you can give an overview of what
possible opportunities, including new markets and new
customer segments, exist for the concept that you are
currently proposing.
Remember, the market opportunity is different from your
plan for your venture. Think of it this way… if you were
working at Accenture or McKinsey and were to present
a report on the size of the opportunity to a large multi
national company, what would you say? The opportunity
is open to all… the MNC may have a better chance of
addressing that opportunity, and your plans may be
different. But the opportunity is the same, whether you
address it or not.
53. How much detail do VCs want to see
in a business plan
It depends on what stage of the discussion you are at with

the investors. If it is the first meeting, they are not interested
in the details. At that stage they are keen to understand
the team, the business overview, your aspirations and
plans to meet those aspirations, the market potential,
your view of the opportunity, the business traction so far –
including quality of product/service, marketing program,
sales program, people management, business case at a
broad level, etc.
If all of the above seems positive, and if they are keen to
pursue this further then they would be keen to understand
in detail the numbers behind your plans. Even more
important than the numbers is the logic behind those
numbers.
Even in the first meeting, while they may not want to see
the numbers in the presentation, the post-presentation
conversation will be to assess how well you understand
the business case around your concept. Hence, even if you
do not present it, you do not have a choice of not preparing
a detailed excel sheet outlining costs and revenues and
knowing it well to discuss about it.
Some points to remember about a business plan

• A business plan is not a product. It is a process.
• Entrepreneurs have to understand the business
dynamics around the concept. Just domain expertise
without understanding of how business works is not
enough.
• Investors are interested in ‘how you will do what you

intend to do’, rather than just knowing what you are
planning to do.
• Business model is about ‘who will pay how much and
to whom and for what’
• The quality of your business plan is dependent on the
quality of your assumptions. If your assumptions and
logic are incorrect, no amount of great planning will
help.
54. Should there be a ‘Plan B’ for a B-Plan?
Plan B is already built into a good B Plan.

When you are thinking about your venture, you are going to
think about multiple scenarios, including very pessimistic
ones and what you would do to mitigate the risks and
the challenges in the journey. This should include what
matrices you would use to track progress, and what stage
you would take corrective action, including aborting the
journey. It will be important to have an advisory board,
or a board, which will guide you through your decision
making in good times as well as tough times.
Anyway, a business plan should take into account
possibilities of both success and failure, and hopefully the
course correction that you might take in case the journey
is not as you plan it to be.
In planning your business, including plan B, it is important
to ensure that your assumptions are closer to reality.
Wrong assumptions are more likely to kill a business than
a poor product or service.
Also remember that a business plan is a ‘process’ and not
a product. And hence, while it provides direction, the
route has to be constantly adjusted according to how the
venture progresses. This process of evolving the B Plan is
in a way also about working on Plan B.
55. A Good Idea or a Good Plan? What do
Investors Invest In?
Investors will be interested because you have a plan to

address an opportunity well, and not just because you
have identified an opportunity that is interesting.
The success of an entrepreneurial venture depends
entirely on the quality of execution. While ideas are
important, just having a good idea is not good enough to
start a company. Many companies fail to implement their
ideas well.
That’s why while having a good idea is certainly a good
starting point, and will be of interest to investors, they
will eventually invest only if you have a good plan to
implement the idea. And of course, that plan has to have
an underlying business potential and business case.
On the other hand, you may have a strong plan around a
concept that has already been implemented in the market
by some others. If there is a business case, and if they
believe you have the capability to implement a sensible
plan well, investors will be interested.
In the Indian market, take the case of online travel
agencies. After the success of Make My Trip, who was an
established leader, investors did back brands like Clear
Trip, Yatra.com and Travelguru.com, each of whom had a
strong team with a plan to create space for themselves in
a growing segment.
56. 7 Simple Steps for Writing a Business Plan
1. Start with a ‘story’ – ‘See the film in your mind’

about your venture – what do you want to do, how
large do you want it to be, what will make you happy,
what are your aspirations, etc. Imagine it as a business
a few years down. This gives you a good view of ‘what
you want to aim for’
2. Work out rough milestones and goals: Your
long-terms goals and aspirations should then be
broken into short-term and long-term milestones,
which are the stepping stones to your eventual
destination.
3. Think deeply on how you will implement

it: This is the critical aspect of planning your
implementation. This also gives you a view of the
cost structures, the infrastructure & people needs,
processes, etc.
4. Work out the ‘structure’ of an excel

