Everything you should know about a Start-UP
There is something which every young guy or girl should know about startups. There is a misconception among many that startup is a business. And it’s not wrong actually, there is one aspect which is neglected very often by the people- it’s that startup is less a business and more a platform, a stage and a period to ‘Experience, Explore and Evolve’. Yes!! It is about those three E’s.
It is an expedition where you transforms yourself and build an empire from scratch. Startups is a win-win opportunity for everyone because even if your startup doesn’t work, it will bless you with so much of learning which actually cannot be gathered throughout your school or college life. Startups demand only one thing from us – Untiring Effort. If you are willing to work for 16 hours a day for 10 consecutive year then no one’s gonna stop your startup from becoming a Unicorn company. The ingredients for a good startup is EFFORT, IDEA and a bit of LUCK.
So, consider Startups less as a business and more as a phase to learn.
Before getting into the depth of the MANTRA for Start Up, we need to know some important terms associated with startup- the terms which we use very often but we are not aware to its actual meaning.
1. Entrepreneur and Entrepreneurship– I am preety sure that most of you don’t know the actual meaning of both this term. And it’s not your fault. The dictionary says that anybody who a runs a business with financial risk is an Entrepreneur. But it’s not. Entrepreneurs are people who perceive an unsolved problem of the society. They then start solving it and generate a business out of it. Basically entrepreneurs are people who sell solutions and ideas.
2. Business Model– It is the blueprint of your business. A basic system and structure on which your business flows. It describes the main prospect and soul of the business- what are you offering as a product or service?, who are your customers?, what is your revenue model?, what is your USP?, This is what a Business Model is all about.
Basically, everything which is important and crucial to your business comes under Business Model.
3. Investor and Funding – There is something without which no one can run a business. Every business requires finances for its operations. Now the question arises that since most of the startup founders are college goers who are in their early 20’s, so how will they put so much liquid money into their startups? If one doesn’t have the money then he/she must have to look for some investors or rather say ANGEL Investors. They can approach individual or entity who are willing to invest in their idea. Now you may think that why can’t the start up founders approach banks for loans? Start ups are associated with huge amount of risks and a lot of cash is burnt into it for a longer period of time and there is no guarantee of returns atleast in the short run. Since there is a risk factor attached to it so no banks are willing to give loans to startups. Now these people or entity who invest in startups are called investors. Generally the rich industrialists invest in startups whose ideas they consider as ‘One in a Million’. Most of the startups in India is invested by top industrialists like Ratan Tata, Mukesh Ambani, and Azim Premzi. The investors have two things in their bag- Portfolios and Anti-Portfolios.
The startups in which the investors have invested and it became successful are in their Portfolios and the startups in which they refused to invest and still it became successful are in their Anti-Portfolios. So basically it means that a good investor is that who has ZERO startups in their Anti-Portfolios.
5. Minimum Viable Product– To keep it simple, MVP is like the Beta Version of your product or service which you will be offering. It possesses all the important and key elements of your product. Let me explain this to you more clearly- suppose your startup is a Café Shop then you don’t require a number of waiters, chairs, tables, chef etc. in the initial phase. You can just start with a couple of tables with two sets of chairs and you can prepare the orders by your own and can serve it by your own. That is the MVP of your Café Business.
6. Pitching– Most of you are unaware of this term. But this is actually the most sensitive part for any entrepreneur. This is that crossroad from where you company will either become a ‘Million Dollar Company’ or it will just remain an unimplemented idea. No matter how good your idea is but until and unless you can pitch your product effectively you won’t be able to kick start the things off. It is in fact a make or break for your business. Pitching is where you pitch potential investors for investing in your startup. Here you present them your business model and try to influence them with it. You have to actually convince the investors to give you their money by explaining to them what are the benefits for them. YESS!! This is the most challenging task for any entrepreneur.
Another thing which should be understood – you can’t miss telling investors anything important to your business and at the same time, you can’t reveal anything confidential. So, you have to play very hard and very smart.
Well, by now you all are aware of the terms associated with startups. Now let’s enter into the next section of the MANTRA:
Tell me If you are interested in Messi and I’ll keep talking and discussing about Kohli then is it gonna make any sense to you or will you be interested in the conversation with me further? No, Right.
So, how you can’t expect this from an investor. He/She is also not interested in knowing all the things about your business. And still if you tell them then, guess what? You are out of the League.
Therefore Pitching requires preparation. It takes time and effort to plan what all things an investor is interested in listening to and what all not. Pitching is not like stupid inter college competitions where you need to present some stupid stuffs. It is more realistic and crucial. Proper research need to be done before Pitching. Research about the investor, his firms, his portfolios and anti portfolios and most importantly whether he/she understands your business. For example if your startup is technical in nature and the investor has zero technical knowledge then it is better for you to stay away from that investor.
So let us go into this process. Let’s see that ‘ What an Investor looks in a Start-Up ?’
