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April 27, 2016

The Road to Series A Just Got Longer & Harder

Deepak Gupta, Co Founder of early stage investment platform Equitycrest, has made an analysis (republished in Inc42) - using Venture Intelligence data - of the "new normal" in terms of the time, money and number of pre Series A rounds required to get to that milestone. Extracts:

I don’t know if we are exactly in the mode of how things are in 2012-13 but it does seem that 2014-15 was an aberration and the direction of the data points gives us some lessons to draw from. So what can we learn?
1. You need to be doubly sure about the idea you are pursuing and the fundability of the team. Just the first seed round does not mean a lot in terms of the success of the business. Also, you probably need something north of INR 4 crores to get to Series A regardless of the market, so be looking out to raise the second seed if your first raise was modest.  
2. In case of an angel round, one needs to ensure that the lead investor is truly committed and understands the company’s business, has the ability to rally folks to fund a second time prior to Series A.  
3. Founders need to invest time and energy keeping all investors on board with the Company’s progress all along, else its hard to re-engage when the time comes for a second dip.  
4. Frugality is a trait that needs to be in the DNA of the company.  Need to spend money in drip fashion until signs of product-market fit are getting abundantly clear. Over-hiring is probably not the best idea at the seed stage.
Related Post: The Indian Venture Capital Funnel: Darwinism at Work

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