What Is A Unicorn Startup & How To Be One

In the venture capital industry, the term unicorn refers to any startup that reaches the valuation of $1 billion. 

Recently one of the most used editing tools, Grammarly became a unicorn.

We often talk about unicorns like Uber, Airbnb, Snapchat & Pinterest but little do we discuss what does unicorn exactly mean. Ever wondered why some startups given this title? What are the criteria to get this title? Or have you just wondered, how to be a unicorn?

If yes, this guide is for you.

Read further to know all things unicorn! 

What does it mean to be a unicorn

In the venture capital industry, the term unicorn refers to any startup that reaches the valuation of $1 billion. 

The term was first coined by Aileen Lee, founder of Cowboy ventures when she referred to the 39 startups that had a valuation of over $1 billion as unicorns. The term initially was used to lay emphasis on the rarity of such startups. The definition of a unicorn startup has remained unchanged since then. However, the number of unicorns have gone up.

Features of a unicorn startup

To be a unicorn is no cakewalk and each unicorn today has its own story with a list of features that worked in their favour. We have listed down a few pointers that are commonly seen across all the unicorns:

  • Disruptive innovation: Mostly, all the unicorns have brought a disruption in the field they belong to. Uber, for example, changed the way people commuted. Airbnb changed the way people planned their stay while travelling and Snapchat disrupted the usage of the social media network etc.
  • The ‘firsts’: It is seen that unicorns are mostly the starters in their industry. They change the way people do things and gradually create a necessity for themselves. They are also seen to keep innovation up and running to stay ahead of competitors which might later boom.
  • High on tech: Another common trend across unicorns is that their business model runs on tech. Uber got their model accepted by crafting a friendly app. Airbnb made the world seem smaller by making the best of the world wide web. 

A recent report suggests that 87% of the unicorns products are software, 7% are hardware and the rest 6% are other products & services.

  • Consumer-focused: 62% of the unicorns are B2C companies. Their goal is to simplify and make things easy for consumers and be a part of their day to day life. Keeping things affordable is another key highlight of these startups. Spotify, for example, made listening to music easier to the world. 
  • Privately owned: Most of the unicorns are privately owned which gets their valuation bigger when an established company invests in it. 

According to CB Insights, there are 361 private companies around the world valued at over $1 billion. India has 16 of these companies, taking 4 percent of the overall share. Also, India is just a shade below the UK, which has 19 unicorns with 5 percent overall share.

Can only a startup be a unicorn?

The answer is yes. Unicorn is a term given only to ‘startups’ who have a valuation of over a billion. The startups that exceed the valuation of $10 billion are grouped under the term called decacorn (a super unicorn). Dropbox, SpaceX and WeWork are some of the examples of decacorn. 

For the startups based out of Canada, there is an exclusive term for what we call a unicorn. It is ‘narwhal’. This means that any Canadian startup company with a valuation of over $1 billion is called a narwhal. Hootsuite and Wattpad are two examples of Narwhal companies.

Examples of unicorn startups

Uber: Thanks to the day when Travis Kalanick & Garrett Camp failed to get a taxi in Paris. Back in 2009, on a snowy evening, they came up with this idea of developing an app to request taxis. Since then the idea has shaken the taxi market in over 450+ cities and being a unicorn in just six years! 

Flipkart: Founded in 2007 and listed under one of the largest e-commerce brands across India, Flipkart is a success story of two friends, Sachin Bansal and Binny Bansal. Amongst all the other e-commerce startups in India, Flipkart stands way ahead with the current valuation of more than $15.5 billion. 

PayTM: Founded by Vijay Shekhar in 2010, PayTM is owned by One97 Communications, founded in 2010, when mobile had just entered the life of common man in India. Gradually One 97 Communications moved from mobile top-up service to bus and train ticket booking, bill payment enabler to a full-fledged payment service provider for businesses and was named PayTM. With the current day valuation of around $2 billion, PayTM has certainly come a long way.

The word ‘unicorn’ has come a long way from just being a mythological creature to a regular feature in business and finance discussions. Today, unicorn companies have attained recognition and made a place for themselves in the market. That said, it is not necessary that every unicorn will end up being a successful startup. The point is, any startup mustn’t stop hustling after touching a milestone.

Hope this article helps you connect dots to execute all that you have been planning!

Recommended Read Best Inventory Management Techniques You Need To Know

Best Inventory Management Techniques You Need to Know

Inventory management includes aspects such as controlling and overseeing purchases, both from the suppliers and from the customers. This includes maintaining stock, controlling the amount of product for sale and order fulfilment.

Picture a successful retail business in your mind. You are probably picturing a local shop or a huge shopping mall. 

Is there something that you find common between both of these? 

Do they both always have products in stock? 

Do they both carry goods in-store and online?

If yes, both the retailers have good handling over their inventories. Inventory management and its techniques are an important aspect to look at before you kickstart your business. Read this article to know more about the inventory management techniques and how to do it the best way.

What is inventory management

First things first, as a part of the supply chain, inventory management includes aspects such as controlling and overseeing purchases, both from the suppliers and from the customers. This includes maintaining stock, controlling the amount of product for sale and order fulfilment. The goal of inventory management is to:

  • Minimize the cost of holding inventory by helping the business owners know when it’s time to replenish products or buy materials to manufacture them
  • Know where the business inventory is at a given time and how much of it do you have in order to manage and balance the inventory the right way

Why do you need inventory management

Proper inventory management is the fundamental building block to your company’s longevity. When your inventory is properly organised, your entire supply-chain will be on the right track. Not having your inventory in place can lead to issues like mis-shipments, out of stocks, overstocks, etc. 

