Fund India

Here is how you can improve chances of raising capital from VC's/PE's

One key factor that drives their decision is whether you can return their fund or not. 

Here is how you can answer it during your pitch:

➡️ Always check the fund size of each VC before the meeting (easily available with a Google search)

➡️ Say it's INR 400 CR. This means that you need to show the VC how they will get INR 400 CR from your startup at exit (via acquisition or IPO).

➡️ Assume the investor will own 10% of your startup at exit. For them to get INR 400 CR, your exit valuation needs to be INR 4000 Cr (10% of INR 4000 CR is INR 400 CR)

➡️ Find out average revenue multiples for startups like yours, say 5x, it means that you will have to generate INR 800 CR in yearly revenues. Now, the average fund cycle is 5–7 years, so your financial model and scalability plan should demonstrate your company hitting that kind of scale in that period.

➡️ Now, divide this revenue with Average Revenue per User (ARPU). This will get you to the number of paid customers that you need to have at exit.

Say, your ARPU is INR 10,000. This means that you need to have 8 Lakh paying customers at exit with your current business model / pricing. 

➡️ Now you’re ready with your preparation. Your main task is to explain your business model, GTM strategy and scalability plan logically to justify these numbers. 

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