Startup Funding Process
Every Startup needs to raise funds for scaling up fast. If you don’t raise funds, then your competitor might raise funds, scale up and give you steep competition. Therefore, you should keep on raising funds and scaling up your startup. You should read the first article: Understanding Startup Funding before you read this article about startup funding process.
First of all, you need to understand the stages of funding we have for you. Please identify your stage and then move ahead accordingly:
If you have built your product/service and you wish to raise funds for moving to the next level, then you can apply for incubation by StartupLanes. We charge 10% equity in incubation and the normal success fee and lead & syndication fee of the Angel Network apply. In case your startup is already earning revenue, then it should be below 10 lakhs per month for joining the incubation program. Get the Incubation Program Details here.
If your startup is clocking a revenue above 10 lakhs per month to 25 lakhs per month then your startup qualifies for Acceleration program by StartupLanes. We charge 5% equity for acceleration and the normal success fee and lead & syndication fee of the Angel Network apply. Get the Acceleration Funding Details here.
If your startup is clocking a revenue above 25 lakhs per month but less than 8 crores per month, you can opt for growth funding program by StartupLanes. We don’t charge any equity in this one, and the normal success fee and lead & syndication fee of the Angel Network apply. Get the details of Growth Angel Funding here.
4. Venture Capital
This is the stage when you have already raised at least one Angel round and you wish to raise funds only through Venture Capitals (VCs or VC firms). We don’t charge any equity in this one, and the normal success fee apply. Get the details of VC Funding Services here.
Step by Step Process of Raising Funds
1. Preparation for Funding
You should ensure that your startup meets the minimum revenue requirements as mentioned in the funding guidelines. Make sure that you have the following documents ready:
(a) Pitch Deck: You should have the pitch deck prepared as per the guidelines of pitch deck by StartupLanes. This is the most important document that you will show to the investors for raising funds.
(b) Financial Projections: Investors wants to know about your plans for spending the funding that you are going to raise. In this the most important aspect is that customer acquisition and revenues along with your profitability. Your exact amount of funding required will come from this document, therefore this cannot be ignored. Do not mention a random amount of funding required in your pitch deck, get the exact number from your financial projections sheet.
(c) Valuation: You have to know the value of your company because investors will invest in your company for a share of your company. Investors will get to know about the equity that they will get for their investment from this document. This is an extremely important document. Most of the founders make this mistake of getting an inappropriate valuation, only get the “Fairshare Valuation” that is propounded and developed by Shishir Gupta, who is the Founder and CEO of StartupLanes.
2. Chek before the Funding Application
Most of the pitch decks, financial projections and valuations that are made by the founder themselves or by their designers are not appropriate. To be honest, more than 98% of these documents are wrong. We don’t explain you the mistakes because generally founders don’t understand, and they start arguing with our team. That’s why it is important for you to understand that these documents are most important and therefore it is recommended that you get these documents made by the experts of StartupLanes. We get all three documents done for US$ 1100 or INR 75000, from our gold members. We don’t profit from these documents; our margin is only 10% out of which we pay 50% to our team.
3. Funding Application
Apply for funding by filling the form at StartupLanes website. Please don’t send the pitch deck and other documents through email or WhatsApp. We only accept applications through the application process because the applications are received in our Application Tracking and Customer Management Software.
4. Connect with SL Team
The Community team of StartupLanes will receive the application in their dashboard and then they will call you after evaluating the pitch deck and other documents that you have submitted through the cloud drive link. Please take the contact number of the person who contacts you and save it in your phone as you will need it many times further. Please setup a date and time for the mock pitching to SL team so that they can evaluate the proposal.
5. Mock Pitching of Founders
The SL team will setup a zoom call for your mock pitching. You should pitch to our team in the same way you are going to pitch to the investors. This will ensure that our team finds out the challenges and then they can suggest you the improvements that you should do.
6. Approval of Startup
After the mock pitching, our team will inform you about approval of your application. We generally don’t reject any application, however in case your application is rejected, you can raise a complain to get it reviewed for one more (final) time or book a call to talk to directly talk to the CEO of StartupLanes.