Here are quick pointers as to why inventory management is so important:

  1. Avoid spoilage: If your business sells perishable products or the products that come with an expiry date, like food or makeup accessories, it is highly possible that it will spoil if you do not sell it in time. Solid inventory management helps you avoid unnecessary spoilage. 
  2. Avoid deadstock: Deadstock does not only refer to expired material but also the stocks that can no longer be sold because it could have gone out of style or out of the season’s demand. By managing your inventory in a better way, you can avoid issues like these.
  3. Save on storage costs: Oftentimes, warehousing brings in a variable cost. This means you have to pay on the basis of the weight or size of your products. A thorough study of your inventory report over time will help you understand what products are sold best and when and hence, you will save on spending excess on the storage houses.
  4. Improper stocks: Usually, out of stocks and overstocks occur when a company uses manual methods to place orders, without overseeing the state of their inventory. This certainly is not a good predictor for inventory forecasting and hence results in too much stock or too little stock. 

All of these mistakes will not only cost you money but also cost you wasted labour to load and unload in the beginning and then rectifying the mistakes later. Simply put, when you don’t implement proper inventory management techniques and tools, your risk of human error mistakes keeps going up. Not just monetarily, this also makes a direct impact on your customers’ experience. Poor inventory management techniques can cost you negative customer reviews and your loyalty might take a negative hit as well. 

 

Top inventory management techniques for your business 

Inventory management is one of the most highly customizable parts of running a business. It varies from company to company. 

However, each business must try to remove as much human error as possible. Regardless of whichever inventory management tool you are planning to use, listed below inventory management techniques will help you improve your inventory (and cash flow too)!

Set par levels

Make the process simpler by setting a ‘par level’ for each of your product. Par level refers to the minimum quantity of a particular product that must be on hand, all the time. Whenever your inventory stocks dip below a predetermined value, you know it’s time to place an order.

Par product value may differ from product to product and also by how quickly is an item sold or how long does it take to get it sold. 

Setting up a par value will take some time initially- you will have to conduct research for each product based on the season and other factors but after setting it up ones, it will simplify the entire process of ordering!

Remember to keep checking on your par values from time to time, to check if your assumption still makes sense or you need to tweak it a little.

First-in first-out (FIFO)

As the name suggests, this principle means that the first stock that comes in goes out first. This is especially important for perishable products so that you don’t end up with spoiled or expired products. It is also a good idea to practice FIFO for non-perishable products. The reason is, if boxes are kept in for long, they are likely to get worn-out. You certainly don’t want to end up with something obsolete that you can’t sell.

In order to have a proper FIFO in place, all you need is an organised warehouse. Typically, this means adding the product from the back and pushing the existing products to the front. 

Build & manage relationships

Building a strong and reliable network plays an important role in a healthy inventory. This inventory management technique goes a long way whether you need to return a slow-selling item or restock a fast seller quickly or trouble manufacturing issues or temporarily expand storage space. It is important to have a strong relationship with your suppliers. That way, they will be more cooperative with you and help you find solutions quickly. 

Please note, a good relationship is not just about being friendly. It is about clear, proactive and open conversations. 

Regular auditing

Even if you have a tool or software to manage your inventory, it is a good idea to make sure that the screen data matches the actual facts. 

Find out ways to have a quick check on all of your products and if they are in sell-worthy condition.

Using the ABC method

Out of all your products, there are some products that need more attention than others. Using an ABC analysis lets you prioritize your inventory management by separating out the products that require a lot of attention from those that don’t. You can do this by listing your products in one of the three categories:

  • High-value products with a low frequency of sales (Category A)
  • Moderate-value products with a moderate frequency of sales (Category B)
  • Low-value product with a high frequency of sales (Category C)

Your Items in category A require regular attention since they have huge financial impact but the sales are unpredictable. The items you list in Category C require less attention since they have a smaller financial impact and they are constantly getting sold. The items you list in Category B fall somewhere in between.

Also Read All You Need To Know About Balance Sheets 

Accurate forecasting

One of the most important inventory management techniques is to have precise and reliable forecasting in place. Even though your prediction might not be 100 percent accurate, you will be prepared for something that might happen. Make accurate predictions by looking at the following:

  • Current market trends
  • Last year’s sales during the current time
  • Current year’s growth rate
  • Seasonality of your products
  • Overall economy

Best inventory management tools

Now that you know what is inventory management, why you need it and have a hold of best inventory management techniques, it’s time you know about the best tools to help you get started. Here are the top inventory management tools to assist your business growth:

  • NetSuite ERP
  • Zoho Inventory 
  • QuickBooks
  • Systum
  • SellerCloud

With the above mentioned powerful inventory management techniques in place, you can reduce additional costs while helping your business to stay profitable. You can also analyze sales patterns and predict future sales and get yourself and the business prepared for the unexpected. 

It’s time you take control of your inventory management and stop losing money and for the same, we hope this article helps you throughout!

5 Challenges for Banks and Fintech to Work Together

Remarkable isn’t it, how fintech has reconstructed payments and financial services, changing how payments work?

UPI has become one of the most preferred payment modes for both P2P and P2M transactions, kicking most other payment modes to the curb. Online commerce has become a child’s play because of payments solution companies and their products. 

Accepting payments from any part of the globe has become accessible. 

What more?

Money lending is growing phenomenally that we don’t even wait for our salaries to make a big purchase anymore. Incredible reward systems have emerged in the payments realm, making credits all the more appealing to every Indian consumer. 

Neobanking is taking over the financial services sector, offering customers more than they ever imagined. 