sheet: Now, after you have done the thinking, it is
time to use an excel sheet to evaluate if there is a
business case in what you plan to do. Before you start
entering numbers, work out the ‘structure’ detailing
every cost head and revenue stream.
5. Start working in the excel sheet – assumptions

are critical: An excel sheet exercise with the wrong
assumptions is going to give you a very wrong
direction, and perhaps wrong hopes. Be realistic. Be
conservative.
6. Work on multiple ‘scenarios’: Life does not play

out the way you plan it. Real life situations will be
different than your excel sheet plans. It is therefore
essential for entrepreneurs to work out multiple
scenarios to see how the business will pan out under
different outcomes.
7. Finally, articulate it into the
‘presentations’: Once your ‘Business plan’ is ready,
you then articulate it into different presentations.
Even an executive summary is one articulation of
the B-plan. You can have an executive summary
for introductions, a 8-10 slide ppt for first meetings
and more detailed documents and presentations for
follow-up meetings where specific details are going
to be discussed.
57. Revenue Streams and Business Models
Simply put, business model is about who will pay, how

much, at what periodicity and to whom. Revenue stream
is about what they will pay for.
E.g. if you are selling math practice solutions, your
business model could be as follows:
“We have a B2B2C model. We will charge parents Rs.250
per child per month. The school will collect this from
parents who subscribe to our service and will be paid
to us at the beginning of every quarter. Students will be
pre-registered but subscription is not compulsory and
parents can choose to opt out. School will keep 20% of
total revenues, which we will give them at the end of
the year on achieving a pre-agreed minimum revenue
commitment.”
For the same product, there could be a different business
model e.g.
“We have a B2C model. We will charge parents Rs.250 per
child per month, which they pay to us in advance at the
beginning of the month.”
Businesses can explore different business models e.g.
• B2B (e.g. in the above example, selling to schools)
• B2C (e.g. in the above examples, selling directly
to parents)
• B2B2C (e.g. in the above example, selling to
parents through schools)
• Free/subsidized for users – other stakeholders
pay (e.g. ad supported products/services)
• SAAS – pay only for service / rental
• Pay per use

• Pay up front
• Annual / periodic payments
• Pay in installments
58. The Importance of Business Metrics for
Startups
In the context of startups, metrics are parameters used for

quantitative assessment of performance and progress of
a venture. If goals are about where to go and strategy is
about how to go there, metrics are about tracking progress
of your journey.
Startup phase is about discovering what works and
what does not. Scale up phase is about replicating what
worked. For companies, especially startups and early-
stage companies, metrics help founders identify what is
working and what is not.
Why are metrics important for startups?

Because in your journey, you don’t want to discover at a
very late stage that you progressed well, but in a different
direction, or were going in the right direction but at a
different pace than estimated.
The journey of a startup is about making certain assumptions
about what will happen once you launch your product or
service in the market, and doing several experiments to
ascertain if those assumptions are valid, and what is working
and what is not working around the assumptions. E.g. If you
assume that 1.5% of all registered customers will buy, you
first need to track if that is indeed the case in the market.
And whatever the outcome i.e. whether 0.5% registered
users buy or 3% users buy, what you need to know are the
reasons for the outcomes so that you can avoid what did not
work and replicate what worked.
Success of a startup is NOT in executing a plan well but in
adjusting plans efficiently, appropriately and effectively, in
order to go in the direction that the venture was intended

to. Metrics provide early warning signs - whether good or
bad. It helps you adjust your plans based on quantifiable
data on what impacts the outcome. Metrics help you
make better-informed decisions in making adjustments in
your plan.
IT IS NOT ALWAYS ABOUT IMPROVING YOUR METRICS

• Performance does not necessarily improve with
scale
• Easier to grow faster when smaller
• Early customer acquisition costs may not hold
good over time
• Some initial aspects that impact metrics cannot
scale
• E.g. founders selling the concept to enterprise
customers can have a very different result
than sales teams
• PR efforts and e-mail marketing does not
scale beyond a point
• Organically acquired, early customers through
connections cannot scale
• SEM, SEO do not scale beyond a point
• Early customer engagement may not hold
good at scale
• Early customers MAY have chosen your product
because they desperately wanted that solution.
Later adopters may be less enthusiastic users.
• ARPU may decline over time
Spend time to THINK ABOUT METRICS THAT ARE
IMPORTANT
59. If no business plan works out as planned,
why do investors insist on a business plan?
A business plan is nothing but a plan for your business.