7. Due Diligence by StartupLanes
We do the complete due diligence of the startup before accepting it for funding, therefore you will be required to submit the following documents for the due diligence: RoC certificate, GST certificate (if applicable), Pan card, address proof of the company, address proof of the founders (current location), two personal references (friends/family) and two work references (other founders), two staff references (team members) and two educational references (college professor/teacher/principal/others), and you have to provide your financial documents certified by your CA including Trading A/c, P&L, Balance Sheet (provisional is also OK), company’s bank statement, GST statement, income tax filings and RoC filings. You will be required to declare that you don’t have any pending cases or police complain against you or your co-founders, at the time of due diligence.
8. Funding Mandate
After the due diligence is completed, our team will share the legal contract with you, that is called mandate. You have to review it by yourself or get it reviewed by your lawyer, sign it and send across. Please note that this mandate is non-negotiable and nothing will be changed in it, except factual errors and typing mistakes. Sign it and get it signed by the SL team, keep the signed copy with you and send across to our team as well.
9. Payment Verification of Startup
There is a legal fee of US $25 or INR 1000+GST to be paid towards the legal charges of the mandate that is also used to verify the bank account of the startup. Please pay the charges and inform our team. This is only for the people looking to raise the funds through Angel Investors, not applicable for the VC funding.
10. Research Report of Startup
The Research Team of StartupLanes will prepare a research report on the basis of data provided by you to present a bird’s eye view to the investors. This research report makes the decision-making process of the investors, easy and fast. Our team may ask for additional information while preparing this research report, please help them, this is for the benefit of all. We don’t charge any fee for the research report from anyone; therefore, you don’t have to pay for it.
11. Startup Teaser
Make a one-page teaser describing problem, solution, revenue, industry, customers, product, competitors, funding required, milestones, and valuation in 1-2 lines for each and send across to us. Do not mention your name, your company name, brand name or any kind of contact details in the teaser. We send this teaser to the investors in our network to pick up their initial interest.
12. Promo Video of the Startup
Our team will give you a basic format to record your video mentioning important aspects about your startup and explaining why should investors invest their money in your startup. This should be a 3 to 5 minutes video. We will do the editing, you just have to record and send to us. We won’t charge you for the video editing and sound editing.
13. Startup Demo Day
Our team will give you a date for the exclusive demo day. It is applicable for startups looking to raise Angel funding from the angel investors in our network. This is an exclusive event for one startup where investors will hear the pitching from you. No other startup will be present in the event, it is an exclusive event for you.
14. Investor Outreach
Our team sends the Research Report, Promo Video and Teaser to the Angel Investors in our network in case of Angel Funding. The interested investors will express their interest to receive the meeting link for the exclusive demo day. On the other hand, in case of Venture Capital Funding, we outreach the suitable VCs one by one and our team will identify the interested VCs for the personal connect.
15. Personal Connect
This is applicable to VC Funding only, where our team connects the Founders with the VCs on a personal call or meeting through video conferencing.
Our team connects with each investor personally to take their commitment of the amount that they wish to invest. We will inform you about the total investment committed.
17. Investor Due Diligence
The investors will do the due diligence to the facts and figures mentioned by you.
18. Term Sheet
The term sheet will be signed by you and the investors to put all the terms and conditions of the investment into the legal agreement.
19. Share Holder’s Agreement
This is an agreement to define the terms and conditions for the startup and the investors who will take the share allotment.
20. Fund Transfer
Investors will transfer the funds directly to the bank account of the startup. You should have a new bank account opened for the purpose of receiving funds as per section 42 of the Indian Companies Act, 2013.
21. Success Fee & Lead and Syndication Fee
You have to transfer the success fee to StartupLanes for the services as per the mandate along with the lead and syndication fee.
22. No Objection Certificate by StartupLanes
After the payment of success fee, please apply for the No Objection Certificate to be prodived by StartupLanes.
Now, you can announce the funding in the media. You should announce it in at least one national media so that the tracking sites can validate your funding and valuation.
24. Share Allotment
You have to allot the shares to the investors within the time limits.
25. Next Round of Funding
Start preparing for the next round of funding through StartupLanes or through other Angel Networks/VCs with the help of SL team.
Please feel free to reach out to our team for any questions.