From the Seed Camp - Amun Thapa

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From the Seed Camp - Amun Thapa
Amun Thapa talks about the art of attracting investors

Amun Thapa is the co-founder of Sastodeal.com, the popular e-commerce site. He is also the co-founder of Anthropose Pvt Ltd, a 'social-good' company focused on finding sustainable entrepreneurial solutions to social problems. In his role as a mentor at Udhyami Seed Camp, Thapa plans to help startups understand seed investments and guide startups into taking appropriate investment decisions.

In this interview with VMAG's Mohit Pradhan, Thapa talks about his understanding of seed investments, his dealings with investors who provide seed investment, the different types of investors that are there in the market, the right time to get an investment and how to decide on the kind of investment suitable for your business.

 

Seed investments and investors

Investors are individuals or organizations who are ready to commit in any form of investment such as capital, property and other kinds of assistance to a business in exchange for financial return. Seed investment is a method through which investors provide capital in exchange for an equity stake in the company they invest in. By accepting investors willing to provide seed investment, startups are basically offering a share of their company to the investors.

 

Basis for getting investors

To put it in simple terms, investors expect some sort of financial return when they invest in a startup or a business. This is because their contribution is instrumental in building a startup and helping it grow. For instance, if a new startup lacks financial resources and has financial problems, it won't have enough funds to operate within the long run. The startup will need the support of certain financiers in order to grow, and investors are a viable option. So if startups want to have a future for their businesses, securing investors is a must. By getting investors at an early stage, startups can acquire seed investments and boost their business. This will reduce their financial troubles because the seed investors will be accountable for overseeing the financial aspects of the business.

 

Beyond financial investments

Normally, investors provide financial support to startups, but their role does not end there. Even companies that are financially stable tend to seek out investors because not only do investors provide startups with the seed investment required to implement their business model, but also contribute in building the startup by providing them with the necessary expertise in other aspects such as marketing, advertising, setting up promotional events, providing skilled human resources, finding suppliers, and more.

Accepting investors

There are several aspects startups need to consider before accepting any offer from investors. Accepting investors may provide financial and asset support, but just doing so certainly does not guarantee success or increased work efficiency. Investors and startups have their own sets of goals they want to accomplish, so finding common ground (both parties need to state and discuss their terms of the agreement) is fundamental.

Before approaching the investors, startups should first determine whether their business is in a position to accept investments. There are several startups that rush with the ideas they have without calculating the feasibility of their business. They consequently fail as a business and end up losing resources, their reputation and the trust of the investors. Startups should first develop a prototype of their product to test their ideas. Only after the product receives a positive response in the market, should the startup go ahead with the investment plans.

For startups that have a great prototype, all they have to do is meet with the investors and decide whom to work with. Startups who present a functional product will attract several investors, but choosing the right investor is what's most important. Almost every investor will have the capacity to provide necessary investment; therefore, the things to consider would be: the attitude of the investors, the way they cooperate and how challenging it might be to work with them. When startups cooperate with investors, their freedom to work on their own terms is compromised to a certain extent, as investors will also be very involved in most aspects of business management. Investors who demand daily reports, disapprove of every decision taken by the team or simply try to take command more than is necessary are problematic and difficult to work with. Therefore, investors who are aware of the workflow system of the startup and do not interfere with the tasks (until absolutely necessary) but do provide constructive remarks are the kinds of investors startups should be looking for.

 

Finding the right type of investors

Finding the right investor at the right stage is vital for a startup's sustainability and expansion. Startups should take into account the stage their business is at while picking their investors, and understand what type of investment will further contribute to business development, and then decide accordingly. For example, it's beneficial for a new startup to reach out to business angels or venture capitalists these are investors who provide seed investment and reduce the burden on the startup's operational cost. However, for established startups who are aiming to expand, seed investment is not the answer. Having a contract with a bank could alone provide the necessary resources for a startup's growth. Then again, startups who are new should think twice before considering taking investment from banks owing to the risk of their losing the collateral.

 

Persuading investors

Approaching investors may seem like a simple task, but convincing them to support your venture can be difficult. There might be several investors ready to invest in your startup, but they would need substantial information on the project you are carrying out, along with the status of your startup before they make their decision. Investors want figures: figures related to the finances of your project, your production costs, and facts that assure investors that your product will succeed. Mitigating risks is also a priority for any startup. The lesser the risk in a business, the higher the chance of scoring investors, especially in Nepal's context. Basically, you have to get all these ducks aligned in a row before you can win over investors.

*First Published by the author in M&S VMAG. 

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