By Vibhuti Channa, Espark-Viridian, India
Every industry has its cycles and typically with each turn, there are learnings that come through which help businesses become more robust. Likewise for the entrepreneurial world, with the long overdue correction in the whole business valuation and investment component of the start up company, there will be learnings that will help us develop and grow stronger businesses. As part of this ecosystem it is vital that we bear this in mind and fold these learnings into our plans as we move forward.
It is critical that we understand that no one will invest money in just an idea – those days are long gone. You will need to have a business that is up and running with adequate traction that is both replicable in a larger market/area and sustainable. Your business will need to have its basic fundamentals in place. The rudiments of running a business are not going to change. The manifestation and tools will evolve, which is natural.
This obviously throws up the question of how does one run a business machine without the oil – working capital. If you approach it from a larger view, there could be many options out there besides the equity/investment route. After all, we do have a very robust local business system of varying sizes and magnitude that has been running for ages and will continue to do so – they did not always go down the equity route. It was about reaching out to friends, family, own savings, banks, money lenders, NBFC’s et al. They chose to take the investment route when the business was ready.
The point being, assess the stage at which your business is and take a critical view if indeed you will be successful in raising capital. If not, it should not mean an end to your business journey. Surely there are other ways of accessing capital which can be explored. Overlay this with a plan that fits your fund flow and has a tight check on spends, whether operating or on business development. Look hard, is there is a more efficient way of doing things, open up to new/non traditional ways of achieving the same outcome. A simple task of sending a letter; does it have to be a courier? Will a regular speed post achieve the same outcome and level of efficiency but significantly lower costs? Can usage of shared services or outsourcing routine work help achieve greater efficiency overall?
When we seek mortgages from banks or other financial institutions we are happy to go through the hoops that are set up to keep the financial rigour in place which safeguard the lender’s interest and also facilitate the needs of the borrower. Do we expect this to be any different, especially when in this model there are no collaterals/security offered? Of course, there is a counter argument on the principles of investment in the entrepreneurial space, which again boils down to the strength of your idea/business at hand.
The way we may approach it, would be to plan for business to run at a level that is sustainable with pragmatic and realistic sources of funding and if a large source of funding falls into place, then plan B can be overlaid. You should not wait to receive the level of funding you believe you should get, for the business to commence.