Bootstrapping refers to starting a self-sustaining business without external funding. There are various stages of fundraising including ventures launched with funding from friends and family, beta products launched with angel investors, and later stages involving seed funds and venture capital. Investors look for businesses rather than ideas, strong teams, risk management plans, good governance structures, and exit plans. Valuation is determined based on factors like discounted cash flow forecasts, comparable company multiples, and the amount of equity exchanged for the investment amount.

1. DEMYSTIFYING STARTUP
FUNDING
WHEN , WHY AND HOW OF
INVESTMENT
By Sudeep Singh

2. WHAT IS BOOTSTRAPPING ?
The art of starting a self
sustaining process that is
supposed to proceed without
an external input.
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3. PROCESS OF BOOTSTRAPPING
• MANAGE FOR CASH FLOW,NOT PROFITABILITY
• BUILD A BOTTOM UP FORECAST
• SHIP , THEN TEST
• FORGET THE PROVEN TEAM
• FOCUS ON FUNCTION , NOT FORM
• PICK YOUR BATTLES
• GO DIRECT
• POSITION AGAINST THE LEADER
• TAKE THE “RED PILL”
• GET A CONTROLLER
• UNDERSTAFF AND OUTSOURCE
• EXECUTE
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4. FUNDRAISING

5. UNDERSTANDING FUNDRAISING
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6. WHEN ?
• IDEA IN A PRESENTATION
• PROTOTYPE READY
• CUSTOMER TRACTION
• PAYING BUSINESS
• PRODUCT MARKET FIT
• MULTIPLE CUSTOMER SEGMENT
• BUSINESS MODEL FIT
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7. VARIOUS STAGES OF FUNDRAISING
Various stages Age Revenue Amount to
be Raised
From Whom
Venture Launched 0-0.6/8
yr
0 5-35 Lacs Self,Family,Relatives,Frie
nds,CrowdFunding
Beta Product Launched
B2B : Good Client Pipeline , A few
clients in trial or on board
B2C : Product used by real clients
, A few paying clients on board
0.6/8-
1.5 yrs
Small
Amount
25-75 Lacs Self,Family,Relatives,Frie
nds,Angel
Investors,Accelerators,
CrowdFunding
Stable Version
Regular Client Growth
1.5-2
yrs
10-15
Lacs/yr
50-200 Lacs Angel
Investors,Accelerators,S
eed Funds
Product-Market fit found
Strong and consistent client
growth
Clear product and revenue for
next 2-3 years
1.5-2.5
yrs
20-50
Lacs/yr
100-500 Lacs Angel Investors,Seed
Funds,Few Venture
Funds
Business Model Fit found
Clear growth path for next 3-5
years
Consistent growth in revenue
from clients
Potential Breakeven
1.5-3.5
yrs
100-500
Lacs/yr
300-2500 Lacs Venture Funds
Note : The values in the above table are indicative only
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8. TYPE OF INVESTORS
Individual
Family /
Friends
Entrepreneurs
/ Industry
Leaders
Organized
Angel Funds
Seed Funds
Institutional
Funds
Individual LP
Funds
Incubators /
Accelerators
Infrastructure
Only
Accelerator
Crowd
Funding
Incentives
Investments
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9. HOW DO YOU GET A LIST OF INVESTORS?
Your Network
Conference / News
STARTOSPHERE.IN
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10. WHO IS THE RIGHT INVESTOR ?
• Who has chemistry with the team
• Who has a willingness to help and even
mentor
• Who believes in the team and their ideas
• Who has relevant connections
• Who has domain knowledge and expertise
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11. WHAT DO INVESTORS LOOK FOR

12. INVESTORS LOOK FOR
• Business ( not an idea )
• The Team
• Risk Management Plan
• Clean Structure and Governance
• Exit Plan
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13. WHAT DOES IT TAKE TO MAKE A
BUSINESS?
• Idea !
• Client’s need/expectations
• Ability to Monetize
• USP / Competitive Advantage/Product
Differentiation
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14. WHAT MAKES IT BIGGER, BETTER AND
LUCRATIVE TO INVEST?
SCALABILITY
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15. THE TEAM
• Chemistry
• Skills / Domain Expertise
• Structure and Role Definition
• Founder’s skin in the game
• Ownership Distribution
• Previous Track Record
• Access to Mentors
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16. RISK MANAGEMENT
• Team Risk
• Market Risk
• Client Traction Risk
• Execution Risk
• Exit Risk
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17. CLEAN STRUCTURE AND GOVERNANCE
• Equity Investments, Private Limited ,Public
Limited and One Person Company are
possible company structures
• Clean Equity Structure
• Intellectual Property
• Business Ethics and Board Governance
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18. EXIT PLAN
• Subsequent Rounds of Investments
• Merger and Acquisition
• Initial Public Offering
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19. VALUATION

20. MODELS OF VALUATIONS - EQUITY
• Discounted Cash Flow
– Forecast of several years of revenue and expenses
– Discount the resulting cash flow back to the present using an
expected rate of return
• Cost to Recreate
– An estimate of what it would be to duplicate the venture
– Make v/s Buy decision
• Market Multiple
– Value the company by looking at recent sales or offerings of
comparable companies and then using a multiple to adjust
– Typically 3x to 5x of projected revenues
– Most commonly used
• Exit Based
– Estimate target exit return
– Calculation dilution the company will go through to achieve the
target
– Plan for that dilution upfront and ask for a higher stake
– Very popular with institutional investors
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21. MODELS OF VALUATION-DEBT
• Convertible Debt
– Early stage companies are difficult to evaluate
– Deferred valuation tied to next round of funding
– A discount on valuation is asserted
– Base valuation to minimum valuation
– Monthly discount
– Cap on the maximum discount
– Least popular valuation process in India
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22. HOW IS VALUATION DETERMINED ?
• If an Investor wants to invest 100 Lacs for 25%
Post Money Valuation
– Post Money Valuation → 100 Lacs / 25% = 400
Lacs
– Pre Money Valuation → 400 Lacs – 100 Lacs = 300
Lacs
• If an Investor wants to invest 100 Lacs for 400
lacs Pre Money Valuation
– Post Money Valuation → 100 Lacs + 400 Lacs =
500 Lacs
– Percentage of share in the company → 100 Lacs
/ 500 Lacs = 20 %
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24. Startosphere is a hybrid crowdfunding
managed marketplace for investors
to identify and meet startups across
industries. It also enables the startups
to raise funds for both creative
projects as well as for businesses.
Our mission is to build an ecosystem
where ideas can come to life. We
believe that lack of funds should not
stop great starts. This way startups
would have the impetus to make their
ideas a reality.

27. WWW.STARTOSPHERE.IN
@stratosphere_in
facebook.com/startospher
eindia
THANK YOU