© 2014 E-HEALTH TECH. BUSINESS INCUBATOR
(An initiative of eHealth Technology Business Incubator,
Sponsored by Department of Science and Technology (DST), Govt. of India)
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Extremely few companies actually get funding and if they haven’t fund-raised before, the chances of doing it wrong are incredibly high. Money comes at a price and often that price is too high or has onerous conditions attached. They have to be explained and sensitized, what they are getting in to. The seed funding share holding agreements of the Seed fund puts in reasonable controls that ensures the start-up companies take proper precautions before diluting equity. But on some occasions start ups seek post-facto approvals after having taken an irrational decision on dilution. Very often the pressure of cash flows is so intense, one can easily succumb to such decisions
eHealth Technology Business Incubator
Technology Development Board (TDB)
Govt. of India
Special Innovation/Small B Branch, Bangalore
Govt. of Karnataka
Visveswaraya Technological University (VTU)
Dept. of Science
Govt. of India
Funds must also keep a close tab on the trends. Know which business models investors favour, and get to know the people you want to approach is 50% of the battle won. There is a lot of money out there and many investors, but only a few genuinely good ones. So getting a start-up ready for a beauty contest is very similar to the work of a make-up artist. After we have helped 30 odd companies, we have realised that we actually have to coach our Star-ups to be smarter than their lawyer and VCs. We now have comprehensive punch list of terms and conditions used in financing rounds and I strongly recommend our Start-ups to looks into them closely while raising funds.
We worked various options for partnerships between start-ups, Governments programs and Banks. This is important because if start-ups can get Seed / Government investment, it makes fundraising from other investors easier. Part of the due diligence has been done and it helps keep dilution of ownership lower when taking investors on board. The first two companies we worked with didn't require external investment. However, subsequently as we evolved the Unified Funding Framework the speed of execution of the Start-up changes dramatically and consequently the seed mortality. On a Unified framework we had Government Grant, Seed Fund and possible debt funding for a commercial Bank (for those start-up that could demonstrate a revenue model) made available to Start-ups. Many start-up companies believe that they have a great idea and build a team and strategy around it. But the sheer process of getting a business plan and also getting the components right for our funding process was more valuable than funding we provided from the Seed Support fund. Some start-up even had a prototype ready but had no clue on commercialization including basic requirements like patents. But in a traditional model with independent fundraising it’s a completely different ballgame. Having a viable business idea is very different from having a fundable business.Ideally, everybody who gets funding should have a viable business.