February 2017 saw the announcement of Stellaris Venture Partners‘ $100 million maiden fund. Founded by ex-Helion partners Ritesh Banglani, Alok Goyal, Rahul Chowdhri. The fund is aimed at India specific solutions and global SaaS startups. Rahul Chowdhri, one of the founding partners addressed the audience at the February 2017 edition of Startup Saturday. Rahul did not focus merely on what VCs look for in teams, but covered the whole spread. If you’re an early stage tech startup addressing an important problem, this should definitely serve as a primer on getting Stellaris Venture Partners to back you.

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Quick stats about Stellaris:

  • Upto $3 million in funding in the 1st round
  • 2 investments committed so far
  • Strong Founder Network of 50+ entrepreneurs and business professionals
  • Past investments include:
    • Bigbasket
    • Simplilearn
    • Livspace
    • Axtria
    • Zefo

What does a VC/PE look for?

In a nutshell, a VC looks for a great team addressing large market opportunities with a unique value proposition that makes financial sense.

The Team

  • Although these points refer to startup founders in particular. They can be extended to the initial employees as well as they play a pivotal role in the early stage of a startup.
  • Strategic long-term thinking.
  • Uncompromising on integrity.
  • Intellectual honesty.
  • Clarity of thought demonstrated by co-founders.
  • Ambition.
  • Fund raising capability for subsequent rounds.
  • Strength of the operations team (Especially in the case of marketplaces as it is relies heavily on ops).
  • Execution skills and attention to detail.
  • Ability to build and retain a great team.
  • Cohesiveness between team members.
  • Complementary skills with respect to technology, marketing, management and finance.
  • Willingness to share!

The Market

  • The addressable market should be large and exhibit rapid growth with no clearly established players or weak established players.
  • Technology enables non-linear scalability. A scalable solution is preferred over a linear one. Common observation that products tend to be more scalable than marketplaces.

Unique Selling Proposition

  • Technological superiority, new business models or choice of markets are great at providing a sustainable competitive edge.
  • “Me-too” hardly works. Copying a model elsewhere in the hopes of a quick exit never works out well.
  • Must address some real customer need/pain. Will customers pay a premium for it?
  • Long term sustainability.

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Financial Sense

  • Capital Intensity. Capital in and capital out matters.
  • Ownership at the time of entry and time of exit. Along with funding options for the next round. If the exit does not return the fund, it is not worth it.

Elements of a business plan

A lot of times, things are simplified when the right questions are asked. Below are some that one could ask oneself in order to simplify the process of making a business plan:

  • What do you do?
  • What need do you address?
  • How big is the need you are addressing?
  • How do you do it? i.e Is it a product/service offering?
  • Who is your customer?
  • How do you do it better than others?
  • How do you make money?
  • Who are you?
  • What is the current status of your business?
  • How much money do you need?
  • How does the future look like? (i.e Projections)

Presenting a business plan

  • Pithy. There’s nothing like a clear, concise description. Keep it as simple as you can and no more simpler.
  • Start well (Think of it as an elevator pitch).
  • Portray your team and team dynamics being well.
  • If it’s a product, the demo is important.
  • Be respectful of competition.
  • Be honest about what you know and what you don’t.

What to avoid in a business plan

  • Lengthy/verbose business plans.
  • Saying things like “2% market-share will make me a Rs. 100 crore company, I only need $1M to go public in 5 years time”. Looking at large, established markets in the hope to take home a small piece of the pie is a common fallacy.
  • Laying out valuation expectation.

 

Cleared the checklist? That’s great! You know you’re onto something great.

(BONUS INSIDER TIP: You know those e-mail IDs that every VC firm has on their website? No one at the firm really pays attention to it. If you really want to be noticed, hustle your way to a meeting. References and events are great channels to explore!)

Written by Suhas Mallya