With technological innovations touching new heights, it isn’t surprising to see a VC getting attracted to the industry. And, when it is India, one of the fastest emerging software superpowers in the world, you can’t wrong with a hi-tech idea as there are countless potential investors awaiting a lucrative investment opportunity. So if you are planning to raise capital in India, there’s nothing wrong in building a strong strategy for fundraising, but, there are certain fine things that can emerge as big mistakes if neglected. As a result, you may have to spend more time and effort finding capital for your startup.
Here are some mistakes that you should avoid while raising venture capital in India.
Capital Raising Mistakes You Must Avoid
1. Not Considering Fundraising As Optional
There are few achievements in life as satisfying as raising capital for your own dream startup. Now despite the fact that capital is one the major prerequisites for a successful business, you should still consider fundraising as an optional thing and not compulsory. You will be amazed to know that the very idea can form the base for a strong and attractive business.
Try to go as far as you can without the help of any investor and you never know when a potential investor might start chasing you! So which sounds more exciting – you chasing an investor or an investor chasing you? You know the answer, right?
2. Raising Very Little Or Too Much
How much is too much or how little is too little is a big question that has forever threatened entrepreneurs around the world. No doubt the value is directly related to the outcome of your business valuation, there is still some amount of probability that works on both sides.
Always remember that you are running a newly-started business which still has a lot to see such as new employees, new equipment or maybe, a new office too so there is no crime in securing some extra cash that can cover up these essentials. Similarly raising too much capital can again lead to unwanted expenditure as it is quite obvious that where there is money there is expenditure. You have to remember that you are raising your business with other people’s money and you have to return the profit as per the amount you are raising, so a balanced approach is a must.
3. Chasing The Wrong Investor
When you are planning to raise capital in India, it isn’t just the capital that you are running after. There are many more additional things that an investor should be able to offer you such as guidance on management and finance, valuable opinion during critical decision-making, sharing invaluable contacts and helping you boost your networking. Keeping your arms open for dumb money is not always a good idea so look for investors who are familiar with the industry you are dealing with so that you can reap maximum benefits from the partnership and accelerate the growth of the business.
4. Choosing A Wrong Time
There is always a right time for everything you do, be it flying a kite or chasing a VC. Before you start, do a proper research on the VC industry to know the time of the year when the VCs are most active. Keep your eyes on the latest news updates and on social media to track the investors activity and figure out if it is the right time to chase them.
Moreover, every VC firm has its own preference regarding the stage of investing – some prefer to invest at seed stage while some prefer to invest a later stage. At the end of the day, you may not want to spend a whole year in chasing and not making it to the next level.
These are some of the very common mistakes that you can avoid only by playing little smart. After all, it is all about showing a VC that your startup is just the right thing they are looking for and it is only possible when you show the right idea to the right person at the right time at right place.
For more information on how to raise capital in India, feel free to get in touch with us at Merger Alpha.