ARE YOU READY FOR FUNDING AS AN EARLY STAGE

ENTREPRENEURPresented by:

Ms Shuba Girish, DirectorCREDENS FIDUCIARY SOLUTIONS PVT LTD, Bengaluru

27th January 2017

STARTUP SCENARIO AT PRESENT

• India emerging as a hot hub for Startups• 11500 Startups by 2020• Top locations are NCR, Mumbai, Bengaluru, Chennai & Other

Cities• Bengaluru has emerged as the “STARTUP HUB”• In 2015 Bengaluru was ranked 15th in the global startup

ecosystem• 72% of the founders were < 35years (91% male and 9% Female)• 125% growth in 2015 as compared to 2014

2016 Highlights

• US$ 3.5 to US $ 4 Billion funding was done in India• Number of deals increased (around 924 Enterprises funded in

various forms from Seed Funding to Series A, B C etc)• 28.5% of deals in Bengaluru• NCR 1.12 Billion, Bengaluru: 1.06 Billion, Mumbai 1.04 Billion • In 2015: 575 early stage deals (Seed/Angel Funding) to the tune

of US $ 578 Million• In 2016 : 571 deals and funding done US $ 223 Million ↓

Continued

• Sectors funded were: (number of deals)• E commerce- 150• Enterprise/Saas- 105• Healthcare -97• Fintech- 86• Edtech – 58• Consumer Internet-56• Foodtech – 44• Transportation-32• Digital media – 29• Logistics - 28

Continued

• Top beneficiaries:• Ibibo: $ 200M got acquired by Make My Trip for $ 720 M in 2016• Snapdeal : $ 200 M , valuation $ 6.5 Billion• Hike Messenger : $ 175 M • BigBasket: $ 150 M• Car Trade : $ 145 M• Shop Clues : $ 100 M• Book my Show : $ 81m• Byju’s : $ 75 M• Rivigo : $ 75 M

Continued

• Number of Unicorns are increasing , the latest to join the elite group is ShopClues and Hike Messenger, the earlier ones being • Paytm, Zomato, Quikr, Inmobi, Snapdeal, Ola, Flipkart etc.• India is one of the youngest nations for growth of Startups• $ 13M invested per day by investors• Investment appetite across sectors• Dollar amount invested has fallen• Graduating from Pre-series A level to Series A facing bottlenecks• Valuations have undergone corrections• FOMO (Fear of Missing Out) based valuations are coming down

Eye Openers for 2016

• Investors are looking primarily at these economic drivers :I. GrowthII. ScaleupIII. Capital EfficiencyIV. ROIV. Unit economicsVI. Potential for market growthVII. Other attributes

Status in the PE ,VC areas

I. Slow down in Investments – funding droughtII. Valuation downsizing-Snapdeal, Flipkart, Ola, Zomato,InMobi

etcIII. Reflection by businessmen and scrutiny by Investors on the

realityIV. Investment consolidation through mergers, slashing debtV. Maturity in investment patternsVI. Both PE and VC deals fell in number and value when compared

to 2015

Status in the PE ,VC areas- continued

I. Information Technology continued to dominate attraction of investments

II. Exit and M & A values remained buoyantIII. PE investors unlocked $ 6.8 billion worth of value through exits

in 239 dealsIV. M & A activity was at an all time high- $ 61.4 billionV. Angel & Seed Investors contributed 57% of PE investment

activity in 2016VI. Big ticket deals surged in 2016 with 26 deals worth $ 6.6 Billion

Status in the PE ,VC areas- continued

I. Average PE value slipped to $ 13.1M as compared to $ 14.5 in 2015

• ASSET MANAGER NAME NUMBER OF DEALS VALUE OF DEALS ($ mn)*• Indian Angel Network Services Pvt. Ltd. 23 $1.78• Blume Venture Advisors Pvt. Ltd. 11 $2.63• Singapore Angel Network Pte Ltd. 10 $0.16• Global Super Angels Forum 9 $1.44• The Chennai Angels 9 $0.16

Status in the PE ,VC areas- continued

• Private Equity Funds• ASSET MANAGER NAME NUMBER OF DEALS• International Finance Corp. 6 $161• IDFC Alternatives Ltd. 5 $239• TPG Capital Inc. 4 $218• PremjiInvest 4 $26• Fairfax India Holdings Corporation 4 $56

Sectors that attracted investors in 2016

• Education-Tech• E commerce• Saas• Fintech• Healthcare• Foodtech• Hyper local• Consumer internet• Some IPOs that were successful were that of Infibeam (450 crores);

Qucikheal (451 crores) oversubscribed by 11 times

Outlook for 2017

• M & A transactions expected to increase • Exits will be IP driven rather than market share basis• IP based product startups will get to benefit• Other areas to benefit will be Artificial Intelligence, Machine

Learning, IoT, Disruptive technologies, Edtech, Fintech, logistics etc• Early stage funding will increase but later stage funding will be

done on an evaluated basis • Investors are sitting on capital to be deployed

Outlook for 2017-continued

• Blume Ventures closed 2nd fund USD 60 M• Nexus ventures closed 4th fund USD 450 M• Accel Partners India closed 5th fund USD 450 M• Sequoia Capital closed its 5th fund USD 920 M

• Though the predictions are that investment climate would pick up as it has gone through the correction cycle still investors are wary to risk investing in new ventures.