And, while all of this is going on, what’s really happening to banks? Are banks finally growing out of their shell to realize the contention? Are they able to cope with the towering change that fintech has given birth to? 

Are they intimidated by the change, or are they able to see the contingent collusion with fintech to empower themselves?

So many questions. 

These are some critical questions. They most definitely need to be answered. 

Surely, we’ve seen prominent banks stepping up to the exigency of the situation. These banks have joined hands with some of the most disruptive fintech companies out there. 

Now, the next question is, why aren’t all banks doing so?

If you’re thinking along these lines, let’s break it to you. It’s not easy. Collaboration means change. Collaboration means dispute. And, more than anything, collaboration means challenges.

Let’s talk about the collaboration of banks and fintech, and try to interpret what these challenges are and how they affect the overall financial system.

Consumers’ lack of exposure to tech can negatively impact banks and fintech working together

Consumers these days are tech-savvy. While we agree with this fact, it’s also important we address consumers who aren’t all that acquainted with technology. Millions of people from tier 2 and 3 cities hold bank accounts. And, several everyday bank transactions can seem complicated to these consumers. 

Also, having a bank account doesn’t compensate for the financial and technological knowledge that is expected of a consumer. So, this may be a significant challenge for banks and fintech to work together. 

Collaboration between banks and fintech can create trust issues

Considering the past collaborations of banks and fintech, it’s easy to say that the result is often a solution that simplifies the underlying problem. And, the solution is not immediately accepted by many. 

Banks have gained the trust of their consumers over the many years they’ve operated, and this trust is something that cannot simply be sidelined. 

For example, we’ve spoken about UPI and its adoption in many of our reports. And, the observation has always been the same. Although UPI apps incentivized transactions to push adoption, gaining the trust of millions of consumers did not come easy. Customers still prefer traditional banking methods over UPI to perform larger value transactions. 

Moreover, UPI was innovated by NPCI, not a private fintech body.

Banks will face increased dependency on tech

Let’s talk about traditional banks. Over the years, we have seen a number of manual efforts being translated into automated processes. But at the core, manual processes still thrive. These processes, along with legacy systems and their regulatory framework, make it stiff for banks to adopt newer tech. 

It’s not impossible to implement changes, but it does require a ton of effort.

Consider that the partnership works out better than we thought. This would mean automating the entire bunch of processes that traditional banks have worked with for ages. 

Not that we’re pessimistic about it, changing traditional means to modern methods are always great. But let’s remind you this change cannot happen overnight.

Speaking of fintech bodies, they’re mostly customer-driven. They want to make it as easy as it can be for a customer to perform all of their financial activities. This means the partnership can result in a complete transformation of how traditional banks work while increasing tech dependency for the banks. 

[Suggested read: What is a Neobank? Everything You Need to Know]

The result will bring about big culture changes

Banks and fintech work together to bring about changes across functional verticals of financial services. With the past collaborations, it’s not wrong to say that the culture of traditional banks has turned out to be slightly modern or innovative. 

On the other hand, banks have built a systematic culture over the many years of their existence. The collaboration can create somewhat of a culture shock to banks because the culture of a startup can be very contrasting. 

It’s definitely not wrong for banks to adapt to the change. But we are talking about highly skilled finance professionals who have their own views as to how things should work.

Banks and fintech working together may bring about new risks

Like we mentioned earlier, banks adhere to a set of traditional systems and legacy frameworks, unlike startups.

A fintech startup intervening with the banks’ legacy systems can cause the emergence of new, unforeseen risks like strategic risks, compliance risks, operational risks, cyber risks, and more.

To overcome these risks, thorough strategic business planning should be carried out — constant monitoring risks and deferring them before occurrence is the way to go for successful collaborations.

Conclusion

Yes, the challenges are many. But the most innovative solutions emerge when banks and fintech work together. As many there are challenges, solutions to these challenges are not impossible. It may take a little extra elbow grease to make things work at times, but finding a way to surpass these challenges and more, will contribute to the era of rising fintech the country is experiencing.

Read next: How to Invest in Mutual Funds Using UPI

Pre-money & Post-money Valuation: An Overview

Pre-money valuation refers to the value of a company excluding the latest round of funding. Simply put, pre-money valuation evaluates the worth of the startup before it steps out to receive the next round of investment. Post-money valuation, on the other hand, refers to the value of a company after it raises money and investment for itself. This includes outside financing or the latest rounds of funding.

The world of startups has a dictionary of its own and sometimes, it gets difficult to understand all of the jargon out there. Ever stumbled upon the word ‘pre & post-money valuation’ before tying your seatbelts for the rounds of funding?

Here’s a concise read on what these mean and how to calculate them.

What Is pre-money & post-money valuation?

Pre-money valuation refers to the value of a company excluding the latest round of funding. Simply put, pre-money valuation evaluates the worth of the startup before it steps out to receive the next round of investment. 

Pre-money valuation does not just give investors an idea of the current value of the company but also provides the value of each issued share. 

Recommended Read: Startup Funding In India: An Overview 

Post-money valuation, on the other hand, refers to the value of a company after it raises money and investment for itself. This includes outside financing or the latest rounds of funding.

Since adding cash to a company’s balance sheet increases its equity value, the post-money valuation always remains on the higher side when compared to the pre-money valuation.

What is the difference between pre-money & post-money valuation?

This difference between the pre-money valuation and the post-money valuation matters because it ultimately defines the equity share that the investors will be entitled to, post the funding rounds. 

For example, if an investor gives the company capital of $2,50,000, he would receive an equity share of 20%, if the pre-money valuation of the company were $1 million. This percentage jumps to 25% if the pre-money valuation of the company were set to $7,50,000. Clearly, this can have a dramatic leg; and financial implications on the company, after the funding is over.

