“Hello, please let me know if the offer is still on the table?”, with trembling hands and lot of courage, I pressed SEND, put down the phone on the table and turned to my laptop.
Though I could sense the sudden change in interest, I wished the investor would never reply because it would be too painful. Somehow I was hoping for a miracle. I scrolled through my Facebook feed but my mind was still focussed on the phone. No reply. My news feed was filled with posts from YourStory and Inc42 with news like 2 IIT Mumbai Alumni raised X million $ funding from Y investor. 3 IIT Delhi students raised 2nd round of funding from another investor. Why didn’t anyone tell me to join IIT, I cursed myself.
**TINNGGG**, somehow everything around me became dead silent as I read the message.
“We think that the risk has increased and we decided not to pursue this further”, the investor replied.
We were screwed now. The discussions were happening for the past 2 months. Everything was decided. We got the commitment, marketing plan was ready, we hired new employees, pre-ordered a huge batch of t-shirts. Only thing needed was the funding amount and we would have exploded. The sudden withdrawal from investor at the last moment left us completely paralysed.
We messaged each other for the next 30 mins trying to know the reason for the sudden change but nothing good turned out. Almost in tears, I ended the discussion with a final message, “I don’t understand the sudden change, but we planned everything based on your promised commitment. I won’t force you to change your mind but I would say this. I am confident in my abilities and I would surely make the coolest t-shirts brand in India. With funding, I would have achieved it sooner. Without funding, it will take some time but it will happen for sure. Wish you all the best your in endeavours.”
We were so angry and disappointed. We planned so much based on the amount we were going to receive. Sitting at Paradise Restaurant, over a jumbo pack of Chicken Biryani, me and my partner discussed for hours what went wrong, how we could have avoided it and the future course of action (somehow eating your fav food when distressed makes the pain go numb).
Here are the lessons I learned after my first encounter while raising funds –
1. Do you really need an investor?
Think about what is your ultimate goal. Are you happy with having a decent sized company making good enough profits while maintaining full control? Then don’t raise funds just because everyone else is doing it. If the only thing affecting your ultimate goal is lack of funds and you cannot raise funds on your own, then finding an investor is a way to go.
2. Fund raising is not a separate activity
Once we achieved good traction, we focussed fully on raising funds and somewhat lost focus on the ongoing business. Raising funds takes a lot of time and energy which can be utilized in growing your business. If you have more than one co-founder, one person should focus on fund raising and other should continue growing the business. Funding may or may not materialise but a sustainable business will keep you in the race.
3. Omg.. He/she said YES? Don’t plan the wedding yet
We had got a commitment from the investor and stopped fund raising activities. After that we utilised all the time in planning how we were going to use that money for growth. We saw a slight downfall in daily no. of orders but we thought no problem, as soon as the funds arrive we will start aggressive marketing and will make up. It was a mistake and it backfired. Ultimately the investor backed out and we were left with a down hill slope in growth and lot of debts.
4. What’s mine is yours, not
Do not share every single detail about your company, plans, growth strategy, competitors, etc to the investor until they’re fully on board. We showed all of our cards based on the word of commitment. We showed who our main competitors were, how much money they are making, etc and it’s possible we might have shown the grass much greener on the other side.
5. Will you have babies together?
Before putting rings on fingers and saying vows, at least ask if you are going to have babies together. Meaning, do you both agree on the same exit strategy? In the future, if the investor wants to sell off the company if a good offer arrives and you want to retain it, it will turn very bad. Nothing wrong in asking upfront, “what exit are you looking for?”
6. It’s all about money, honey
Fund raising and getting an investor on board might sound great but ultimately it is a business deal. And nothing wrong with that. They are looking for great ROI and you are looking for quick growth potential. Still, please check if you are marrying a cheque book or a great partner? I was furious when the deal was cancelled, but I looked at it this way – that it’s just a business deal. They saw some risk or they found someone better or they changed their mind, anything can happen. You can’t blame them. That is why maintaining focus on growing a sustainable business is a must, so that you don’t fall, if funding efforts do not materialise.
7. It’s not done until it’s done
We made the mistake of not pursuing other offers. When we got this particular commitment, the investor told us it’s final and do not look anywhere else. We got inquiries from 2-3 investors after this initial commitment but we politely refused them. Now how bad it would appear look if we went back and told them the initial investor refused and so now we have come to you.
8. It’s not the end
We were so down when this happened. We wanted to jump in chullu-bhar water. Got lots of thoughts of shutting down or selling it off, but we didn’t. Funding efforts did not succeed? No worries. Remember you did not start company just to raise funds. Fund raising is just an activity to grow your business. Focus on making a sustainable and profitable business, even if it’s small.
Finally, what I learned is, fund raising is not the Heart of business but just a Part of business.
PS – I used Alok sir’s template for making the Investor Deck and it’s amazing. Trust me, the best one out there according to Indian audience.
I can be reached on twitter – @mubaids
The article was first published on blog The Lazy Ninja
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Read a RodinStar post by the same author:
Why you should never give up on your dreams
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