Understanding dilution is critically important for an entrepreneur who has cofounders or who plans on raising venture capital money to help grow their startup.
Dilution refers to a decrease in the ownership position of a company. Equity is a primary criteria in venturecapital investment and is the heart of venture capital. The concept of dilution is a major factor to consider in deciding upon a financing strategy. By definition, bringing in an equity investor means that that the new party will be taking part ownership of the company.
Concept of dilution was the backbone of very popular movie “Social Network” which dealt with equity among founders, friends and VCs.
Lets try to understand the concept from the scratch –
if you are a startup or small product company and running short of testing time and resources and want to get your product tested without hiring testers here is a good news for you. 99tests can solve this problem of yours, 99tests is a software testing platform based on crowdsourcing concept.
99tests is a Bangalore based startup founded by Praveen Singh and Avinasha Shastry. 99tests is an online testing platform which aims to bring together a passionate group of testers. 99tests provides access to a community of software testers, where software owners can post their product to be tested and get bugs filed for their products.
99tests has adopted a simple workflow, Clients can create a contest and set a cash reward for the most valuable tester. Clients need to upload the clear testing specifications, and testers compete for the cash reward and file bugs as per its priority/severity.
The client then validate the bugs and award points for very valid bug, tester with maximum points is declared winner and prize amount is transferred through PayPal account. Platform currently has 300+ testers and over 1000 bugs have been filed. 99tests takes a nominal fee from the client for usage of its platform.
USP of 99tests platform is Developers/Entrepreneurs can get an on-demand QA team of top testers to test their product and reduce the goto market time.
VC Pitch is a very important activity of fund raising process, its the first step towards raising money. A great product/business entity can loose on the opportunity if its not pitched properly, I have personally seen great products have failed to catch the VCs attention since entrepreneurs messed up with their pitch. A bad pitch of a good product can ruin the investment opportunity while good pitch for a so-so product can attract investments.
VC pitch is no rocket science but its easier said than done. Entrepreneur has to worn multiple hats, he/she has to be a salesperson, dreamer, visionary, technologist, operations guru.
Key elements of a Pitch are -:
The problem/gap in the market
Solution
Business model/revenue model
Underlying magic/technology,
Marketing and sales,
Competition,
Founding Team,
Projections and milestones,
Status and timelines.
Summary – Investment required, Exit route to VCs
These are the basic guidelines, obviously some business requires further detailing but these elements are good enough for an impressive VC pitch.
Ever wondered why your excellent idea/product failed to attract the attention of VC, even though your product is witnessing good traction but VCs are unmoved or they wait n watch for few quarters before showing interest I had a long discussion with a VC today in this topic.
VC likes to invest in startups which are driven by supermans or guy who is capable of exectuing things smartly. Serial entrepreneurs are one category of people who are well sought by VCs and there are instances serial entrepreneur have raised Venture capital without presenting any business plan, case studies, excel sheet.
These breed of entrepreneurs are capable of creating something out nothing, they somehow manage to stitch together product, customer and partnership out of thin air. They are always ready with their alternate plans, if plan A fails or doesn’t meet the expectation Plan B would be up and running in no time. They also have uncanny ability to foresee things or envision the future.
in short VCs look for a key man insurance in a startup which can assure them that their investments are in safe hands and 5X return is guaranteed.
ISB in association with TiE Hyderabad chapter, is conducting ‘Velocity’, a business plan competition for startups. This competition is being held as a part of TiE-ISB Connect 2010, the largest networking event for entrepreneurs to connect with VCs and mentors. Its a well sought networking event which attracts VCs and entrepreneurs across all countries.
The competition is open and participants will have to send in their business plan summary online through here. The last date for registering is September 20, 2010. The selection criteria is as below-
• Participating ventures should have been in operation for at least three months to a maximum of three years.
• The plan/ venture should be scalable, market ready and must have taken the first steps for revenue generation.
• Must have a team with adequate technical / management education or business experience
Six ventures will be short listed in the finals of the competition and they will get an opportunity to present their business plan to a panel of investors. ‘Velocity’ offers a several benefits to the participants such as presenting their plans to VC’s, funding, mentor support, networking and getting their plans incubated at the ISB.
• Hyderabad Angels, a VC firm based in Hyderabad, will make a guaranteed investment of 25 lakhs in one of the finalist ventures. The selected venture will also have access to a mentoring programme to facilitate a working relationship with the VC, academics and relevant experts.
• The short listed ventures will also be eligible to apply to the Entrepreneurship Development Initiative at the Wadhwani Centre for Entrepreneurship Development (WCED) at the ISB
TiE-ISB Connect 2010, will be held from October 29 to 30, 2010 at Hyderabad. The objective of the TiE-ISB Connect 2010 is to bring together all the elements necessary for real venture creation. Its mission is to- :
• Provide a platform, together with important tools, resources and networking opportunities, to assist all aspiring entrepreneurs, in taking their first steps on their entrepreneurial journey
• Facilitate the creation of new ventures with potential for high growth and a global mindset
• Engage the venture-support community to rally around entrepreneurial innovation and provide the necessary eco-system for its development
• Generate a positive economic impact by encouraging and nurturing high growth potential entrepreneurship together with a vibrant private equity market.
