Investors and mentors play a very important role in the journey of entrepreneurs and startups because business is a playground where you only learn by playing. No matter how great your idea is, it needs the right direction and guidance that can only be provided by the right investors and mentors.
Mr. Vedant Ahluwalia is the CEO of Dataviv Technologies and also the VP of Stanford Angels. Having more than five years of experience, he has vast experience with several unicorn startups and established large companies spread across various sectors. Here’s what Mr. Ahluwalia shared with Sociobits for startups who are looking to raise funds and certain things they should be careful about.
Team Sociobits: What do you think about the future of the startup ecosystem globally?
Mr. Vedant Ahluwalia: If you look at it from a global perspective, there are a lot of new markets forming globally. From the startup’s perspective, Berlin is very good for Europe, California is one of the biggest, and Australia also has a lot of unicorns coming up. So, every country including India has startups that are trying to create themselves as unique or different from other startups. Globally, the startup ecosystem is going to see a positive forward trend. Also, investments are reduced in the venture capitalist community for companies in the later stages but interest in early-stage companies, new innovations, etc. remains. From a global startup, standpoint there is a very positive outlook on technology and innovation that can power the future growth of industries.
Globally, the startup ecosystem is going to see a positive forward trend. Also, investments are reduced in the venture capitalist community for companies in the later stages but interest in early-stage companies, new innovations, etc. remains.
Team Sociobits: What do you think about the funding crunch that the startup ecosystem is facing due to global economic instability?
Mr. Vedant Ahluwalia: As said by global leading investors, now is the best time to be doing a startup, as it is at such times that the best sustainable companies have formed and blossomed. Innovation when funding is limited tends to attract and promote mostly the best startups as the criteria for investment tends to become harder. That said, there are funds available for the right ideas and the right founders. Historically, multiple companies like Google were formed in similar periods.
Team Sociobits: How important is the role of mentors in guiding budding entrepreneurs?
Mr. Vedant Ahluwalia: Mentors play a big role for especially entrepreneurs who don’t come from a business background. Someone who is just beginning their entrepreneurial journey needs a lot of guidance because they can avoid a lot of mistakes when they have a second-time founder or investor that can advise them about a lot of decisions that should be made at an early stage. A lot of successful startups have had mentors involved. Young entrepreneurs should look at onboarding a mentor or advisor that can guide them on better decisions, knowledge of markets and products, etc.
Team Sociobits: If you would like to give one piece of advice to all the budding entrepreneurs who are looking to raise funds, what would that be?
Mr. Vedant Ahluwalia: Although this may seem like controversial advice, I would like to tell them to not raise funds until is absolutely necessary. What happens is, if you take funding too early, you end up diluting your equity towards the end. (https://www.bricks4kidz.com/) By the time you reach Series E or Series D, you are left with very minimum equity and investors take a large stake at the beginning depending on which fund you choose to go with. Some startups have managed to retain significant control eventually but that is because of strategic investments coming in at the later stages. There are many ways you can raise funds so I definitely advise that if it’s not too necessary you should delay it. This way you can get a better valuation and less dilution which is always helpful in the long run.
Although this may seem like controversial advice, I would like to tell them to not raise funds until is absolutely necessary. What happens is, if you take funding too early, you end up diluting your equity towards the end.
Team Sociobits: What have you learnt in your journey as an investor?
Mr. Vedant Ahluwalia: Since we invest in relatively early-stage startups, it is a lot about the founder. As an investor, you have to understand their desire to achieve what they want to achieve and their ability to solve problems, pivot, and move to your solutions to solve the problems in a better way. In the end, to sustain a business, profitability and similar metrics play a very key role but in the early stages, there is a lot of problem-solving that comes into the picture. That’s when we try and find an entrepreneur who would be a very good fit for the business problem that we are trying to solve.
Team Sociobits: How do you spot a good founder?
Mr. Vedant Ahluwalia: The problem and the founder have to be related and the motivation that he/she has also plays a key role. A good founder is basically more motivated than a normal person to solve a particular problem and you can judge this by interacting with them and understanding why they are trying to solve it. Any problem you come across in the market, there will be at least 10-12 people trying to solve that problem at different stages and using different approaches. You need to judge the capability and desire that the person has to solve the problem and how far they are willing to go to achieve that success because it’s not easy to reach the top looking at the competition and the space you are in. So, to judge that someone will be among the top four in their space is a skill.
Team Sociobits What are the easiest/toughest things about being an investor?
Mr. Vedant Ahluwalia: There is nothing easy about being an investor although it may seem that way from the outside. You have to predict trends, essentially know the future, be accountable for portfolio returns and compete for access and investments in the best startups that are only a handful. The toughest is definitely your anti-portfolio where you have made decisions that the market has proven wrong. It does make you question your hypothesis sometimes as to why you rejected that startup but eventually your role as an investor is to pick a handful from a lot of brilliant startups and you’re bound to miss some.
It does make you question your hypothesis sometimes as to why you rejected that startup but eventually your role as an investor is to pick a handful from a lot of brilliant startups and you’re bound to miss some.
Team Sociobits: Could you point out some of the mistakes that businesses make while pitching investors?
Mr. Vedant Ahluwalia: When first-time entrepreneurs pitch in front of investors, they talk a lot about their product. This ends up being a long discussion on why the product is the best, why is it technologically advanced, etc. That takes up a lot of time and while it is important, there are also a lot of other important things. This includes the revenue, current traction, market sizing, etc. so the kind of flow in which they need to provide all the details to convince the investor is something a lot of founders lack. A founder is definitely motivated because of his/her product but an investor tends to look for sure-shot startups that have huge potential. Thinking from the investors’ mindset is something startups, entrepreneurs, and founders should look at.
Team Sociobits: Could you point out some of the red flags that you have come across on your journey as an investor?
Mr. Vedant Ahluwalia: Sometimes startups tend to overcommit to numbers and claim they can achieve viral growth or 10x growth in a certain period which doesn’t seem feasible. And since we are used to seeing many similar ideas in the market, we do know the growth rates. The aspect that we judge you on is the comprehensiveness of your analysis of your space and sector. So, some areas where startup overcommit, even beyond optimism is a red flag. The person may have not done enough research or have understood the space very well.
Another red flag is omitting details that you should absolutely know. It also becomes a red flag when certain numbers like customer acquisition cost, lifetime value of a customer, etc. are not worked out and shared as it shows a lack of focus on the business aspect. So, having a comprehensive pitch always helps so that you can understand the company from a holistic perspective. Another one is having the company in existence for a long term but not having good traction yet.
Investors like Mr. Vedant Ahluwalia put a lot of factors that startups should look at into perspective so their journey toward the top becomes clearer.