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Debunking Myths of Studentpreneur

Debunking Myths of Studentpreneur

Aditya Arora has been recognized as a successful Young Entrepreneur and Achiever on various national and international platforms, He is an Angel Investor & currently CEO of Faad Network Pvt Limited, Faad is recognized as a leading member-based investor network, handholding early-stage startups with access to the right network and capital. Aditya Arora was invited as a guest speaker on the event “Entrepreneurship During College Days” Co-Hosted by Writer’s Voice Society in association with Namaste Sir, Poornima University & Faad Network. Read the Q &A Session of this wonderful event, where Aditya has debunked many myths of college entrepreneurs.

Aditya Arora | CEO, Faad Network
Q: How does an Idea play a role in seeking investors to fund their idea?
Ans: As I think the execution is way more important than an Idea. There shall be confidential between the Investor and the Founder, to trust and to rely on. The investor looks for the revenue generation model in a start-up, he needs to be sure to about getting his money back. A lot of people have an idea with potential, but are they really ready to execute it on the market level and generate revenue from it. I am an angel investor, if I give four people 200 rupees each and I want 600 in return, then the execution matters, I will see a person with 10X potential, the person who can convert my 200 into 2000 or 20000. They must know, who’s the target customer, where they actually stand in the market. These things really matter from the perspective of an investor.

Q: There are a lot of students who think their idea shall be unique, is this the right mindset for starting a business?
Ans: We use Paytm, phone-pay, MobiKwik, google pay, amazon pay, these all companies are working on a similar idea, I have all these five apps in my phone and I choose to use where I get the best deal. India has a population of around 135 crores and as census says it will be over 170 crores with the end of this year, so any idea you think is unique has already crossed some minds, and maybe someone would be already doing it. It’s the preposition of execution that should be unique, Uber was never the first taxi, and they just changed the preposition, now you can have a taxi at your step.

Q: When a startup is started and the time it even does not have the seed funding, at that time how the valuation of the company could be done?

Ans: The valuation of a company is not a science, it’s an art. The valuation depends on the factor when you are going to raise funds for the next time. A person can show the valuation to be 100 crores and on the other hand for the same company they can value it to be 50 lacks. The only difference is in the assumption, as someone may evaluate the company on the basis of current growth and some can valuate it on the basis of growth after 4 years. There is an extreme need for the right mentor and the right investor for a startup because they can only perfectly valuate the company. And for them, the valuation shall not be a constraint. You need to pick the right value for your company just fair and square.

Q: 90 to 95 percent of entrepreneurs focus a lot on Fund, rather than market analysis or finding methods for revenue generation. Is it the correct method for entrepreneurs?

Ans: This is a myth that getting funding is a success, funding is a method to boost your company, suppose somebody starts a social media platform and they develop a good reach, and there is someone who has not good reach, so they go for paid marketing, that’s where we use the funding. Everyone wants nationwide reach, get their company into the stock market, release IPO, for that some use money. You have heard about OYO, they have raised funding around 14 times and they have a valuation of around 1 Billion, you may or may not have heard about Zoho, Zoho also has a valuation of 1 Billion and they never had taken investment from outside sources, they always had invested their own money. Funding is required when you need to boost up your company or you need a partner in form of an investor, but if you can grow on yourself, you shall not rum behind angel investors, because equity is the costliest form of raising funds. First ask yourself if capital is needed, if needed how much capital you need, and with capital what else your investor could offer you. Funding is never an end, it just a beginning to find your way on to the success.

Q: How to approach an investor?

Ans: Investor does not come with a definition, stay active in LinkedIn, and make connections, instead of coldly pitching try to go with a reference. I get around 25 deals every day, but it’s a matter of extra care to the one with reference. Just try to connect with the people who could raise money for you, connect with your fellow entrepreneurs.

Q: What is the scope of manufacturing set up in the present scenario of the country?

Ans: It really depends on the kind of manufacturing business you are thinking about, we are in the stage of unlocking, so there is relaxation, so if you want to begin you could start. If you want to manufacture something that comes under essential items, you have a big scope, for pharma manufacturing, this is a good time.

Q: What shall be the equity we should give to the angel investment?

Ans: It depends on the business you are doing, if the investor is very crucial to your business than there is nothing off the road in giving 2 or 3 percent extra equity. Because 100% of grape is still less than 60% of watermelon. Broadly at angel level, the equity shall be 15 to 20 %, and that keeps rotating, there are a lot of ways to share equity, you can also wait for the next round.

Q: Sometimes at the seed the person takes funds at with 50% valuation and at the next round of investment, there is a chance to lose more equity, what shall be the perfect way to have it through?

Ans: The equity hold by the initial investors is also diluted and the same is provided to the new investors, so it does not mean at different rounds of raising funds you may eventually lose all the equity of the company, it’s rotational of capital.

Q: In the situation of COVID-19, are the investors looking for making investments?

Ans: At Faad Network investment we have more than 400 angel investors, some are full-time investors and some just started, so some are making investment and the new ones may be shying away. Everyone has their philosophy, if I talk about our faad network, we have closed 7 deals in the past 3 months, it’s may not be up to the demand, but the investments are still being made. You look at the gaming sector, online education sectors, skill-building sector, health sectors, diagnosis sector, tele medics sector, and these sectors are booming and funding is done in these sectors. The virtual sectors are on the peek, and investors are not going to wait.

Q: Is a technical co-founder is better than being non-tech cofounder in the market?

Ans: As a technical co-founder there are benefits, in a technical business you definitely need a technical co-founder. It’s better to bring a technical co-founder.

Q: What is the right time to go for funding?

Ans: The investor always wants to invest in a business, that has been launched in the market. If you have only an idea, it is very close to impossible to get an investment. So, I would suggest, set up a business, invest your own money, then move into the field to find an investor for your firm. Bring traction, bring validation of capital you will use to generate revenue. And it is also very important for you to know if you really need funds for your company.

Q: What is the first thing, the investor looks into if a startup applies for funding?

Ans: The first thing the investor looks for is the entrepreneur himself or herself. He looks for the founder to be in the right market with his business, he’s confident in the business, his zeal that follows. A founder shall be a good people person. He should be the reflection of the business he is handling.

Q: Books you would suggest for an entrepreneur?

Ans: Basically Zero to One shall be your first choice, and there are a lot of other books, read the biography of Walt Disney. Read about Phil Knight who is the founder of Nike, The $100 Startup, You Can Win - Shiv Khera,