How to calculate pre-money & post-money valuation

Calculating post-money valuation 

Comparatively, it is easier to calculate the post-money valuation of the company. Here’s how you can find this: 

Post-money valuation= Investment Dollar Amount / Percent Investor Receives 

So if an investment is worth $3 million nets an investor at 10%, the post-money valuation will be $30 million.

$3 million / 10% = $30 million

Please note, this does not mean that the company is valued at $30 million. Wondering why? The balance sheet of the company shows an increase of just $3 million (in cash), hence increasing the company’s value by the same amount. 

Also Read: All You Need To Know About Balance Sheets

Calculating pre-money valuation 

Remember that the pre-money valuation of a company is the company’s valuation before any funding comes into the picture. But this is important since it gives investors a picture of what the company is valued in the present day. Calculating the pre-money valuation is not difficult but it just requires one extra step: calculating the post-money valuation. Here’s how you can find this:

Pre-money valuation= Post-money Valuation – Investment Amount

Let’s use the example mentioned above to understand this better. Here, the pre-money valuation will be $27 million. It is because we subtract the investment amount from the post-money valuation amount. 

Pro-tip: Knowing the pre-money valuation of a company makes it easier to determine its per-share value. Here’s how you can find it:

Per-share value=Pre money valuation / Total Number Of Outstanding Shares 

Key Takeaways

  • Pre-money & post-money valuation differ in timing of valuation
  • Pre-money valuation refers to the value of the company excluding the latest round of funding
  • Post-money valuation includes external funding 

The concept of pre-money & the post-money valuation can be a confusing one at first for many startup founders. There are also cases where founders opt to ignore these valuation processes and simply place a pre-money valuation based on self assumption and their company’s performance. Basically, they end up using this as a shortcut and give up on the entire procedure in exchange for the quick investment they need. 

The drawback that this approach gets is that you offer an unrealistic valuation and your potential investor thinks you are unprepared.

Remember that investors also consider other factors like your target markets, competitors performance, scalability and many other factors relating to your company.

Hence a detailed report on pre & post-money valuation plays a major role when you step out with your company!

Hope this guide helps you get started if you haven’t already!

Also Read Non-Disclosure Agreement: Meaning, Importance & Benefits

Government Benefits for Start-ups in India

Ever since the Indian government came up with the ‘Start-up India’ program, more and more young entrepreneurs have come up with their creative ideas and are trying to turn them into a business model. 

To promote this concept and allow youngsters to engage in this process even more, the government has come up with quite a few significant benefits for young entrepreneurs. While some benefits help in easy filings and registration, others help in the tax exemptions.

Let us dive into the benefits one by one and see how it helps the young start-ups.

Simple process

The biggest issue with legal, filing and registration systems in India is the slowness of it. One cannot deny the fact that it takes you ages to get some paperwork done across all platforms. To prevent the young generation from getting fed up with the system and giving up, the government decided to make the whole process simple and easily accessible. You can now register your start-up using just an application on your phone. You just need to submit the required documents and you are good to go. With the whole process online, you can do the registration from anywhere you want if you have a smartphone with an internet connection. 

Reduction in costs

Filing for patency costs a certain amount of money, which many small-scale entrepreneurs cannot afford. To make it feasible for everyone, the government has reduced the fee by 80%. The government now provides the list of facilitators of patents and trademarks and have increased the pace of operations of Intellectual Property Right Services. By reducing the fee structure, a start-up now just has to pay the statutory fees and the facilitator’s fee will be managed by government. 

Better chances of getting funds

With the government now allocating funds upwards of Rs 10,000 crores, start-ups now have a much better chance of getting funding, which has always been a huge problem for them. Furthermore, the government has also asked all the major banks to provide financial capital to budding start-ups. 

No tax for the first 10 years

Initially, a company fell under the definition of a start-up for its first 7 years of existence and the company did not have to pay taxes for the first 5 years. However, now the company can remain classified as a start-up for the first 10 years and the tax exemption rules too have increased to 10 years. The government is listening to the response from people and angel investors in general, and has made these changes. 

Start-ups can apply for tenders

The general rules require a company to have a certain amount of experience or a certain turnover to make bids on government tenders. However, the government has exempted start-ups from this rule, allowing them to make tenders if they have the required financial backup. This provides wonderful opportunities for everyone new involved in the game to both earn and learn in the process. 

Setting up R&D Facilities

The government has promised to develop several R&D parks across the country to help tackle the problem of not having infrastructure to build new things. A few such parks have already come up in the nation with a few more coming down the line pretty soon. 

No unnecessary or time-consuming compliances

As mentioned above, the simple process of registering a start-up is due to the direct result of a cutting down in processes and steps. It not only saves a lot of time but money as well. Start-ups can self-certify their company through the mobile app by following the 9 labour and 3 environmental laws. 

Investors too can save money

Investors do not have to worry as they too are exempted of taxes if they make investments in such start-ups. It is not just the parent company that will enjoy the tax benefits but the investors too. This rule has given way to many investors investing heavily in projects where they see a certain spark or opportunity. Therefore, if you believe that your idea is incredibly superb then you just need to find the right investor who will be ready to invest in your company generously. 

Freedom to choose your investor

Now with this plan rolled out, there are far more options in terms of venture capitalists. Earlier, the options available were quite limited but now more and more firms are coming up as VCs to aid start-ups. With this development, start-ups now have the freedom to choose a VC that resonates with their thought process. This results in the smooth functioning of the company as you get the required money at the right time. 

