Founders must leverage their cap table
The founders should be strategic when fundraising for pre-seed and seed rounds. Capital is a commodity in today’s venture capital market in India. It’s abundant.
Therefore, founders should look for smart money, not dumb money.
When founders raise capital, who they choose to raise from can have a critical impact on their trajectory.
They should get as many value-add angels as possible on their cap table.
It’s great for the companies to expand that net, have people with various domain expertise.
Let’s take a few case scenarios:
Scenario one:
The worst-case scenario — you raised capital from investors, investors who can only help you with their capital, and with nothing else. In other words, you have raised dumb money.
Scenario two:
A little better case scenario — you raised capital from 1–2 funds (these funds claimed that they will help you grow your company through their value add services), some angels, some dumb money, and closed the round.
Scenario three:
The best-case scenario — you raised capital from 1–2 funds, funds that you think (after reference checks) would also help you grow your company through their value add services. In addition to this, you have also carved out INR 1Cr — 2Cr for those angles who can write anywhere between INR 5L -20L cheques and can help you with their specific domain expertise.
These angels could be founders, operators, CXOs, and evangelists.
Value-add angels are available in India now, you just need to go get them.
About 10 Indian internet companies have announced to go public in the next 1–3 years. Some of these companies are Flipkart, InMobi, Policybazaar, and Zomato to name a few.
In addition to this, India currently has 44 unicorns and is on the path to have 100 unicorns by 2025.
The founders and early employees at these companies either already have some liquidity or will soon have some liquidity and will start investing in their friends, co-workers, and next-gen founders.
It’s already happening 👇
I asked Pravin Jadhav if he could share his fundraising strategy. This is what he had to say 👇
Imagine you are able to bring the following kinds of investors on your cap-table who are:
- Expert at a specific industry
- Expert at product development
- Expert at technology
- Expert at hiring
- Expert at scaling
- Expert at building company culture
So on and so forth.
Imagine the impact it will have on your company’s trajectory.
Harry Hurst of Pipe puts it the best:
But you must be thinking, getting 10+ angels on the cap table would become an operational nightmare? You can’t get everyone on the cap table.
I agree it will be a disaster. No doubt.
But luckily there is a solution. This is precisely where AngelList India comes in and can help you. You can route as many angels as you want through an SPV (max 199 investors). This way instead of 10+ entities, you will have a single entity on the cap table, along with the benefits of having all the value-add angels on your side.
AngelList handles the back-office, tax, legal, and accounting of the SPVs.
I’ll be putting out a list of founders and operators who have started angel investing in India shortly.
And I’ll end it here 👇
Leverage the cap table.
Disclaimer
Any views or opinions represented in this post are personal and belong solely to the post writer and do not represent those of people, institutions, or organizations that the writer may or may not be associated within the professional or personal capacity.
