Virus alters deal-making ecosystem
4 min read . Updated: 11 Aug 2020, 10:32 PM ISTVC funding in Indian startups took a break in the initial days of the lockdown, but they have largely returned to normalcy on the back of investor confidence
The standard investment presentation by startups for investors may be a thing of the past. As deal-making goes virtual, venture capital (VC) funds expect startup founders to provide detailed product demos and video walkthroughs, sharper pitch decks and deeper domain knowledge during remote pitching to raise funds.
VC funding in Indian startups took a break in the initial days of the lockdown, but they have largely returned to normalcy on the back of investor confidence even though deal momentum is slower.
“We are looking at founders with a digital first approach, around products in the “wellness" and “good for you" spaces and the “experience at home" category. It is interesting to observe how several startups have pivoted from 30:70 online to offline ratio to becoming almost a 75% online /e-commerce model in a big shift and is a key criterion for us when we are evaluating them," said Kanwalit Singh, managing partner, Fireside Ventures, which has backed consumer brands like Licious, BoAT and Tasty Tales.
At the recent India Internet Day event by TiE, Mohit Bhatnagar, managing director, Sequoia Capital India said the importance of the 45-minute pitch or presentation by startups has decreased in the current scenario.
Since the lockdown and even after unlocking, VC funds and startup entrepreneurs are conducting virtual meetings over platforms such as Zoom, WhatsApp, Teams, Google Meet, BlueJeans, Webex, GoToMeeting, FaceTime and Skype.
Anand Prasanna, managing partner at Iron Pillar said in many cases, product demos tend to suffer since people end up fumbling with multiple platforms between calls.
“…Make sure that everything is working and demos are ready to go before you start the call. One way is to have multiple team members in the call so that while one is talking and engaging the investor, the other is ready to pick up the demo, MIS etc seamlessly from there. In cases your product is not straight forward, investing time and money in making a good product video helps. Finally, understand that the attention spans are lower in calls. So, keep things more to the point than a physical meeting and do deep dives only when asked for," Prasanna said.
It took edtech startup Toppr over 75 virtual meetings, before they raised $50 million last month, led by Dubai-based investment firm Foundation Holdings.
Zishaan Hayath, Toppr CEO and co-founder, said it was a unique situation where he had to raise capital during the lockdown with new investors with whom he had no prior dealing. Hayath's banker reached out to Foundation Holdings and they had 75-100 meetings in the last 150 days.
"Virtual meetings are low-cost meetings, equal for everyone as one can dial in from anywhere, scheduling is super fast. Multiple team members join in, listen in and chip in whenever needed. This is a different beast, it took 2-3 weeks to adjust to this format, it was like a mental barrier but once you switched on, it resulted in deeper conversations, multiple meetings and quicker actions," Hayath said.
While most VC executives said that deals are getting closed faster, early stage investors in particular are mostly about betting on high quality founders addressing a large market.
All the meetings and formalities had been done remotely in Mitron app’s recent fund-raising from angel investor Arun Tadanki along with 3One4.
Tadanki said when they first connected with Mitron team in May, nobody had heard of it. “…There wasn't even a full pitch deck but instead a few slides on the founders’ vision to build a strong product along with some early data points. Our early conversations centered around the founders' plans to build a differentiated offering in the short-form video space.
We confirmed my interest to lead the round immediately after the conversation, as they showed a sharp sense of understanding of the category with clear articulation of thoughts.
The deal literally got closed after the first round of discussion," he added.
Rahul Chowdhri, general partner, Stellaris Venture Partners advises startups to come with a well- prepared deck for remote pitching.
“If the founders are in multiple locations, it is important to coordinate who will present and who will answer on which topics. Ensure that the videos are on, background is checked for and keep a backup presenter to account for any tech glitches," Chowdhri said.
However, it remains to be seen if remote pitching and deal making is temporary or is here to stay. Anup Jain, managing partner, Orios Venture Partners said they recently held a virtual demo day with over 100 funds across different time zones.
“We circulated a survey post that and most funds have told us they would like to continue like this even after covid," Jain said.
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