Founder's Diary: Successful steps to equity crowd funding

Tushar Srivastava, founder and CEO of Nurturey.com, explores the evaluation process he undertook to raise funds for his start-up

Raising investment is not just a key milestone but a matter of survival of an entrepreneur's vision. Besides the efforts spent on the actual business, an entrepreneur is likely to spend most of his or her time on fund raising. Many underestimate the time it takes to prepare a business plan, approach investors, and even the time spent post investment commitment.

Though I was fortunate enough to raise our seed funding successfully, I still wish I had known more about the process in advance. Nevertheless, here's the evaluation process I undertook before selecting 'equity crowd funding' as the investment route to make your journey easier.

First things first - Bootstrap!

The first decision I had to make was whether to bootstrap or start looking for investors immediately. I decided to bootstrap Nurturey.com till at least we built a prototype or beta version to demonstrate my commitment and belief in the business. Of course, a working prototype would also make it easier to explain the concept and help investors visualise the roadmap.

I strongly recommend bootstrapping in early stages for one very important reason. Any external investor at this early stage will tend to take a huge equity (unless you have an entrepreneurial track record), if you are fortunate enough to find one. And in excitement, most entrepreneurs don't realise that it takes several rounds of funding before they build a successful business, leading to significant equity dilution. If you give up a lot of equity early, soon you will find yourself to be an 'employee' of the investors rather than an 'entrepreneur'. 

If you don't have your own savings, convince wealthy friends or their parents to invest on easy terms. 

Early stage VC firms?

Once we had the prototype ready, along with a clearer vision of the product, we started to look for investment. Our first choice was early stage VC firms and I was sure someone would give us a few thousand easily. But the idea came crashing down, as we began to understand that early stage VCs don't really mean early. VCs expect you to have achieved quite a bit in terms of products, users, revenues, etc, especially if you are outside the Silicon Valley.

How about Angels?

So, the next option was to find wealthy angel investors. However, it is an uphill task to find a single person, who could invest a large amount in a risky business run by someone who is perhaps unknown. 

Accelerators

The only reason I didn't pursue accelerators was that I didn't want to get trapped in filling several different applications, at a different time in the year for often small amounts of money. It felt like applying for jobs all over again, after MBA. I just wanted to focus on my product and my business.

Distributing the risk?

Despite all the failure, it was clear that a lot of non-investor type people show more interest in start-ups and are willing to invest their small amount through crowd funding platforms.

However, going for crowd funding would have meant revealing significant information about the business. Since I needed money to pursue my vision, any investment from them would be a ringing endorsement of the concept. Moreover, our product was meant for parents - and many of the investors I'm sure were parents themselves.

Tushar Srivastava is founder and CEO of Nurturey.com, a firm that provides online tools to parents to measure their children's productivity