Entrepreneur’s DNA

• Concept, Creativity, Confidence• Discipline• Self Starter and Motivator• Competitive• Open minded• Flexible and Adaptable• Ability to lead• People person • Realistic• Determination• Honest and loyal• Strong Ethics• Risk lover• Down to Earth• Intuitive• Forward looking• Work on constructive strategies for their business

Investor’s DNA

• Proactive learners• Planned Exit strategy• Patience & Persistence• Strong Emotional Control• Well defined investment strategy• Focused on their investments• Use trend to their advantage• Thrive on Risk• Leverage the opportunity• Learn from mistakes• Listen to Professional advisors• Strong financial background• Killer shark instincts• Passionate Mentors

Investor’s criteria before deciding to invest

• Promoters and a great team• Pedigree and background of promoters-have they been around• 2 to 3 co-founders• Track record• Scalability• Large market size• Growth potential• Monetization and business model• Disruptive and technology enabled• Salability

Funding Options

• I. Early Stage: Bootstrapping (Own funds) Loan or Equity from friends and family

Next Stage: Angel/ Seed Funding –normally from USD 50,000 ~ USD 2MHigh net worth individualsStartup fundsAccelaratorsIncubators

Funding Options -continued

• Blume Ventures ; Unitus Seed fund; India Quotient ; Kae Capital ; Seed fund etc

• III Later Stage:Venture CapitalPrivate Equity Funds – Strategic / Financial InvestmentBank loansConvertible Debt (Debentures)Government Institutions – SIDBI, NABAARD, Private Sector like – IL&FS Trust Company LtdOverseas PE and VS fundsAngel Networks –Indian Angel Network etcStartup Competitions, Crowdfunding (small ticket size for social enterprises)

Sacrifices to be made from the Entrepreneur's side

• At the time of Angel/Seed funding 10 to 15 % stake to be given away to investors depending on the value of investment and the valuation arrived at• Participation in the Board of Directors• Participation in the operations of the organization• To VCs and PEs higher equity stake may have to be given anything

above 25%• Need to give the promised return on investment ranging from 22%

to 24% along with the investment• Achieve the promised results

How do you prepare yourself

• Evaluate your ideas on a prudent basis• Gather your facts correctly• Prepare an honest pitch• Don’t exaggerate-no investor is going to fall for your hype• Be realistic in your projections and modeling• Have your elevator pitch ready along with your presentation

deck• Remember no investor is ready to listen for more than 15 to 20

minutes, you are one among the many

How do you prepare yourself

• Take the help of experts and professionals• Have a mentor to guide you• Develop a good network in the funding world• Be aware and knowledgeable about what is happening in the current scenario• Don’t repeat your mistakes• Have a fresh approach• Remember you are alone only if you want to be• Back up your teams and your people• Exercise patience• Are you there in the happening place

How do you prepare yourself

• Do not over value your ideas just to attract larger investment• Stories do not sell• Build a proto type• Show some performance • Listen to your instincts and do not get carried away by others

suggestions • Have the obsession to make your idea a grand success and work

towards it• Last but not the least have your back up plans• Do not follow the herd

Latest amendments by SEBI

Limit of Angel investors increased from 49 to 200 for participation in a schemeAngel investors can now invest in Startups within 5 years of incorporation-earlier the period was restricted to 3 yearsMinimum investment amount by any Angel Fund in any Venture Capital is reduced to 25 lakh from 50 lakhs.The lock in period for any investment made by an Angel Fund in venture capital undertaking is reduced to 1 year from 3 yearsAngel Funds are allowed to invest in overseas venture capital undertakings upto 25% of their investible corpus in line with other AIFs.

Tax incentives for 3 years for Startups provided certain criteria are metPlease refer to startupindia.in for a host of incentives for startupsNasscom has initiated the 10k startup planGet mentored regularly by experienced leadersGovernment has set up 10,000 crore fund for startupsSME and MSME have a lot of support from the government –interest rate on loans, purchasing preferences, winding up etcEducate yourself what is there in it for you

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