An easy exit plan 

It is not just about inviting entrepreneurs to this scheme and forcing them to stay in it. The government has made an equally easy exit plan allowing any company to leave the scheme if they feel like it is not working out for them. You just need to fill the form for exiting the service and you will be able to leave it within 90 days of this submission. 

Opportunity to meet fellow entrepreneurs 

The government has planned to keep start-up meets every now and then to ensure that you can meet with fellow entrepreneurs and work on different ideas. It also gives you an opportunity to form new alliances, resulting in better quality of products coming out. 

With all these benefits offered by the Indian government, it is surely the best possible time to start your company and aim high. 

Also read: All You Need to Know about the Make In India Scheme

Offer Multiple Online Payment Methods to Boost Customer Acquisition

Payment options might not be the first thing that comes to your customer’s mind when you ask them about the most important aspect of placing an order online. But when it comes down to it, offering a wide range of online payment methods actually affects the customer and their final call of making a purchase.

Offering a number of ways to make online payments provides a lot of benefits to both the customers and businesses alike. Read this article to understand how offering multiple online payment methods can help you boost your customer acquisition. 

Benefits to the customers

Easier checkout experience

Complicated checkout can instantly make your customer take a U-turn, to never return back again.

Imagine a situation where you have added items to your cart and you are about to place an order but you realise the business does not offer your desired payment option. Chances are that you might just cancel your order. (and get frustrated too!)

The same happens when your customers do not find his/ her desired payment option on the checkout window. Hence, offering a wide range of payment options can help you stay with the customer until the end. 

Convenience in terms of payments

Every customer likes to have options. At any point, if your customer’s experience is limited due to the shortcoming on payment front, it needs urgent attention from you. Offer your customers the convenience they deserve, so that they keep coming back to you!

Pro-tip: Use payment mode intelligence to understand your customers so that you offer their first choice the next time they visit you.

For example, if your customer chooses to pay via American Express for an order that was worth more than Rs 20,000, than offer the same payment option when they have a similar order value going forward.

Little things like these enhance the customer experience by 10x or more! 

Satisfaction on your platform

As mentioned above, having diverse online payment methods gives the customers the chance to choose which option do they want to use and this, in turn, gives them a feeling of satisfaction. 

When they add items to the cart, they just expect a simple card checkout but when they see a variety of options, they will likely feel more valued!

Benefits for your business

Increase customer base

Your customers are more likely to come back to you if you leave them with a smooth experience.

A research report suggests that 8 percent of 1,799 respondents said that they abandoned a shopping cart during checkout due to lack of payment options.

What does this mean for your business? Much larger reach!

When running an e-commerce business, you might be targeting your local area or a country as a whole. But you know that you have the opportunity to get customers from all over the world!

The key is to enable international payments. Razorpay allows you to accept payments in nearly 100 foreign currencies!

Start accepting international payments with Razorpay today!

Higher chances of calling customers back

As mentioned above, the fact is, if you make your customers happy throughout the process, there are high chances for them to come back to you. Offer multiple online payment methods and never lose out on a customer. 

PS: Offering diverse payment options is the key to call your customer again and again! 

Stay ahead of the competitors

The most important benefit of offering multiple online payment methods is that it will help you set your brand apart from competitors. If a number of your competitors are offering a single or a few-mode of payment options, adding a range of options on your website will directly fetch you more customers! 

Offering diverse online payment methods make a lot of difference than you might think, for both the consumer and for your business growth. 

How about considering to add multiple payment options, if you already have not? Here’s a list of payment options you can offer to your customer through Razorpay:

  • Credit & Debit cards
  • Netbanking
  • UPI
  • Wallets etc. 

While you focus on your business growth, leave all your payment worries to us! 

Recommended Read Convert Cash-On-Delivery Customers Into Digital Payers With Payment Links

Demystifying the Processes and Nuances of Venture Capital

Providing monetary support to startups and new ventures comes with a price. For higher growth opportunities, the possibilities are endless; at the same time, it’s risky business, too. Regardless of the difficulties, there are many Venture Capital (VC) firms that provide the necessary push to new ventures. 

For example, Y Combinator, Sequoia, Tiger Global Management and Matrix Partners, to name a few. 

VC firms aim to invest in high-risk projects with the anticipation of high returns, and the funds provided by them is called venture capital.  

What are Venture Capital funds?

According to the Securities and Exchange Board of India (SEBI), Venture Capital Funds (VCF) is a stock of money established in the form of a trust or company registered with SEBI.

The VCF will have a dedicated pool of capital, raised in a specified manner and invested by following regulations of SEBI.

A pool of money stocked together from different investors that a fund manager invests into selected startups is called VC funds. 

An ideal VC organization manages about $100 to $200 million in venture capital every year for its investors. The fund gets divided between many startups, but in some cases, the money is pumped into a single company. 

[Suggested reading: Startup Funding in India]

Who invests in Venture Capital funds? 

Most of the capital that a VC firm invests comes from Limited Partner investors or LPs, who are high net worth individuals and institutional investors. 

The nature of LP investors can vary widely, but the bulk of the capital in the VC ecosystem comes from large institutions or Institutional investors. 

Institutional investors: Large institutions like endowment and pension funds, hospitals, charitable trusts, and corporations, who invest their capital to achieve a certain percentage of interest

Whereas, a modest portion of the overall capital in the VC ecosystem comes from high net worth individuals.

High net worth individuals: They are people with a net worth of over $2 million in liquid assets who invest their wealth. 

Who manages Venture Capital funds?

VC firms employ competent managers who are responsible for running the funds invested by LPs (high net worth individuals or institutional investors). 

