Author Archives: Aristotle Consultancy

WedWise gets seed funding from StartUp Equity Partners

Wedding planner portalsWedwise Consultants Pvt Ltd, which operates WedWise, a portal for wedding planners, photographers, caterers and other related service providers, has raised an undisclosed amount of seed funding from StartUp Equity Partners (STEP), co-founder Ginny Kohli.

The funds will be primarily used for the development of Wedwise TV, a YouTube channel focused on wedding planning and wedding themes.

“WedWise is a close-knit community that allows people to look for wedding inspiration, find professionals to carry out certain tasks, or vendors to reach out to customers. So, we are both B2C and B2B,” said Kohli.

STEP, a boutique investment banking and consulting firm is founded by two investment bankers Neeraj Batra and Gunit Chadha. Batra has earlier worked with Bank of America, AMAS Group, and Hinduja Group. Chadha, an alumnus of ​The ​Wharton School, is the CEO of Deutche Bank Asia Pacific region. The firm offers strategic consulting on financial structuring and branding, acting as a startup accelerator, and picking up 15-40 per cent stake in its investee companies.

A bunch of startups that seek to connect couples with wedding planners has emerged in the last 12 months. The market for wedding-related services is estimated to be worth $40 billion in India, according to US-based venture capital firm CerraCap Ventures. Some of these ventures have also secured external funding. In a similar space, Weddingz.in, an online marketplace for wedding venues and vendors, has raised an undisclosed amount in pre-Series A funding from consumer-centric venture fund Sixth Sense Ventures. Prior to that, the startup had raised about $1 million (around Rs 6.7 crore) in angel funding from a group of investors, including Google India’s managing director Rajan Anandan in December 2015.

Hyderabad-based With Ease Technologies India Pvt Ltd, which operates an integrated wedding services provider AppilyEver.com, has raised $400,000 (around Rs 2.75 crore) funding led by Varun Aggarwal, founder and COO of Univariety, and other angel investors.

Last month, New Delhi Television Ltd (NDTV) launched its wedding solutions platform Bandbaajaa.com. In December 2015, CerraCap had invested in NDTV’s subsidiary Special Occasions Ltd under which the portal is housed.

In September, wedding planning portal WedMeGood raised seed funding worth Rs 2.7 crore ($407,200) from Indian Angel Network. Others in the Indian online wedding planning space include WeddingPlz, PlanningWale and FullOnShaadi.

Wedwise was founded in May 2015 by Ginny Kohli. She has an engineering degree from Aston University in the UK and an MBA from Infinity Business School, and has earlier worked with Rolls Royce, London, and Groupon India.

The portal allows the customer to post a query to access vendors, and also see reviews and recommendations by others in the invite-only community.

The startup claims to have 25,000 members on the portal, of which close to 55 per cent are vendors or service providers. It also claims to have a query posted every hour, which gets a response in less than a minute.

Source – Techcircle

Investments in start-ups decline 24%

Startup investment declineVenture capital (VC) and private equity (PE) firms cut investments in Indian start-ups by almost a quarter on a sequential basis in the three months to March, the second consecutive quarter they did so, as investors starved of exits and fearful of souring bets hold back cash.

Investors infused some $1.15 billion into Indian start-ups in the first quarter of this year, down as much as 24% from the December quarter, which itself had seen a slump in investments of 48% from the preceding three months, according to a joint report by KPMG and CB Insights.

The $1.15 billion reported by KPMG includes at least $150 million of secondary share sales that went from one set of investors in Snapdeal (Jasper Infotech Pvt. Ltd) to another.

The number of start-up deals fell 4% to 116 in the quarter, the report said.

The largest deals in the January quarter included $150 million received by online grocer BigBasket; $150 million raised by online marketplace Shopclues; and $50 million raised by Snapdeal, India’s second most valuable e-commerce firm.

“With mounting investor hesitation and concerns of overvaluation, Indian investment continued to decline in the first quarter,” KPMG and CB Insights said in the report.

After pumping more than $9 billion into Indian start-ups since the beginning of 2014, investors started pulling back late last year because of a mix of global macroeconomic factors such as a growth slowdown in China, as well as concerns over massive losses incurred by start-ups.

This year, investor caution has increased manifold, resulting in an acute slowdown in funding, fall in valuations and delayed deal closures.

