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Jun 17, 2020
Do's and Don'ts by Early Stage Startup Founders with Rajesh Sehgal



The discussion held between Rajesh Sehgal and Sanjay of 100X Live is about Do’s and Don’ts for early-stage start-ups while speaking to investors for fund-raising. 

Brief Introduction to Rajesh

He is the Founder and Managing Partner at Equanimity Investments. He has been an angel investor for Indian start-ups for over a decade and has mastered the art of choosing the best business ideas. He is an active member at Mumbai Angels, heads Corporate Report, Board Member of Tie Mumbai, member of the managing committee of NASSCOM 10000 Start-ups, and overall a prominent investor.

Rajesh’s view on the current crisis

The present scenario is not as bad as people show it to be. The life and even the business continues during the pandemic. There are a few companies that are benefiting from it too. Their two companies are at record high sales. Malls, gym chains, and similar enterprises are suffering. 

In the current scenario, it is vital to focus on the basics. It is wise to look for the right people to work. Hiring and managing the team is crucial for start-ups and larger businesses. Communication is essential during this scenario. Entrepreneurs are either cutting salaries or restructuring them for making remunerations performance-based. It is significant to communicate the reasons with the employees or co-workers.

There are examples of start-ups where employees have come forward to discuss the restructuring so that everyone survives to see the end of this tunnel. We all should understand that the pandemic would end, and we should be ready to capitalize on the world after that.

Definition of an Early-Stage Start-up

Considering the lifecycle of a business, when an idea germinates, infused with the capital, a business begins. It should have the potential to grow bigger. Even large corporate companies think of ‘behaving like a start-up’. So, irrespective of the size, revenue, and other details, if you are nimble-footed, you are a start-up.

About his choice of the sector and size-specific start-ups for investments:

Equanimity is an early-stage investor investing in various sectors without any specific preference. There are regulations about the revenue and other factors, which are not hard rules. Before they invest, they evaluate the companies sticking to basics, like the right people. 

For ‘magic’ to happen, there has to be ‘chemistry’. So, they spend time with the founders to understand their thinking and work culture and let them know the Equanimity team. So, both should think of each other as the right people to spend the next 5-10 years.

Should start-ups approach Venture Capital directly, or should there be some more steps?

As the capital is the fuel for the growth of any business, the entrepreneurs should try to tap the right people who can invest. Again, the quality of that money always counts. As VC, they look for friends and family before evaluating companies. Entrepreneurs need to have the confidence and trust of their families to reach glorious heights. Yet, it is not hard and fast. 

If you have a feasible plan and convincing abilities, you can approach VC directly. The founders need to strike a balance between the time and money they spend to get the capital, again, building the business in the initial stage so that the investors would have some kind of proof that the plan works.

How can one take the learnings from start-ups and extrapolate into medium-sized companies, especially during the pandemic?

For any size of the business, it is essential to keep a close eye on the cost structures during the pandemic. The entrepreneurs are encouraged to think that during this scenario, there is nothing like ‘fixed cost’ and everything is ‘variable’. That is a crucial survival technique. Cutting salaries and even staff is happening all over. So, entrepreneurs must communicate their philosophy transparently to let the people understand it.

How do you build a team?

It is a great time to build a great team. Now, talent at every level is available due to unemployment. People are looking for jobs, and start-ups are hunting for talent too. You need to spread the word about your requirements and tap into the community working from home. You would surely be able to build a good team.

About the procedure should the start-ups follow to seek investment from Equanimity:

The most crucial things are:


  • Equanimity looks for a great set of founders.
  • Big scalable opportunity.
  • Their capability to execute


Things that Rajesh would never invest into - 

There are mainly two sets of people out there: 


  • Some are chasing a larger business, and
  • Some are after great valuation with the business-plan in mind.


The entrepreneurs that are into the ‘valuation game’ are difficult to assess. Equanimity looks for entrepreneurs that they would like to associate with for over the next 5-10 years. They believe that if the entrepreneur can execute a larger business, the valuation will follow. So, entrepreneurs with a mindset to grow in size generating value would be preferred. 

Do VCs invest in start-ups in the ideation stage or start-ups that bootstrap and look for funding?