The fund managers or general partners are responsible for investing the wealth in profitable startups, which guarantee a favorable ROI and maximize returns for the LPs. 

Other responsibilities of the general partners: 

  • Raise funds from LPs
  • Source innovative startups
  • Invest funds in promising startups 
  • Deliver ROI to LPs 

How do Venture Capitals get paid?

A typical VC investment expects a 20% return on investment. 

Because mustering meteoric returns rely heavily on strategic investments. Therefore the assumption is based on assessing the performance of the fund managers and analyzing the risk levels. 

And, a ten year VC funding would require startups to pay six times of the investor’s investment. The VC firm’s winner investments need to make 30x returns to provide the VC fund with a 20% compound return, to generate maximum ROI.  

Here’s an interesting fact: Traditional VC funds are usually LPs, so, this means the fund managers only get to invest the money once. 

For instance, if a fund manager makes an investment and exits after a 6x return, he/she is obliged to return the principal and gains to the LPs. 

After this, the fund manager can no longer reinvest the money. 

[Also read: 5 Steps to Pitch to a Venture Capital]

Startup fundraising: from seed to Series C and the road ahead

Startups raise venture capital in phases, which is generally referred to as rounds. 

Fundraising rounds attribute to the essential issuances of venture capital. For example, when investors get a pool of funds together and invest in the startup in one or more increments is known as tranches. Often tied to a valuation event, each fundraising round is correlated in a startup’s development. 

Benchmarks at every funding rounds

Seed stage
  • Round ranges from $750,000 to $2 Million 
  • Showcase early traction
  • Need capital for product development and acquire the first customer base
Series A
  • Round ranges from $4 Million to $10 Million 
  • Strong product 
  • Extra capital to increase user base and revenue
Series B
  • Round ranges from $6 Million to $25 Million 
  • Strong revenue
  • Large market share 
  • Repeatable growth 
Series C and beyond
  • Round ranges from $15 Million to $100 Million 
  • Large scale expansion 
  • Developing new products 
  • Exploring newer geographies 

Conclusion 

In VC funding, startups can raise money that they are under no obligation to repay. However, the cost of accepting the funds is higher–investors can buy a percentage of the company from the founders. 

VC funding is the ultimate financing structure for the startups that need cash to run their engine and will spend more time in the red to build a profitable business.   

Read next: A Beginners Guide to VCs

Minimum Viable Product: Meaning, Purpose & Examples

A minimum viable product means a product which usually has one basic set of features. It is released to a handful of people to test a new business idea and gauge people’s or your potential customers’ reaction to it.

Building a startup is a journey full of experiments. You have to come up with an out-of-the-box idea, build the product and finally plan and invest in effective marketing to deliver the product. This is the hygiene that usually every startup follows.

However, a number of entrepreneurs deny the above-mentioned flow, saying that building a product is not necessary in the first place. As surprising as this may sound, this strategy works! Businesses like Dropbox and Airbnb have adopted this and today, they speak for themselves. 

If you look forward to replicating the success of Dropbox and Airbnb, you need to think about building a Minimum Viable Product or MVP.

Interested much? Read this article to find out more about the minimum viable product.

What is Minimum Viable Product or an MVP? 

A minimum viable product means a product which usually has one basic set of features. It is released to a handful of people to test a new business idea and gauge people’s or your potential customers’ reaction to it.

The basic purpose of an MVP is to collect feedback before releasing a full-fledged product. To put it simply:

  • Minimum The most rudimentary skeleton-like foundation of the proposed solution
  • Viable– Sufficient in itself for early adopters 
  • Product– Something tangible that a user can see, touch or feel

What is the purpose of an MVP?

Wondering why not a maximum viable product? While you are planning to launch a new product or service, all you are trying to do is validate your hypothesis on the world and the world’s people. 

Patrick Collison rightly quotes, “You are trying to figure out in the early days of starting a product: are we wrong or is the world wrong?”

It is crucial to test your innovative hypothesis with the smallest amount of money, time and features, hence minimum! Listed below are the main benefits of having a minimum viable product:

Prevents building something no one wants

Let’s assume you created a mobile application that helps people count the number of times they stepped out of the house. Building this took month-long efforts and thousands of dollars to design and develop.

You finally handover the product into the hands of people and within a few days, realize that no one needs such an application. 

This is where a minimum viable product comes into the picture. It helps you save time and money that you spent on a product that did not deserve it in the first place. 

The key is to build the basic foundation of the product to understand the customers and analyze if they are willing to pay for what you have to offer.

Assists in understanding your own product offering

The next step after having an MVP ready is to gain user feedback. You will come across cases where your product/ service will be used for a different end goal than what you initially intended. Sounds awesome, right? 

Let’s take an example of Bumble. This dating app noticed that many people were finding the platform helpful for networking. This observation led the Bumble team to develop something called Bumble Bizz, a platform to connect professionals.

Validates your thesis quickly 

Before you start working on creating your product, you already have a thesis in your mind, don’t you? Creating and rolling out an MVP helps you to validate your hypothesis. 

If the user you invited to test your MVP on is willing to pay for your solution and use it in an intended way, then it’s a win-win for you. If not, you might have to look to some pivoting strategies.

How to create or develop a minimum viable product?

Now that you know the basic of an MVP, here’s how you can get started:

1. Identify & understand the market needs

The first step is to identify if there is a need for your product or service in the market. Go for detailed competitor analysis and establish how will you make your product stand out. While you come to the conclusion of this exercise, you should have the following two things in place:

  • Long term goal: Since you will have an understanding of the market by now, you must be able to project a long term goal and have a concrete answer in place for questions like what are you planning to achieve, what will be the target metrics etc. 
  • Success criteria: Success metrics differ from business to business. It is essential for you to have a definition of success when you start, so as to have easy tracking in place. 