It is an articulation of your vision on how the future will
play out.
A business plan also articulates how the startup proposes
to go from point A to point B, and by when. It also outlines
the milestones and other dynamics (costs, resources,
revenues, etc.) on the way from point A to point B. I.e. It
is a plan of how the concept of your startup will alter the
market, and how you intend to implement that disruption.
But at a startup stage, there is no past data that can be
used to make reasonably dependable predictions. Hence
the vision of what might happen in the market with
your concept is based on assumptions that you have
made based on your conviction and your insights. Even
in more established companies, there is only so much
predictability you can bring into a business plan based
on past data. How in-market dynamics may change is an
unknown variable and business plans even of even larger,
established companies can and often do get disrupted.
Some of the assumptions you have made will play out as
assumed, others will not. Nothing surprising about that.
Why then is it important to make a business plan knowing
that what happens in the market is most likely to be very
different from what you planned for?
A business plan helps you define your strategy

There is no ‘one right strategy’ for ANY business. Strategy
is all about making a choice between the various options
that are available to you, AND then aligning all your

resources to support the option that has been chosen.
A business plan therefore becomes that document which
helps every person involved with the implementation to
visualize the strategy, and be aligned on the road map.
It helps everyone ‘see the film in their mind’. And as you
can imagine, the clearer the business plan, the greater the
likelihood that everyone will be seeing the same film in
their minds rather than different people making different
interpretations of the road map.
And even if things do not go as planned, making a business
plan allows the team to foresee early-warning signs so
that they can adjust the plans to factor in in-market inputs
and data on how things are moving.
It gives a sense of your aspirations, in the context of the

potential
How you define the market opportunity is a key indicator
of how large you think the opportunity is. (e.g. local or
global). And how large you intend your business to be is
a key indicator of your aspirations. Since angel investors
and VCs typically invest in ventures that are scalable,
a business plan becomes a document that helps them
understand the scale of your aspirations.
A business plans helps investors understand if the road

map is practical
A good idea is of no use if it is not executed well in the
market. And for a concept to be executed well, a number
of different aspects have to be aligned and coordinated.
For a business to succeed many different things have to
work well in tandem. Even one of these varies aspects
going wrong is enough for a venture to fail.
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A business plan helps investors understand whether the

team has a practical view of the complexities that will
be involved in implementing the concept and scaling the
venture. How you have thought about your go-to-market
plans, cost structures, resources required marketing
efforts, and other aspects is a good indicator on whether
the team has the necessary competence and understanding
of market dynamics to deal with the challenges in scaling
up.
As I keep telling entrepreneurs, a business plan is a useless
product but an invaluable process. It is not a document
that you write and print and refer to as the only direction
to go by. It is a living document that you will refer to and
continuously make adjustments based on what happens
in the market.
Also, I tell founders to make a business plan even if they
are not looking for investors. A business plan is YOUR
plan for YOUR business. Only one of the uses of that
business plan is to get investor interest.
CONCLUDING REMARKS
1. Take that leap of faith
To be an entrepreneur, one has to have the conviction

and belief in the idea that one is pursuing. Unless you
have that conviction, you are unlikely to take the first
step required to convert that idea from a ‘thought in your
head’ to a ‘venture in the real world’.
Once you have a thought or an idea about something that
can become a good business venture, you have to think
hard about the potential of that concept, assess the merits
and challenges, and once you feel convinced enough,
you have to be ready to take that leap of faith to go and
implement that idea in the marketplace.
Many aspiring entrepreneurs tend to test and research, and
retest and re-research their idea or concept and depend
only on the research findings to pursue or drop that idea.
Often, research cannot give you the answer to whether an
idea will work or not. Sometimes, entrepreneurs have to
take that leap of faith and that gut-feel based decision to
start up.
Entrepreneurs however, should NOT be blind risk takers.
Successful entrepreneurs understand the risks and take
necessary steps to overcome those risks and challenges.
Planning well is what helps them deal with the risks and
challenges better. Others who give up often do not think
hard enough about addressing those challenges. They
get scared of the challenges because they do not think of
solutions.
Entrepreneurship often requires entrepreneurs to pursue
their vision in the face of skepticism and negative feedback
on their ideas and plans from many individuals. Often
these individuals who are skeptical of the plans are well

