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Davis was pumped, but he said he’d be a lot happier if they signed Dwight Howard, too.All things considered, however, it was a good Thursday for the Rockets’ new media partners, Clear Channel Radio and Comcast SportsNet Houston. Sports Business 101 dictates the best way to launch a new channel or a new stadium is to sign a marquee player, and Lin’s signing coincides with the Rockets’ efforts to sign sponsors and radio affiliates to join their new flagship, KBME (790 AM), and as CSN Houston lobbies cable systems for carriage.”It will definitely have a positive impact, especially since this is the rollout of a new regional sports network, so the timing is very good,” Chris Bevilacqua, founder of Bevilacqua Media Co. And media rights adviser to the Pac 12, Big 12, NHL and other leagues, said in an e mail.”Lin will bring real excitement and visibility to CSN’s distribution and advertising sales efforts.”Lin’s presence will almost certainly boost Nielsen ratings, which will boost ad revenue, which in turn will boost the Rockets and Astros, who together own 77.3 percent of CSN Houston.It could help bring reluctant cable systems into line in the Rockets’ core telecast area, which includes the Designated Market Areas of Houston, Beaumont Port Arthur, Victoria, Lufkin Nacogdoches, Bryan College Station and Lake Charles, extending in a radius of 150 miles, as the team moves to its new home for the 2012 13 season.Another key question is whether even in areas where Rockets games cannot be seen live, Linsanity will be sufficient to convince cable operators in, say, Austin or Corpus Christi to pick CSN Houston so fans can follow the network’s Rockets news and feature shows.”There are Rockets fans throughout our five state region and the nation and anybody who is a Rockets fan is going to want to know and see what is happening not just with Jeremy but with the team,” said Matt Hutchings, president of CSN Houston.

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How to Ace your Seed Round of Funding?

Continuing our discussion about Startups 2174931364, it’s very important for a startup to understand when a seed round of investment can be raised. The quick and obvious answer is ‘whenever money is required’, but it’s a bit more complicated than that, considering that a startup raising investment from an investor is a two-sided transaction wherein the startup is getting money to scale and investor is investing money for a return and hence a transaction is consummated when both parties are happy and feel they have a win.


Raising external funding too soon could mean a potential loss in direction due to a lot of pressure too soon in the game, a loss of control of the company way too early (if it’s equity funding) because valuation is unlikely to be very high very early on and in general could potentially destroy a team and their dream of building a product. At the same time, raising external funding too late is also a bad thing because every idea has it’s time / moment and if that’s passed, it can feel like a wasted opportunity. Everyday that you’re working on your idea, remember that there might be other people, working twice as hard on the same idea and hence every day gone by is a lost opportunity.

So when it comes to the right time for raising money, there is no one correct answer, but that being said there are a few indicators which you can rely on to understand that you might be ready:

  • When you’ve decided to dedicate 3 to 5 years of your life, on this idea –  Some people start their business as a project and hence aren’t 100% dedicated to it in the medium to long term from the start. There’s no harm in that. But before raising money, ensure that you’re 100% dedicated to spend the next 3 to 5 years of your life (trust me, no success comes before that) on this idea. If you can’t, then raising money might be a bad idea for the expectation of the investor (whether written or not), is that you’re going to see this through, one way or another. Not being able to puts the transaction in jeopardy and makes life difficult for both the startup founders and the investors.

  • When you have a decent team – It will take years to come up with exactly the right team and for many companies, it might never happen, but having most of the core members in place is important because at the end of the day, it’s a people game as these are your biggest assets to execute your vision. There are some hires which you might make only after you’re funded, but having a decently well rounded team in place is a good indication that you might be ready to raise some money. The point here is that if you don’t have a decent team along with you, there’s no way you’re going to be able to deliver what an investor expects you to deliver, for it’s impossible for one person to do it all. If you can’t deliver, once again, life is going to be difficult for the investor and for you.