The Venture Capital community in India is growing, and there are both kinds of VCs. Some would invest in an idea. Some VCs see some traction after the ideation, and contours in your plans, and so on. Equanimity invests in start-ups that have already bootstrapped and had something to show. They look at start-ups in pre-revenue and post-revenue stages. The most important aspect is the founder’s commitment.

How should start-ups pitch to VC? How VCs evaluate the investment potential of an early-stage start-up?

Every investor would be looking for good investment opportunities. The significant aspect is that the entrepreneur’s business idea should fit into the investors’ scheme of a theme. So, entrepreneurs should evaluate VC before approaching them. Different VCs may look for various things. 

Again, ‘chemistry’ is also crucial. You need to evaluate whether the investors allow you to execute your plans or as they are investing, they become bosses, and you would be just working for them. Research about the VC upfront and prefer ones that mentor your business and steer it in the right direction after investing.

Insights for early-stage tech start-ups:

There should be a business guy among the partners or the senior hires to succeed as a tech start-up. The techies may build the best tools and technology. Yet, the business mindset is crucial to run a business successfully. 

So, rather than waiting for the right technology to launch and the right time, he would push you to go out with whatever you have as a product, get the feedback and improvise. 

Again, founders should self-evaluate, decide on their strengths, and get the experts for whatever they might be weak.

About financial terms that the start-ups should know about:

The trainers for start-ups should send the aspiring entrepreneurs out in the real world to pitch their business plans to different types of investors. As you are building something to be sold, the thought-process would be on the other track. 

Do VCs help validate the product/ business idea?

VCs want to make sure that your idea or product is the best. So, they may ask different kinds of questions. You should take feedback from every meeting and fine-tune your product, idea or the way you present it. 

Right tick boxes before reaching out for early-stage funding:


  • Can you spell out your idea?
  • What is the solution you are about to give to the customers?
  • The size of this opportunity: how many people can get benefitted?
  • Do you have a feasible plan to execute the business?


Things that may turn off an investor:

The entrepreneurs need to understand that the investors are spending time in understanding your idea and plan because they want to invest. Yet, they may get turned off due to some reasons:


  • Not being punctual.
  • Not being prepared for the meeting.
  • Not being presentable.
  • Presenting without clarity of thought.
  • Not being passionate about your idea.


Impact on the evaluation of seed start-up if the team distributed across geographies:

It may be challenging for start-ups and even investors to evaluate such kinds of teams. VCs should not have a problem with distributed teams, as the pandemic has shown us that you can manage things being in different places. Yet, the founders should be very clear about the scalability of their plan. They should understand the challenges of being such a team and should have managed it in the past.

Views on valuation and deal-making in India:

Valuation and deal-making follow the same path across the world. Everyone wants a great valuation, the least dilution, and close the deal right away. A few traits are very peculiar to India. People feel that fund-raising is a success.

Yet, this culture should change. Generating ROI on the capital raised is the challenge. So, entrepreneurs should raise capital that is practically required to deliver. For valuations, the ecosystem is healthy in India for early-stage start-ups. So, the valuation may go up or be reasonable.

How is Equanimity different from other VCs?

Equanimity is an investment firm that looks for:


  • Entrepreneurs chasing a dream to set-up a large business and not valuation
  • Entrepreneurs that prove to be the right set of people to work with


Three preferred sectors for future investments:

The sectors in India with promising opportunities:


  • Consumer-oriented
  • Fintech
  • Edtech


Views on 100X.VC:

To have a rich ecosystem, you need players at all levels. 100X.VC is doing great, and Rajesh takes it as discovery. His mentor feels that the way 100X.VC encourages and develops entrepreneurs, should be taken to the other countries as well. 

Three things that start-ups should not do in the short-term:


  • Never make a business plan for a short run.
  • Never look for short-term funding sources.
  • While building a team, prefer people that would stick with for a long time.


Three things that start-ups should do in the short term: 


  • Set the short-term business tactics right,
  • Ensure you are not in business with people who don’t help you grow your cash flow.
  • Keep making small bets.


Visit Rajesh Sehgal’s website equanimityinvestments.com and send an email through the ‘contact’ button. Someone from their team would get back to you soon.


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