2. Map your user’s journey

While you design your product or service, it is essential for you to map the journey of your potential customer. Spend time and learn about their behaviour and patterns.  The key is to step into your user’s shoe and then take the decisions.

3. Create a pain and gain map

Once you have empathized with your user’s journey, precisely jot down the pain points they might be facing and next to each point, write the gain your product or service will provide them with.

This exercise allows you to determine if you have the greatest potential to add value!

4. Decide what features to offer

At this stage, you are all set to filter and figure what features you want to offer in your MVP. Asking the question of what my customer wants versus what my user needs will help you have the correct priorities in place. 

Pro-tip: At this point in time, the only features you add must be connected to your product’s overall goal. 

Minimum Viable Product Examples

Wondering how are the above-mentioned pointers being practised in real life? Let’s have a quick look at some examples!

Instagram

When he started, Kevin Systrom developed and raised funding  <can link funding article here> for a mobile application which he named Burbn. This app was aimed to enable people to check-in and share their views of various locations. 

The app did not turn out to be an instant success and Kevin realised that people were more interested in photo sharing functionality. Hence, the Burbn team changed its focus on a single feature: photo sharing. We all know where ‘Instagram’ stands in our lives today!

Airbnb

Today whom we call the founders of Airbnb once faced a hard time when they had to accommodate guests coming over for a conference. All the hotels in the city were full and there they discovered Airbnb! The idea was to host the guests in their own apartments on ‘air’ beds. 

A true example of the skeleton-like foundation was enough to signal that their solution aligned with a common problem across nations. 

PS: This seems like one of the shortest MVP runs, doesn’t it? 

Amazon

What initially started as an online bookstore back in 1994 is today one of the leading e-commerce globally. The concept back then was to sell books at a lower cost. We can say that the idea behind Amazon then and now is pretty much the same, what has changed is the number of features and product on the platform. The first version of Amazon is a typical example of an MVP project where everything went from small to huge! 

Wrapping up…

If you are planning on starting something new, you should definitely create a minimum viable product. The best part is that once you launch an MVP, you can collect realistic feedback and make changes in your product or services. We hope this article will help you through your business journey. 

Takeaway? It is recommended to continue to test, learn and measure and keep testing until the product or service is finalised. 

Recommended Read Startup Funding In India: An Overview 

Startup Funding In India: An Overview

Etymologically, funding is the money raised by a startup or provided by an individual, organisation or government bodies to a startup for a particular purpose.

Getting started with a business and planning the growth ladder is full of challenges and tough decisions. One of the most critical stages is when you step out to raise funds for your business. Read this article to know everything you should about startup funding, before you reach out to investors or vice versa because there’s not a lot of ‘fun’ in ‘funding’!

What is funding?

Etymologically, funding is the money raised by a startup or provided by an individual, organisation or government bodies to a startup for a particular purpose.

Stages of funding 

While a founder knows that his or her startup is excellent, it is difficult to convince people to invest millions in your company. Funding for startups is a slow and gradual process, and it is essential to know each stage well in advance.

Pre-seed funding or self-funding

Before even starting the business, the founder(s) must ascertain as to how much amount will they invest from their own pockets. At this stage, people also prefer to take help from family & friends as this does not require lengthy documentation and they can save on heavy interest rates, which the bank would otherwise charge. This is also called the bootstrapping stage of your business.

Seed funding

This is the very first set of money that a startup raises from an external investor. As the name suggests, this is the seed that (hopefully) helps a company grow when it is just planting itself. Usually, the amount raised from the seed funding during the process of startup funding round is used for market research and product development.

Angel investors are the most common type of investors at this stage. While this is the starting stage for many startups, it is also a ‘wrapping up’ stage, If the startup fails to utilise the first round and get in some results, it gets difficult for them to move to the second round of funding that is, Series A funding.

Series A funding

Once a startup passes through the seed stage and has some traction on their website/app (it can be in terms of users, revenue, views or whatever the set KPI is), they are ready to go for Series A round.

In this round, startups are expected to have a plan in place for the future development of the product or service they offer. These businesses are also likely to use the raised money to increase revenue.

Series B funding

Any startup that has reached the Series B has already figured out their product-market fit. All they need is assistance in expanding it.

Usually, the expansion that occurs after raising the Series B round is not limited to focusing on gaining more customers but also in building a strong team to serve the growing customer base. 

Series C funding 

At a stage when a startup is ready to acquire other businesses or develop new products or expand to new markets, it can be said that the startup is ready to make it to Series C funding.

The common trend suggests that a startup gets ready to raise Series C round when they plan to go out of their home country or to acquire like business models. (similar to the one they have)

It is also seen that Series C is the last round that most of the companies go for. However, some companies move ahead to Series D & Series E rounds too.

Series D funding

This round of startup funding is a little more complicated than the other rounds. As mentioned, most companies usually exit the funding rounds after Series C. However, some companies move to Series D. Two of the common reasons here are:

Positive side- The startup has discovered new opportunity for expansion before going public or has found more opportunities to acquire businesses and increase the value of the business. 

Negative side- On the other hand, another reason a startup might want to raise Series D can be because they have failed to hit the expectations laid out in the previous rounds. 

Series E funding

A very few companies make it to Series E round for the startup funding. Startups looking to raise funds at this point have usually failed to meet their expectations from the previous funds raised. Another reason can be that they still need some external help before going public.

How to get funding for startup?

Now that you know what are the different stages and rounds of funding, here are some of the alternatives about how you can raise funds by yourself, by investors and other ways!