  • When you have a plan in place – One of the worst things one can do is to raise money without a plan. That’s the beginning of the end for any company, no matter how talented the entrepreneur. So until you have worked on the business idea enough to have a decent plan in place for a period of 1 / 2 years, raising money is a bad idea. The point here is that unless you know how you’re going to spend the money, what you need the money for and what the money is going to provide in return for you, there’s no way you can make a pitch to a potential investor, not unless you’re Elon Musk of course, in which case, it’s a totally different story.

  • POC Done – Again, this is not a rule at all, it’s subjective, but I believe that raising money for a Proof of Concept might be such a good idea. That, according to me, needs to be your investment in the business. Once you’re ready with your POC, you know what works or at least what doesn’t and that’s when you’re ready to go deeper and hence that’s a good time to raise money. Investors who are asked to contribute even for a Proof of Concept are often skeptical about the startup / founders and are more likely to turn down the opportunity. A potential investor understands risk vs. reward, but at the same time, there’s a line on how much risk an investor is willing to take. If the requirement is beyond that, he / she is more likely to pass than engage.

The quantum of money you need to raise is an extremely crucial decision that you will encounter in your quest for seed capital. I must clarify that there are two schools of thought. I will demonstrate both to you here, but once again, please remember, there is no right or wrong. These are just guidelines based on which you can decide the timing:

  • Raise as much as you can – In this school of thought, which a lot of successful entrepreneurs have used, the core assumption is that money as a resource is not available whenever you need it, on the terms that you need it and hence it is prudent to raise as much as is reasonably possible, even if it’s higher than what you need and have money in the bank. This approach helps a company tide over uncertainties and unexpected money crunch scenarios very well and that way, the company is able to secure much better funding deals (w.r.t the terms of money) because it’s never desperate for money as it always has more than it needs. Of course, this doesn’t apply in case it’s a loan / debt funding.

  • Raise as much as you need – In this school of thought, a reasonable run way of 12 to 18 months is considered wherein the money required to sustain the business for this period of time is the quantum of money that is raised. A runway shorter than 12 months doesn’t make sense because the founders go from one fund raise to another, which means there’s less time to focus on the business per say. A runway longer than 18 months doesn’t make much sense because the cost of funding becomes very high and then a limited amount of capital employed in the business has to work much harder to provide a return on idle + employed capital.

A word of caution while budgeting the quantum of money to be raised, please double the expense and halve the revenue and use those numbers. The reason behind this, which is a limitation of an excel financial projection is that there is no way to account for experiments or failure. For instance, a business projects 200 customers @ $8 / month / customer. Chances are that you might not get 200 because of some genuine reason or that $8 is effectively only $5 because of discounts and offers etc. These are things, which no matter how diligent you are, you can’t factor in your excel workings and hence the suggestion. Like how it’s impossible to run a car at 90 Kmph if it runs out of fuel with no pump in sight, you can’t run a funded company if it runs out of money with no next funding in sight.

What does Seed Round of Funding mean?

Before we get to the funding part, let’s address the ‘Seed’ Part. Investment raised by startups from investors are called ‘Rounds of Funding’. These rounds are given names based on the quantum of money that the startup is raising. Here is how the nomenclature works:

  1. Friends & Family Round – upto $50k
  2. Seed Round – $50k – $250k
  3. Pre-Series A Round – $250k – $1m
  4. Series A – $1m – $3m
  5. Series B – $3m – $10m

The above is not carved in stone and might vary from region to region. Further, what the round is called is less important than actually raising the round and taking the company forward. But by getting to know the above, at least, the next time someone mentions this, you’ll know what they’re talking about.

Now, coming to the more important part, the funding. So it is a fact that every company needs an infusion of funding to scale. It’s not the only thing required, but it is definitely an important one. FUnding can be of two broad types, Internal and External. The former is where the company uses the money it has made, running the business to fund expansion. The latter is where the company uses money from third parties to fund expansion.

