Understanding the Urgency of Fundraising

In the previous article, DailySocial give tips do fundraising for startup startups. Fundraising is crucial in the startup business development process, although it is not the only way to keep the business running.

One of the conventional methods that can be used is to take advantage of the company's profits to cover operational costs and other necessary costs. This is not easy, considering that startups usually focus on developing products and businesses. However, most startups decide to do fundraising for various purposes.

One thing is for sure, fundraising can help startups move faster, regardless of the business model or segment the startup is targeting.

Sribulancer CEO Ryan Gondokusumo said:

"Will it becomes difficult for startups not to raise funds because of the need capital itself to accelerate startup growth. For that, make sure the initial focus of the startup is from the start, is it chasing? growth or sustainability."

Focus on the original goal

Even though it's getting harder and harder to attract attention now venture capital (VC) to invest in new startups, this does not dampen fundraising activities by various startups.

Many startups receive large amounts of funding. Nonetheless, the gain funding does not automatically mean that the startup will be able to last a long time. Even though this aspect is the main key so that startups can continue to run their business.

It is very important thatfounder Don't let the fundraising process distract companies from finding product market fit needed to create a real business.

"In my opinion, in the end, people build startups in order to make money. So, of course, profit should be made sustain for good business. In the end there are two choices: whether the startup wants to move organically or then start focusing on business growth by leveraging fundraising," said Sirclo CEO Brian Marshal.

Brian added, in order to continue to exist and be relevant to users, stakeholder, and investors, the fundraising process should indeed be carried out. Although not very often, at least it can be benchmarking for the startup itself.

Apart from VCs, Ryan sees fundraising by approaching companies as an ideal alternative. In addition to getting capital, startups can also establish strategic partnerships with the company itself.

"Eventually Startups are built to be profitable businesses. If it is not profitable, of course it will be useless. Therefore fundraising needs to be done, adjusting to the priorities and targets of the startups to be achieved," said Ryan.

Profit and scalability

Many startups are starting to focus again on earning income to run a business, especially those targeting the business or B2B segment. The nature of B2B which is considered more rational than B2C or C2C (which is usually more emotional), makes the B2B segment more attractive to startups, such as Sirclo, Ralali, Akseleran, or Telunjuk to run a business.

"We choose not to do fundraising currently and only focus on taking advantage of the company's profits. Even though it's not too big, at least we don't depend on investments and equity that are often demanded by customers venture capital," said Telunjuk CEO Hanindia Narendrata.

The last fundraising that Telunjuk received was in mid-2015. index gain Series A pendanaan funding from Venturra (formerly Lippo Digital Ventures).

To make a profit, there are several steps that must be followed. One of them is to manage and reduce the company's expenses. Companies must also be able to get repeat orders and acquire new clients on a regular basis.

That's what Sribulancer also did, They tried to use funding in the most appropriate way and reduce unnecessary expenses after knowing who the target market is to reach.

"For startups targeting B2B businesses, such as Akseleran, it is certainly more profitable because we are dealing with markets that have already developed mature. However, it is undeniable that we still need fundraising, even though the time doesn't have to be too frequent," said Ivan.

Founder's stock and control

There are many reasons why startups decide to raise funds, from acquiring users, launching marketing activities, to increasing the number of teams.

As a "reward" for raising funds, investors get shares of the company. According to Hanindia, the ideal share distribution depends on the needs of each startup itself. The amount and percentage of shares can be negotiated between the VC and the startup founder.

"Depends on how big the expectation is founder to potential investors. It also depends on how investors expect founder. Whatever you want founder and investors, make sure it is mutually agreed in writing in the company deed."

The same thing was conveyed by Akseleran CEO Ivan Tambunan. Ivan added that startup valuation is also a factor of consideration.

"In my opinion, usually angel investors up to 15%, then the seed stage and Series A investors [get] around 20%-25% each. The more advance funding, the dilution usually gets bigger too."

After the number of shares is determined between the founder and the VC, the next step is to make sure the startup has control after the fundraising is done. What Ryan does at Sribulancer is make stamp table and simulation. If a new investor wants to enter by giving about X%, then the startup can get the rest--is it less than 51%.

"If in the end the amount is less than 51% which then the rest is obtained by startups, it could be that startups no longer have control over their startups," said Ryan.

Meanwhile, according to Ivan, there are two ways that can be done so that startups can still have control after the fundraising is done. The first way is to make sure founders holding not less than 50,1% shares. Another way, in Shareholdersagreement it is regulated that the management (board of directors) is filled by people who are dominated by founders even if the founders share is not up to 50,1%.

"Founders need to discuss with lawyer who used to hold transactions fundraising startups or Mergers and Acquisitions (M&A), so as not to make a wrong step and get the right protection," said Ivan.