A start-up, a serial entrepreneur, or a seasoned businessperson – every venture needs funds infusion at various stages of growth. Even in cases where the start-up is bootstrapped initially, it needs to raise funds to meet the needs of the venture which might centre around resources, technology advancement, product development, marketing, etc. These funding stages are seed stage, early stage, early stage growth, private equity funds and each of these cater to different stages of growth of the company. “Besides these, there are also nuanced terms like pre-IPO funding, leveraged buyout, etc. I think one of the things women entrepreneurs grapple with is the terminologies which sometimes can be daunting. The best way to go about is to keep things simpler and decide if you are looking at raising the capital through equity or debt. And mostly try to not offer a lot of equity in later stages and raise funds through debt,” said Soumya Rajan, Founder & CEO, Waterfield Advisors, while speaking at Express Awards for Women Entrepreneurs (ExpressAWE) Masterclass.

Raising capital, while important for a start-up venture, needs a lot more caution that one might think of when at it. There are three kinds of investments – the high net worth individuals who provide capital in exchange for the equity in companies; the second group is the institutional who are PE and Vcs who earn profit from investing funds in start-ups; and the third is the family office which is actually a hybrid between VC and angel investor. “While the advantages and disadvantages of all of them are varied, an entrepreneur should try to keep majority equity of the start-up to themselves. They should not go for one institutional investor but many investors so that you have a good hold, decision-making ability, etc. of the start-up to yourself. Every time you raise a round, as a founder you get diluted. It’s only wise to not go for too much dilution of the company for funding,” said Soumya Rajan. According to her, 26 per cent is an important threshold for a founder/ promoter group, and debt is a better way to get capital infusion and avoid dilution and can also help protect promoter equity.

The funding pitch

The overall process of landing the capital to grow a company is exhilarating and most often than not, takes the focus of founding members from running the business to the pitch and the process of securing the fund. Besides the basics of pitching for funding, one needs to also work on the negotiation part, the kind of capital they need, the terms they would agree on so that their future options are not shut, etc. “I think the basics of pitching should be clear and women entrepreneurs especially need to prepare more on their pitches. For structure, I feel instead of crowding it up, a maximum of 10 slides should be enough and the overall pitch should last for 20 minutes maximum. One needs to also have clarity on if they are focusing on metrics or the bigger picture of what the firm is all about and aims to be going forward. In terms of content, it should not be elaborate but cover the basics like business model, founding team, competition, fundraise requirement, etc.,” said Soumya Rajan.

She also pointed at the potential gender biases that could come in the questions by the investors and said that women entrepreneurs need to be ready for such questions. Few tips from Soumya Rajan, for making the funding pitch, are: entrepreneurs should have a list of potential investors, should keep practicing their pitch, should not hesitate in following up, and always have risk mitigation strategies ready during pitches. She also advised women entrepreneurs to follow all due diligence processes and take every step of signing the term papers, legal documentation, etc. with caution.