Every company is not necessarily a company that needs external funding. There are businesses out there that are sustainable from the word go (they use internal funding to scale) and they don’t need external funding and hence the notion that every business needs external funding or without external funding, you can’t build a great company is incorrect. That being said, It would be wrong to say that a company can scale without funding, because that’s not possible and hence the use of the phrase ‘external funding’. It is very important to understand your own business model to figure out if external funding is required for your business or not.

When it comes to external funding, there are a couple of options in which this money can be raised. There are pros and cons of each option, which we will discuss later.

  • Loan / Debt – This could be from a bank or from an individual. This is where you receive a certain amount of money and then you repay said money, over a pre-decided time frame including a certain amount of interest. The biggest advantage of loans is that out of the three options mentioned here, they are the cheapest source of finance. A big disadvantage of loans is that they need to be repaid over time and that means the business needs to generate enough cash flows to repay the loan. Businesses that can benefit from bank loans are those businesses that will either be cash flow positive or profitable after the investment through bank loan is made in the business. Cost of debt funding varies from company to company and depends on a vast number of factors, which may or may not be in the control of the company. By typically, for a startup, one can expect a cost of about 14% to 24%. It can go beyond that, but in my professional opinion, 24% is where one must draw the line.

  • Convertible Debt – This is where an investor invests money into a company for CCD (compulsorily convertible debentures), which is a debt instrument, which is then converted into equity (at a x% discount of valuation of the subsequent round of investment) at the occurrence of a trigger event, which is likely to be the subsequent round of fund raise. From a company standpoint, the biggest advantage of this is that valuation discovery is pushed by 15 to 18 months and this helps a company greatly ramp up valuation through business metrics using the money invested by the investor, without diluting a large chunk of the equity of the company. A big disadvantage here is that while negotiating, if the investor requests for a cap on the valuation, this could go against the company, for the company, at a future point of time too, will dilute significant equity even if the valuation of the company is very high, because the cap on valuation will become effective. This is a relatively new concept from an indian context. The dilution here depends on the quantum of investment and the valuation, which in turn depends on a vast number of factors, of which there is no standard list. For a seed round, you might end up diluting about 10% – 15%

  • Equity Investment – This is where an investor invests money into the company in return for equity shares issued immediately. A big advantage for the company here is that the money needn’t be repaid and hence there is no pressure on profitability and cash flow, but that being said, this is the most expensive source of raising money as the investors expectation in terms of returns will be more than the cost of any other source of money. Further, here if the valuation is not negotiated accurately, it could lead to a significant dilution of the founders equity, wherein in a few rounds of investment, the founders could end up owning a very small portion of the equity of the company and therefore will have very little control over the company. The dilution here depends on the quantum of investment and the valuation, which in turn depends on a vast number of factors, of which there is no standard list. For a seed round, you might end up diluting about 12% – 20%

In conclusion, a business needs to be aware of what the appropriate option for external funding is, based on the business operations and then decide accordingly. There is no general right or wrong. It’s all subjective.

P.S. – Interested in knowing more about how to raise Funds for your startup? Join the Halbe “Seed Funding 101” Workshop on 9th June, at OrangeScape, Tidel Park, Chennai. Register now 

New Year, New Identity, New Focus!

We’re at the fag end of 2017 and it’s been a good year for us! We’ve learnt, we’ve grown, both us and our clients! It’s been more than 5 and a half years since we started this firm. Looking back, we’re able to look at how this firm and its clients have evolved. Some of you were running your previous businesses, which we were supporting since they started. Fast forwarding 5+ years, some of you have successfully exited those businesses and started new ones, which once again, we’re supporting. That is a true endorsement of the firm, nothing else. When you feel like coming back for more, it makes us want to give you everything til the moon and back.

Continue reading New Year, New Identity, New Focus!


India’s startup e-commerce poster boy & Unicorn Club President, Flipkart is in the news again! The company just lost $4.1bn in it’s valuation in the past couple of weeks! Now to give you an idea of what $4.1bn is, it’s Rs. 27,060 crores! You could buy 40% of Ferrari with that kind of money. No, not the car, but the entire company!

Continue reading Tech Startup valuations tanking & Flipkart Leads the Way