“We have not been in contact with investors to raise funds but the sense we are getting is that there is a wait-and-watch situation that is going on,” said Ashish Goel, chief executive at online furniture retailer UrbanLadder. “There is definitely lesser investment in early-stage start-ups when compared to the last 4-5 months and (the number of) deals have certainly reduced.”

Even India’s top start-ups are struggling to raise cash at their current valuations. There are two main reasons why companies are struggling to raise money, said Aseem Khare, co-founder of home services start-up Taskbob, which raised Rs.28 crore in February.

“First, companies have been using investor money for giving away discounts that have beefed up top-line numbers but have not been able to create brand loyalty. Due to this, the percentage of revenue that comes through discounts is very high and has put doubts on the business model. The second reason is that of unit economics. There are businesses that are solving a problem, but the margins are too low for them to be sustainable or operationally profitable,” Khare said. By unit economics, Khare’s reference is to the cost and revenue from one transaction—say, a food delivery order taken online, and fulfilled.

The funding slowdown is not restricted to Indian start-ups alone, said Varun Khaitan, chief executive at home service app UrbanClap.

“The US has much bigger problems. And since some of the biggest investors are US-based, this problem has flowed into India. But if a company is doing well, then irrespective of the environment, it will attract investors,” he said.

The report by KPMG and CB Insights confirmed Khaitan’s views and said start-up deals in the US were much lower in the first quarter compared with the peak levels seen in 2015.

“The first quarter of 2016 extended the global decline in VC (venture capital) activity with both total deal volume and deal value declining further following a major dip in the fourth quarter. Some of the factors driving VC investors to take a more measured investment approach include an economic slowdown in China, rising interest rates and an approaching election in the US and a June referendum over the UK’s future in the European Union,” the report said.

Investors expect the funding environment to remain depressed for some time to come.

While start-ups have started to conserve cash by reducing discounts and other expenses this year, it’s not clear how young Internet companies will sustain their high growth rates without the lever of ultra-low prices.

“For the slowdown to end and for funding to return in a big way, there needs to be a trigger. Right now, there is a lot of uncertainty over macroeconomic factors like China’s economy and what’s happening to US start-ups. Plus, the Indian unicorns are also facing a rough patch. So it’s hard to see where a positive trigger will come from,” an executive at a firm that has invested in Flipkart said on condition of anonymity.

The government has added to the troubles of start-ups with new regulations governing e-commerce.

India on 29 March allowed 100% foreign direct investment in online retail of goods and services under the so-called marketplace model through the automatic route, which would legitimize existing businesses of e-commerce companies operating in India.

Three conditions attached to the government’s approval, however, could either hurt e-commerce companies or force them to find new ways to get around them. One, no group company or seller on a marketplace can contribute more than 25% of the sales generated. Two, marketplaces cannot influence product prices. Three, small sellers will now have to take responsibility of quality of goods and after-sales support.

Source – Livemint

Successful characteristics of a high-performing startup CFO

CFOIt goes without saying that a CFO should have proven success and appropriate experience in a mid- to high-level financial role within a VC-backed company. But there are several other seemingly ‘soft’ skills and traits that shouldn’t be underestimated.

The role has undergone a large-scale transformation over the last decade. Thanks to the infectious nature of the modern dynamic start-up culture, CFOs are expected to take a leadership role in functions of the business beyond the financials, acting as the right hand of the CEO and strategically steering the company through the challenges of rapid scale.

But this outdated view of finance professionals as being black-and-white thinkers, rigid and often separate from the rest of the team is a hangover from the days of big business ruling the world. Now, the start-up is king, and a CFO must be agile if they’re to be successful. They have to consider the grey areas, be willing to modify their assumptions and strategies if necessary, and be prepared to get involved with the various aspects of the business and take on roles and tasks that don’t necessarily fit snugly within their vertical. In today’s businesses, they’re the only person, other than the CEO, with access to a bird’s-eye view of the company as a whole: in order to successfully strategize for scale, it’s imperative that they possess detailed knowledge of the internal processes of each team.

However, the most important characteristic of a CFO in a founder-led, VC-backed firm is a high level of emotional intelligence, or EQ. Traditionally, when the CFO was viewed as the black-and-white thinker, the CEO would have been expected to possess this trait: the ability to be aware of the emotions of oneself and others and manage them in order to achieve the best possible outcome. But with the advent of tech firms led by their founders, the relationship has, to a large degree, been inverted.

