Investor Talks: “Startups should always be transparent with investors”, Mr. Sahil Makkar

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Entrepreneurs envision a life where they can build their dream and watch them reach the sky. As easy as it sounds, being an entrepreneur requires hard work, perseverance, and discipline. To help entrepreneurs along the way, many investors, advisors, and mentors join their vision and use their experience to help them turn their dream into reality.

Mr. Sahil Makkar is a Chartered Accountant and also the Managing Director at Punjab Angels Network. As an investor and someone with vast experience in the field of finance and business, Mr. Makkar helps startups make their entrepreneurial journey smooth and also assists them in tackling challenges. As a part of Sociobits’ Investor Series, here’s what he shared with team Sociobits:

Team Sociobits: What do you think about the future of the startup ecosystem globally?

Mr. Sahil Makkar: Even if you consider anyone at an individual level, innovation is absolutely in order to grow. Although the word startup might have come into the picture only 5-10 years ago, nations across the globe have become successful because of their innovations and the money that they make from these innovations. Now, the meaning of a startup is innovating something, turning it into a business model, and making revenue out of it. So, I think that the startup culture is still in its early stages and the real startup culture is yet to come. From a long-term perspective, the startup ecosystem has a positive growth rate in the future.

Now, the meaning of a startup is innovating something, turning it into a business model, and making revenue out of it. So, I think that the startup culture is still in its early stages and the real startup culture is yet to come.

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Team Sociobits: Is there any advice that startups should always follow throughout their journey?

Mr. Sahil Makkar: Now, I am an alumnus of ISB (Indian School of Business) and there the most important thing that I have learned is research. As a CA, I have always known that whatever is written is true and is a fact. Be it income tax, GST, or anything related to finance, whatever is written is a fact but when I studied at ISB, I was taught that every decision that you make has to be research-based. Not the kind of research you do on Google but evidence-based research. You need to be confident that whatever I am saying is right and that I have evidence to back it up otherwise it is simply a perception. So, any startup should forget about perceptions and focus on evidence-based research.

If you don’t research well, then it is possible that the idea that you have come up with has been in the market for years and someone else is working on it. Even if you come across an idea similar to yours, you can always research and learn from what they are doing right and what they have done wrong to come up with a better solution and in turn, make a profit out of it.

Consider any definition of a business; business means profits. When I say profit, it means whatever you are selling, you should be able to earn from it. If you cannot earn from it, then you cannot take care of your expenses and you cannot call that a business. A lot of startups when they start their business are inclined towards making the world a better place and the social aspect of businesses but I believe that it is also very important to see how you can make a profit out of it. There should be a plan in place for how you want to grow your business otherwise you are simply doing social work.

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Team Sociobits: How important is the role of a mentor in a startup’s journey?

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Mr. Sahil Makkar: The role of mentors is critical in a startup’s journey. For example, if you are traveling to Chandigarh from Mumbai, you’ll need the right direction. You cannot drive in any direction. In today’s times, Google Maps is giving us the right direction so in a way, it is mentoring us. It will show tell us which route should be taken, which is faster, how far is your destination, how much time will you take to cover the distance, etc. So, it is showing you the right direction. Similarly, a mentor uses the experience that he has gained over the span of 10-12 years to show a startup the right direction. If you find the right mentor, you will be in the right direction and if you don’t you’ll move in the wrong direction.

Having said this, I would also like to say that everyone loves to talk even if they are unaware of a particular thing, they will still tell you about what they feel is right or wrong. Hardly anyone will come and tell you that I am not an expert in this topic, I am not the right person to advise you about this. So, even your mentors should be advising you about the topics they have expertise and mentors should avoid giving advice on the matters they are not experts in and rather refer them to an expert. So, startups should definitely have a mentor because without them you never know which direction they are moving in. Without mentors, startups cannot grow. If you search for some successful startups, you will always find a good mentor on their team.

Startups should definitely have a mentor because without them you never know which direction they are moving in. If you search for some successful startups, you will always find a good mentor on their team.

Team Sociobits: What are the easiest and the hardest things about being an investor?

Mr. Sahil Makkar: I really think saying no to startups with a good idea is the most challenging job. They put in a lot of effort and come to us with a lot of passion but we try to figure out how will we be able to make money out of this. A lot of startups tell us our idea is great; we understand that but if you think from an investor’s point of view, we are puzzled about how we can earn from it. An investor will not give you donations because he is not into a charity so even if you ask for 100 Rs. and simply waste it, he will not invest. It doesn’t matter how much money an investor has if the investor feels you are going to waste his/her money, they are never going to invest. With this, investors don’t have the time to teach startups everything from the scratch. So, it becomes very tough to say no to a good idea that lacks a proper business model.

On other hand, nothing comes easy. In today’s world even crossing the road is a tough job. At the end of the day, if we get a chance to guide startups on what they can and can’t do, we always encourage it.

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Team Sociobits: What are some of the common mistakes that startups make while pitching in front of investors?

Mr. Sahil Makkar: A lot of startups don’t know how much money they need for their business to grow. I always ask this question to many startups if I give you one crore rupees right now, how will you use it? Many times, startups come to us with a random number as their ask but they have no clue how they are going to use it. They randomly allocate percentages in different verticals like marketing or team building but they won’t know what exactly are they going to do with this money. Again, even if I give you 100-1000 Rs., you should at least know the basic math that you will do in using it.

Team Sociobits: How important is the role of the founder in any startup?

Mr. Sahil Makkar: Funding can only be secured on the basis of two things. One is the idea and the other is the person who implements the idea that is the founder. The valuation of the company is secondary for investors but this comes into the picture only after knowing the idea and its implementation. I am an investor, I will simply be sitting and earning from my investment but the startup will be the one that executes and generates revenue from the business. So, the founder plays an important role and he is the one who can grow the startup as well as the investor’s money.

Every day people are coming up with new ideas. Recently, I watched a series called Money Heist. If you may have watched it then you will know that the person who was heading the team knew what was supposed to be done if things go north. So, considering that the mastermind of the series is the founder, he conceptualized everything, implemented the idea, guided the team, and assigned roles to everyone. Even though he was in the back end and simply guiding everyone, he had the most important role. Similarly, this is how a founder should be.

Considering that the mastermind of the series is the founder, he conceptualized everything, implemented the idea, guided the team, and assigned roles to everyone. Even though he was in the back end and simply guiding everyone, he had the most important role.

Team Sociobits: What are some of the red flags that you spot in startups?

Mr. Sahil Makkar: The base of everything is the idea and the founder. If the idea is not good but the founder is, it’s not a good fit, and vice versa. If this match fits, only then investors move forward to funding the startup. One of the red flags that I could point out is whether the founder is telling me the truth in the meeting or he is not. Sometimes startups end up lying in order to get their company funded. As an investor, no matter how great your idea is since you have lied to him he will be reluctant to be associated with you. Startups should always be transparent and truthful with investors.

Investors like Mr. Sahil Makkar point out how important is for an idea and its founder to match with each other. Even if you have a great idea, you should know how you can scale your business and generate revenue from it.

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