Frequently Asked Questions
For Founders:
1. Why do startups require funding?
A startup may require funding for one, several, or all of the following purposes. It’s crucial that an entrepreneur has a clear understanding of why they are raising funds. Founders should have a detailed financial and business plan before approaching investors.
2. What is equity funding?
Equity financing involves selling a portion of a company’s equity in exchange for capital.
3. How to return an investor’s money in equity funding?
Capital growth for investors is achieved by providing them an exit option when they can sell their shares.
4. What are a few sources of equity funding?
- Angel Investors
- Self-financing
- Family and Friends
- Venture Capitalists
- Crowdfunding
- Incubators/Accelerators
5. How to fund my startup in the pre-seed or idea stage?
- Bootstrapping or Self-funding
- Friends and Family
- Pitching events and meetups
6. How to fund my startup in the seed stage?
- Incubators
- Angel investors
- Crowdfunding
- Government loan schemes
7. How to fund my startup during or after product-market fit?
- Venture capital funds
- Non-banking financial companies
8. What is the step-by-step process for fundraising?
- Assessing the need for funding
- Assessing investment readiness
- Preparation of pitch deck
- Investor targeting
- Due diligence by the investor
- Term sheet
9. Why do investors invest in startups?
Investors seek returns on their capital deployed in startups through methods such as:
- Mergers and Acquisitions
- Initial Public Offering (IPO)
- Selling of Shares
- Distressed Sell
- Buybacks
10. What is Sachna’s process for fundraising for startups?
- Initial deck scrutiny: We review the submitted deck and initial information. If it aligns with our investment philosophy, we schedule a first-level call.
- First-level call: A member of our team evaluates the business model, vision, mission, and competitive landscape. If successful, we move to the next stage.
- Deep dive: In this session with a Partner at Sachna Ventures, we explore the startup’s core values, funding history, and business expansion plans.
- Building a funding strategy: We co-create a strategy that aligns with the startup’s goals, market position, and potential.
- Mandate and meetings: After signing an NDA (if required), we assist in the funding process, setting up meetings, and ensuring the best interests of the startup.
For Investors:
1. I am new to startup funding, how do I know what is a good startup and what is not?
Angel investing is a high-risk, high-return asset class. We encourage angel investors to gather complete information about the strengths and weaknesses of every startup. We conduct thorough due diligence before considering any investment.
2. How do I work around financial risks?
To mitigate risks, spread your investment across different startups. Decide on the amount to invest each year and create a diversified portfolio.
3. What is my role during and after the transaction?
- During the transaction: Your role involves reviewing the information statements, resolving any queries, and signing relevant documents (offer letters, Shareholders Agreement, etc.).
- Post-transaction: After the investment is made, you will receive a share certificate. Our team will coordinate with the startup or fund to ensure smooth processing.
4. How many investments can an individual have active at one point in time?
There is no restriction on the number of investments one can have in private limited companies.
5. How actively will the investor be on the company’s board?
The level of involvement depends on the size of your investment and how much time you’re willing to dedicate to the company. This can vary from company to company.
6. What does the first month look like after the deal closes?
Investment rounds can take 2-5 months. After the deal is closed, you can expect to receive the share certificate/unit within 1-3 months.
7. As an individual investor, do I have to upload documents every time to show I am accredited?
Once you have invested with us, we keep your KYC details. For new investments, you’ll only need to upload documents specific to the particular startup (e.g., SSHA and offer letters).