Now many CEOs are, first and foremost, technologically minded creative’s and inventors. They’re highly intelligent, they think differently than the majority of people, and they have short attention spans, often leaping from one engaging idea to the next. They are, by nature, disruptive thinkers who create equally disruptive products and companies, but they’re not necessarily effective or comfortable communicators.

A CFO in a founder-led business must be able to manage upwards: it’s their responsibility to get the best out of the CEO, and to manage the stake-holders. They have to know which battles to fight and when the best time is to fight them, as well as which ones to leave well alone.

Emotional intelligence is equally important, if not more so, as IQ to a person’s career: the higher their EQ, the more money they’re likely to earn. For today’s CFO’s, having this skill translates into reading the CEO’s mood ahead of key company events, managing the board and investors, successfully implementing a change in process and procedure into a long-standing team, and knowing without asking when the founder is calling on their skills as a strategist, a number-cruncher, or simply as a confidant.

Source – Notion Capital

Facebook toying with the $50 billion hyperlocal services market, launches Facebook Services

facebook servicesAlong with virtual reality, Facebook Live and other in-house projects, Facebook is now venturing into the hyperlocal services segment in India. The social networking giant  has introduced the services rather discreetly into the market. One can now look for spas, pet services, and even event planners on the page. This step marks the move of Facebook into an already crowded segment, with other players like UrbanClap, Quickr and Housejoy.

The current services include plumber, medical and health, arts and marketing, automotive(repair), business services, personal care(spas) and pet care among several others. Apart from browsing for the services, the Facebook services page also provides reviews and ratings of the services provided. The customer can thus find businesses and organisations based on the ratings. The bookings however cannot be made via the page, the user is directed to a website, email id or phone number. Hence, the monetisation plans for Facebook services are still not clear.

In November last year, UrbanClap had raised a Series B funding of $25 million. They claimed to serve over 5000 customer requests in a day and had built a base of over 20,000 service professionals.

“Today, UrbanClap sends them business worth US $200 million annually (current run rate), from small carpentry jobs worth Rs 200 to large interior designing assignments worth several lakhs. With this round of funding, we are well positioned to build a large company that Indians will love which will make their everyday lives easier,” the team had quoted.

There are believed to be over 132 home services companies and over 530 local service companies that are said to have raised close to $180 million in funding. The space has already attracted major investors like IDG, Tiger Global, Lightspeed Venture Partners, Saif, Accel and Bessemer Venture Partners.

Listing portals such as JustDial, Sulekha, YellowPages, Near.in; and providers such as Jack on Block, Hammer and Mop (which recently merged with Mr. Homecare) also operate in the same segment indirectly.

LocalOye had raised $5 million from Tiger Global and Lightspeed Venture Partners in April this year. Taskbob recently acquired Zepper and had earlier raised $1.2 million funding from Orios, Mayfield and others, Doormint raised $3M  led by Helion Ventures and Kalaari Capital in August 2015, while Timesaverz had raised an angel investment in October 2014.

World’s largest social media network already has over two million small and medium businesses on its platform and Facebook Services launch can further intensify the competition in the hyperlocal segment.

Source – YourStory

Starting Up? Here are some legal formalities you need to know

Legal StartupSaving a great business idea is one thing, but starting a new venture is another. Setting up one’s own venture involves a lot of legalities and first-time entrepreneurs are rarely able to fully comprehend the implications of various legal terms and conditions. If you are embarking on an entrepreneurial journey or are on the verge of raising your first round of investment, then here are some legal formalities that you need to be familiar with.

Documentation at the time of starting up

An entrepreneur can choose to register his venture as a company, a LLP, or a partnership. However, most often ‘company’ is the preferred entity. Also, if he is considering venture capital funding as a source of growth capital in the future, incorporating a company will be necessary given the relative regulatory and operational flexibility it offers. “Assuming that the founder chooses to incorporate a company, he will need to acquaint himself with the memorandum of association, and the articles of association of the company,” says Ashwini Vittalachar, partner at law firm, Samvad Partners.

Memorandum of Association, Articles of Association, and Founders’ Agreement (in case of multiple co-founders) are the defining documents for a venture.

The memorandum of association sets out the main objects and activities of a company. The founder should identify the core business of the company and ensure that the same is reflected in the ‘main objects clause’ of the memorandum of association.