1. Problem– This is actually the Origin of Your Start-UP. Startups are all about solving problems. They exists because of the existence of unsolved problems. For example, due to the problems faced by Indian hotels and inns we found the emergence of OYO Rooms ( Own your Own Rooms) , due to the problem of home delivery of food we found the emergence of Swiggy and the list is never ending. Tell the investors that what problems you and your team have perceived. Make him/her understand that why do you even consider it as a problem? What utility can be derived by the society once this problem is solved? And finally explain him/her that how this problem is giving birth to multiple problems.
2. Solution – This is exactly what the investors will be looking for. Once you have explained the problem then present your Business Plan as a strong solution to that problem. Describe and explain your entire Business Model and make them understand that why it is a solution? , who will be benefited? And most importantly how it will be profitable? Tell them everything from top to bottom.
3. USP– Unique Selling Proposition means- what makes your idea different from others. Differentiation is a crucial aspect of everything. Tell them that what is different in your business idea. Explain that how it is different from your potential competitors, from other products, from customer utility etc. A good USP will help convince your investor regarding the belief that you are going to make a space in the market. And that is the only thing of concern for an investor. After all it’s their money which is at stake. Let me make it more clear to you with the help of an example- Starbucks is a big coffee house chain in today’s date. There are many things which are different in case of Starbucks but one of those is the signature of customers on Starbucks’ cup. This idea differentiates their product with the product of their competitors like CCD , they use human psychology to generate more customers flowing into Starbucks’ outlet thus creating crowding off from CCD. This is their USP.
4. Customers– Customers are the heart of every business. Without Potential Customers any business can’t survive. Defining your target customer is the next thing you should do before your investor. Explain that which section of the customers will be willing to buy your product and how you have identified them. It reflects that how better you understand your business and hence your customers. Let me explain this one also with the help of an example- Suppose your business is about hair dressing and salon then it is very sure that bald people are not going to be your Potential Target Customers. So accordingly you have to do the marketing of your business.
5. Market – With Market I actually mean the underlying Market Conditions. Tell the investors what are the present conditions and what could be the future prospects of the market for your product. No matter how good or bad the market scenario is, tell them the truth. Because an Investor invests less in a Business and more on an individual. For example let us take current market scenario, suppose you have an idea of making oxygen masks at a very cheaper rate then this market condition suits you perfectly. With increase in pollution there is a high chance of having a great future market prospect for your mask business. So you need to make the investor understand this while Pitching.
6. Competitors– It’s more like punishing yourself. But you have to mention the names of your competitors. Remember that competitors makes you better. Have a deep study and research of every big competitor in the market. Mention what are the things your competitors are lacking and how you are bridging that gap. Tell your investors that how you have an edge over them. Studying more about competitors help you having a better USP and it will leverage your business idea before your investor.
7. R n C – R n C refers to Revenue and Costs. Any investor is most interested in knowing about his/her business. As I said it is their money which is at stake. They are interested in knowing the return on their investments. So here it is. Tell them how exactly your business is going to make MONEY. Explain them your Revenue Model. Mention all the sources of revenue. As cost is something which is inevitable, so explain the cost structure to your investors. What are the fixed and variable costs going to incur. Tell them about the expected duration of all the three stages of production. Tell them that where your business is going to consume how much of money. Explain the rationale behind your expected earnings in the first financial year of your business. Explain how will you reach your first thousand customers, ten thousand customers and finally a hundred thousand customers. Tell them about the ESP and stake planning among the founders. And finally explain them the future benefits from your business.
Revenue and cost are very critical aspect of any start up. More than 90 % of startups fail because of poor management of these two tools.
8.Talk about Yourself – This is what you have to plan. This is where you end your Pitch. Mention whatever you think an investor should know about. Be confident and express belief that you will get the funding cheque. Explain what is the reason that you are crazy about this problem and you want to solve it. Most importantly, as it is the end of your pitch try to influence and touch the investors emotionally. Because emotions are powerful than anything.
The Final MANTRA:
As you all must have understood by now that the most important thing is to PITCH your product or service. So Let me give you some ‘TIPS for PITCHING’
1. Tell a story while Pitching. This increases the interest of the investor and make your pitch more effective. It is not mandatory to use real stories, you can hypothetically make the story and characters.
2. While explaining your Business Model make sure that you are not missing out anything , however minor it is.
3. Keep your MVP ready and explain it. This will influence the investors as it shows that you really care about your startup and you are committed to it.
4. Don’t take much time.Keep it short but effective. Use catchy words or phrases to make your point.
5. Tell the investor about yourself and your team, tell them what role each one of your member plays. Make it a bit emotional.
6. Be Genuine and Honest. Focus on your objective of drawing Funds.
7. Reflect your spirit, passion and dedication in your Pitch, in your words and in Yourself.
8. Practice Pitching before a mirror
-DC SIR
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