Create a detailed business plan

Before you begin with anything, have a precise business plan in place. The reasons are simple: no one would like to invest money in your business if you don’t have a detailed and long-term plan in place. Different type of investors will need to see financial projections before they even offer your business a dime. This plan should cover topics like:

  • Who are you?
  • What do you do?
  • What are your long-term & short-term goals?
  • SWOT analysis
  • Competitor analysis 
  • Defined roles of all the employees
  • Detailed financial projections (this is the most important parts)

Pro-tip: Make sure you don’t over-commit and have realistic expectations in place.

Visit a local bank 

It is a better idea to approach a local bank and get into a conversation and check what the loan amount that they can offer to you, the interest rate and other pre-requisites. 

Be professional and showcase your requirements.

Get in touch with several lenders and see what works best for you.

Seek help from friends & family

These are a bunch of the most trustworthy people you have. Do not be afraid to ask for help during your startup funding stage from them. The best part is that you will not have to pay any interest in case you raise money from them. 

A research report also suggests that loans taken from friends and family contribute to a startup’s success as they have an add-on motivation of faith and support.

Venture Capitalists

These are well-heeled investors that often invest their capital in businesses with indelible growth opportunities. This infused capital is called venture capital. 

The bitter side of this kind of fundraising is, you might have to be prepared to give away a portion of your business. 

Read Beginner’s Guide to Venture Capitalists to know more.

Angel Investors

Commonly, an angel investor is an individual (or a group of a few people) who provides capital to a startup, usually in exchange for convertible debt or ownership equity. 

It is very common for these investors to be an entrepreneur themselves. If you find the right angel investor, you may also benefit from their expert advice and management skills!

Crowdfunding

To put it very simply, crowdfunding is a practice of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, usually via the internet or via gatherings. 

There are mixed views about whether a company should go for crowdfunding or no, but the final call lies with you!

These are some of the most common ways to fetch in funds for your startup. You can decide what suits your startup the best and plan your roadmap accordingly!

Recommended Read How to Get a PAN Card for Your Company 

Company Registration for Online Sellers: Legality, Procedure, Requirements

With online shopping having become the norm for most consumers, many sellers are now taking their business to the internet to capture a larger market. 

As a prospective seller, you have many chores to tick off your list. Apart from getting an e-commerce website built, you must also ensure that your company has been registered in the correct manner, with all the requirements for your business to be up and running smoothed out before you launch.

In India, though the start-up culture has grown and blossomed wildly over the last few years, most companies are not completely aware of the legal procedures and requirements that go into establishing the legitimacy of their business, which can often lead to a myriad of issues down the line. 

So, in order to help you prevent the same, we’ve jotted down everything you need to know about registering your company as an online seller.

Registering your company

To begin with, you must identify whether you want to register your company as an LLP (Limited Liability Partnership) or a Private Company. You can also choose to register your company as a Sole Proprietorship, as it is the simplest to register. However, do not that under a Sole Proprietorship, individuals running the business are not protected from any liability, business debts or even obligations. This is why many people prefer forming an LLP. 

Ideally, you should register your company on the same state that you intend to operate in. if you are planning to register the company as a private company, you must have:

  • An approved name
  • A registered office address
  • 2 directors with their own director identification numbers
  • A minimum capital of Rs 1 lakh
  • Digital signature certificates
  • Memorandum of Association (MOA) and Articles of Association (AOA)

Additionally, you will need:

  • Tax Identification Number (TIN)
  • Permanent Account Number (PAN)
  • Tax Deduction Account Number (TAN)
  • A bank account registered in the company’s name
  • GST Number

Additional laws to abide by

If you are an online seller looking to register their company, there are a few other laws that you should keep in mind while running your business. Some of these include:

  • Contract law
  • The Indian penal code
  • Current tax laws
  • Shops and Establishment Act
  • Intellectual property rights protection

Abiding by these laws can help you protect your business from any potential liability issues that might crop up later. You must also abide by the cyber crime laws that are currently in place in India. These laws make it mandatory for companies to offer data security, data protection, privacy protection, confidentiality maintenance, and cyber security to all consumers that shop on their website.

As an organization, you must take care of additional details like having a proper HR team in place, along with proper employment contracts for everyone who works for you. 

What is the process for registering your company?

You can register your company online by submitting all the required documents such as your PAN, company name, corporate identifiers, and so on. To do so, you must visit the website of the Ministry of Corporate Affairs. You will need your Digital Signature Certificate in order to apply for the online registration, so make sure that you have secured that beforehand. 

When you’ve got your DSC and DIN, you can fill out the 1A form online to register your company. Remember to add at least 4 different name options for your company while registering the same. 

The RoC generally takes close to 2 days to come back with the approval, and once you have that, you can get the company registered anytime within the following 6 months. If 6 months pass, you must initiate this process all over again! 

What else do you need to run your business smoothly?

For many companies looking to sell goods online, it is crucial to have a payment gateway on your website. Most consumers these days prefer getting the payment process over with, and they are less likely to come back to a website if they sense that the payment gateway is not secure enough. 

Of course, it is not enough to just have any payment gateway on the website. Instead, pick a gateway that offers a myriad of functionalities that can help you run your business more smoothly. 

For instance, Razorpay offers not only solutions for online payments, but also additional functions like creating GST-compliant invoices, a smart dashboard that tracks payments, customer behavior trackers that can help you spot trends, and much more. 

With all of this in place, you need never worry about the smaller details that go into running the business and can, instead, focus on the larger picture, like your growth.

Also read: How E-commerce Companies Can Reduce Cart Abandonment