And, the Articles of Association acts as the rule-book or bylaws of the company. It contains provisions pertaining to transfer of shares, further allotments, board and management procedures, Vittalachar adds.

She further notes that Founders’ Agreement is reflective of the intended relationship among the founders. So, rather than acquainting oneself with the terms of a Founders’ Agreement, a founder must discuss the various aspects of how the multiple founders propose to own and operate the company. Accordingly, the agreement will need to be crafted. Typically a founder’s agreement will have provisions relating to shareholding and percentage splits, dilution mechanisms (especially in the context of a fund raising in future), share transfer restrictions and board seat/ management rights, etc.

Clarity is key, believes Sunil K Goyal, managing director and fund manager, YourNest Angel Fund. “Co-founders may ponder between themselves while starting a venture on aspects such as position and role of each partner, delegation of decision making, decision making process for major decisions, clarity on initial and subsequent funding by partners, valuation norms for investments by partners, sweat equity, rate of interest on loans extended by partners, signatory for banking operations, norms for profit sharing, salaries, etc., keeping in mind engagement levels such as full-time or part-time or a sleeping partner, exit valuations between partners, settlement of accounts on liquidation or exit,” he stresses.

Besides having clarity on role and equity, founders must ensure necessary registrations/operational licences are obtained, labour compliances are met with, intellectual property, if any, are registered, and that contracts are properly formalized. This is useful not just from a future investment perspective, but also ensures that the corporate house is in order and that risks are mitigated, Vittalachar says.

Term sheet: A key legal document during fund raise

Once a founder has an interested investor on board, the parties generally enter into a letter of intent or a term sheet. The term sheet essentially sets out the basic framework of the transaction. While the same is non-binding in nature (except for certain terms like exclusivity), the term sheet becomes an extremely important document as this determines how a transaction unfolds. The definitive agreements signed are broadly based on the provisions contained in the term sheet. This document also allows the parties to gain exclusivity, and hence becomes important.

A term sheet is basically a non-binding document. Apart from two or three clauses – like those relating to exclusivity, confidentiality and governing law – the other provisions in the term sheet do not constitute a binding contract. The idea of a term sheet is to say that the parties – founders and investors – have, after discussions, reached a stage where they have a preliminary level of comfort with each other.

It’s a broad, in-principle agreement relating to the key deal terms, including the valuation, explains Vijay Sambamurthi, founder and managing partner at law firm Lexygen.

The term sheet codifies the discussions and includes things the parties have agreed to informally, not legally. Subsequent to the term sheet, there will be a due diligence process and the parties will eventually negotiate, agree on, and sign the definitive agreements.

Term sheet is only the beginning of a funding process, according to Goyal. “A well-prepared entrepreneur should be prepared to cut down the lag from term sheet to money in the bank account. It requires having audited accounts, tax filings, RoC compliances, highlights of major customer and partner agreements, patent filings, and the books of financial statements of the venture,” he says.

And, assuming that the outcome of the due diligence has been satisfactory, an investor then proceeds to negotiate the definitive agreements – typically the shareholders’ agreement, share purchase or share subscription agreement (as applicable), Vittalachar says.

Common mistakes

Mishandling an exit, when the engagement level becomes part-time or one of the founders becomes a sleeping partner, is one of the most common mistakes committed by entrepreneurs. Upfront clarity in the Founders’ Agreement can ensure smooth sailing in such times. And, during rounds of external funding, the founders must retain the management control or the board control with themselves, understand implications of key terms such as liquidation preference and drag-along rights of the investors.

Adding to the point, Vittalachar cautions, “Often, founders undermine the importance of reading and understanding the fine print.” This is true both in the context of material contracts as well as term sheets and definitive agreements. “Another common mistake is laxity in formalising employment terms and incentives (including ESOPs). This becomes difficult to formalise and manage as the numbers increase, and tends to take a nasty turn, especially in the context of disputes.”

Having a legal counsel to assist on various issues helps address all these problems. According to Vittalachar, most of the legal issues that a founder battles with are not necessarily “business law” issues. There could be concerns around IP law, taxation, real estate, employment law, litigation, to name a few. Hence, it is necessary to choose a lawyer who can provide advice relevant to the founder and the business. But this is often overlooked. The right lawyer can anticipate issues and will guide entrepreneurs in the right direction.

Source – Kotak Business Boosters – VCCircle