Startups – Know more about Investors & common mistakes startups make when choosing partners from my own experience.

- - Advice

Most of us Founders have never raised capital, including me, so when we dig in for the first time, we’re mostly guessing how the game is played. And friends — it is indeed a game. The problem with this game is that as Founders, the odds are stacked way against us.

We actually make matters worse when we don’t understand the rules, and instead revert back to our base instincts, which range from carpet bombing the investor with follow-ups to trying to translate “I think it’s interesting” into 50 potential meanings like a 16-year-old after their first date.

What we need is to be able to read the signals for what they are, and when we do, take our foot off the pedal if the signal says “stop” and jam the pedal when the signal is “yes.”

Anything that’s not “Yes” is “No”

The worst answer we can get from an investor is anything that’s not “Yes” or “No.” Everything in between, even if it sounds like “maybe” is a “no.” We’re inevitably going to hear two things from investors: “That sounds really interesting” (they love to call things “interesting”) and “We’d love to talk when you see a bit more growth.”

Those both mean “No”

They don’t sound like “no” — but that’s 100% what they mean. When investors want to do a deal, they don’t use any of that language. They use phrases like “We’d like to get seriously involved” and “We’d like to put a term sheet together.” Again, anything that isn’t an overwhelming yes, is just a diluted version of no, and it’s our job to take that hint.

Real Deals Happen Fast

If an investor isn’t chomping at the bit to close our deal — it’s probably not happening. Now, a lot of Founders don’t know this because most of us have never raised capital before. We assume that the investor is just “taking a few weeks to get back to us.” If we’re not immediately getting blown up by the investor, there’s a 99% chance it’s not happening (investors do get busy, but usually not too busy to close deals!).

You can refer my this blog to see how Byju’s acquired WhiteHat Jr. startup for $300 million, in all cash deal to in just six weeks through WhatsApp messages and Zoom calls between Byju & WhiteHat Jr, Founder Karan Bajaj.

BYJU’S Founder and CEO Byju Raveendran’s success story

When investors find a deal that they really like — they go all in quickly. They have to because good deals are very hard to find. That means they jump into due diligence, asking for detailed financial forecasts, product demos, and aspects of our business plan. They want to know as much as possible so they can get this deal done.

Conversely, if we’re getting “hey that sounds interesting, let’s stay in touch” it just means “no.” The investor isn’t hoping that over this time period we inundate them with follow up requests. If the deal is real, we won’t be sending follow-ups — they will. If our phone isn’t ringing, it just means “no.”

Please Stop Harassing Investors

Investors don’t need to be reminded that our deals exist. They have a very short list of what they want to follow-up on, and they focus the balance of their time trying to get those deals across the finish line. It’s not like they are waiting for our 10th email that reads “What’s our status?” to say “Oh man, I totally forgot I wanted to close that deal! Thank heavens this Founder reminded me!”

Follow-ups are appropriate for getting an initial meeting and following up after a meeting. After that, we’re just harassing the investor. That said, it’s reasonable to check in maybe 6 months or a year later when we’ve had substantial progress (if lightning has struck our growth) but short of that, let’s leave these poor bastards alone!

You can see one of my failed Startup, a social networking website launched for Entrepreneurs here.

It was not properly planned and we rushed for Pre Launch party and spend a huge amount of our Capital. We  conducted a Startup Pitching Contest and we rewarded the top 3 startup ideas selected by our Jury. You can see the pictures in my website home page now also. But due to poor planning and issues related to further funding , project was dropped for time being now.

Another main issue to be taken care is of mistakes that we make in choosing a technology partners. From my own experience, I learned a lot from my own mistakes.

1. Rushing through specifications and overall software architecture design due to a limited budget. After the pre-launch party we were hardly left with very minimal budget in developing the Websites and Apps. We should have concentrated on making a prototype and presenting, instead of conducting startup pitch contest, which didn’t helped our startup in anyway.

2. Making price a priority, over quality. Once our Pre-launch party is over, we had hardly left much capital to take care of making cutting edge website and Apps. So we had to compromise on quality which was the main reason for the startup failure.

3. Trusting software development companies that have no experience working with startups. We chose wrong software development companies without much checking there past projects as after the prelaunch party , we were rushing for the launch as soon as possible.

4. Focusing on short-term results rather than concentrating on the long-term evolution of the product. Our social Networking website was developed as a paying website for its members to refer other Business people to the site. Also these referrals will indeed make the website members to have more business within the circle of friends in the website. But due to lack of money for proper advertising, this idea didn’t reach to the outer world.

So, if you are a startup or going to have a startup, hope these mistakes made by me can be avoided by you.

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Nishanth Muraleedharan, also known as "Nishani," is an IT engineer who transitioned into entrepreneurship, driven by a profound passion for the textile industry. As the president of Save Handloom Foundation, (SaveHandloom.org) and the Founder & CEO of DMZ International Imports & Exports Pvt Ltd., I am passionate about reviving the Indian handloom industry and empowering the weavers and artisans across the country. With 25+ years of experience in the textile industry, I have developed deep market insights and a rich network of handloom weaving societies, master weavers, and self-help groups, who exclusively make products for our trust.