Skip to main content

"Mistakes to Avoid in PE Fund Raising"

Image
By
Extract from an Economic Times article by Manish Kanchan, managing director of SAGE Capital.
Very often we see entrepreneurs consulting with well wishers, old-time chartered accountants or their loyal CFOs during the deal-making process. Usually this is the first time anybody is dealing with private equity transactions and are therefore completely out of their depths. Sometimes, they are also insecure about their own future position in the company.

...Investment bankers are your allies. Choose them based on their track record of having closed similar transactions Ask for references and speak with them. Do not appoint them based on the valuation they promise you. Investment bankers do not sign the cheque. Once appointed, trust them and encourage them to provide you with honest feedback directly. The same applies for lawyers as well.

...The business plan must be realistic with a slight optimistic bias. It should also be linked to past performance. If the business has grown at 15% over last 3 years do not project it to grow at 60% suddenly after the deal closes. The fund managers seek to understand your thought process, how you assess risks, how you deal with competition, from where you will get people to manage the growth. The level of detail, correlation to industry growth rates, and honesty, will win respect and improve the chances of raising money.

... Do not sign the term sheet too readily. The term sheet lists out the key commercial terms and rights and obligations of each party. This is a nonbinding document which is typically subject to legal, financial, commercial due diligence and approval from the investment committee of the fund. This allows the fund to modify its offer (or sometimes walk away). However, clauses relating to exclusivity are binding on the promoter and the company. Exclusivity prevents the company from engaging in discussions with another investor usually for periods ranging from 90 to 120 days.


Venture Intelligence is the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports.

articleArun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. Click Here to learn about Venture Intelligence products that help entrepreneurs reach out effectively to the investing community.
Labels:

Popular posts from this blog

Startup Funding: The Luck Factor – By Sanjay Anandaram

By
We hear all the time about the amount of money that's available to fund startups. For example, that private equity funds invested over $ 3.3 billion in just the first 3 calendar months of the current year. That VCs are always looking out for good deals as most of the plans they see merit little or no attention. That they invest in about 5-10 a year out of the 500-1000 business plans they get. And so on…But the truth is that a majority of deals that get funded are those that come through a referral or because the VC knows (of) the entrepreneurs; its natural because VCs don’t have the time to look at all the plans that they get to pick out the Rediff, Naukri, or Tejas Networks. Deals that come through some trusted source or through a trusted filtering process are therefore valued higher and rise to the top of the pile of business plans. It is therefore easy to see how many plans don’t get funded. And also how competitive the race to secure funding really is. Given this situation, wh
Read more

How I Raised Funding - Priyanka Agarwal, Wishberry

By
You have to be confident and shameless while crowdfunding. Priyanka Agarwal, Wishberry shares on how to succeed in crowd funding with Venture Intelligence in this  interview. Priyanka also candidly shares how the team built Wishberry, raised funding from top angel investors like Rajan Anandan, on pivoting, and difficulties in raising capital for entrepreneurs operating in niche spaces not chased by VCs. Q: What does Wishberry do? Priyanka Agarwal : In its latest avatar, Wishberry has pivoted into crowd financing of low budget films (INR 1-5 Cr). We are essentially trying to create an internet platform for investment opportunities for HNIs in films including Marathi, Tamil, Kannada, or films targeting the global diaspora. L-R: Co-founders Anshulika Dubey & Priyanka Agarwal, Wishberry Given that you are building a marketplace, how did Wishberry solve the Chicken and Egg problem? Beyond the “all or nothing” model what did Wishberry do to pull in more artistes and inves
Read more

Profile of Career Forum founder

By
The Starship Enterprise column in The Economic Times (not available online), featured Sujata Khanna of entrance exam training institute, Career Forum. The company, which started with just seven students in Pune, now covers over 39 cities reaching over 15,000 students. ...The most important milestone I think was in 1995 when we decided to incorporate Career Forum into a Company. This brought in a lot of professionalism and we also went for expansion. ...Strong technical network is our unique selling proposition. We have a strong ERP system running across all centres in all areas of business from distribution to logistics... Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.
Read more