meaning and may give an honest feedback based on their
own assessment of the risk-reward dynamics of that idea.
But mostly, entrepreneurs are able to spot opportunities
where others see problems.
Entrepreneurs see opportunities before others see them.
Entrepreneurs catch the wave on the up…. Entrepreneurial
thinking and aptitude is about seeing the ‘signals’ where
others see ‘noise’.
The ability to take that leap of faith AFTER assessing the
potential and understanding the risks allows entrepreneurs
to be confident and optimistic about the opportunity and
potential of an idea. Optimism and confidence create
positivity and enthusiasm, which infects others around
them. It helps entrepreneurs build teams, get early
adopters, and often, helps them get investments from
investors. (It is not without reason that entrepreneurs
who are successful are good presenters and can tell their
story with conviction and passion.).
Most businesses that ultimately succeed are the ones
where the entrepreneurs had the grit, determination,
patience and perseverance to succeed. In the most trying
times it is these virtues that’ll help you go past the tough
phases.
All businesses go through ups and downs, and almost all
businesses and teams will have a number of challenging
times. And that’s why passion is critical. Unless you have
passion, the temptation to give up at the first signs of
challenge is quite high.
Go ahead. Think hard about the opportunity around
that idea and what you need to do to make it work.
Seek guidance from those who have more experience in
PRAJAKT RAUT 185
operationalizing a business. Plan well. Execute efficiently.

Be confident.
You will never fail. Either you will win or you will learn.
And this learning will help you prepare even better for
the next journey of your life. Go ahead. Take that leap of
faith in your idea. Irrespective of whether you succeed or
fail, you will enjoy the journey. You will emerge wiser, and
certainly better-prepared for opportunities that life would
have for you ahead.
Wish you all the very best in your entrepreneurial journey.

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STARTING UP

First Published by Notion Press 2016

No part of this book may be used, reproduced in any manner

About the Author xiii

Entrepreneurship – Living a Life You Love

1. Life is short. Startup 1

Finding a Co-Founder(s) and Advisors

11. Find a Co-Founder – Find a Co-Traveller 33

14. Is it ok to have a part-time co-founder? 38

Idea Selection and Assessing

26. Idea Generation 61

30. What are some Important Questions to ask in

Funding for startups

41. Points to remember when raising funds for

45. The process of pitching to investors 134

Writing Your Business Plan

52. What is a Business Plan 162

1. Take that leap of faith 183

Prajakt Raut - Entrepreneur and

Prajakt is the founder of Applyifi.com. Applyifi

As the Asia Director for TiE, Prajakt was primarily focused

For a startup to be successful 20-30 things have to go

you inputs on what areas to seek answers & guidance/

I have often heard senior professionals tell entrepreneurs

Most importantly, irrespective of what the outcome of an

In my view, easier availability of early-stage capital,

you think through the steps you need to take in your

capacity and capabilities to deliver on that potential, you

Well, there are some lessons that I have learnt in my own

points in the journey (e.g. what would you do if you were

Most of us have a streak of entrepreneurism within us.

Typically the top three excuses for not starting up tend

Why ‘I have no capital’ is not a valid excuse any more…

That opens up entrepreneurship as a career option to

Why ‘I don’t know anything about running a business’ is

Why “I am afraid that I might fail” is no longer a valid

I think it is a good idea for aspiring entrepreneurs to get

In effect, both environments – large companies and

From a business point:

Persistence and resilience:

persistence in pursuing what you believe to be appropriate

journey. Every entrepreneurial journey will have its ups

the sales function. However, in the initial phases of the

1000s of others whose ventures did not succeed. Or did

I urge everyone with the desire and aspiration to become

have the time to pursue the venture at this stage, or is it

In my observation startups fail because of any one, or a

• Failure to get funding or follow-on funding or

as the very worst case. Either of these scenarios could

Studying a startup that was not successful can teach you

About the product/service:

Was the value proposition meaningful:

Was the positioning right:

a ‘BIG BITE’ and expected a ‘BIG BITE”…. and we were

Was the communication clear:

Was the pricing right:

Were the processes appropriate for the venture:

Was the team right:

not know and therefore were they able to reach out to

Was the company adequately funded:

Changing the business model often:

of being frugal, and that being resource starved actually

In my view, it is extremely helpful if you find a co-founder