This document provides an investor perspective on raising angel/seed funding for agribusiness startups. It discusses the types of startups that typically require funding, basics on venture capital and angel investing, the typical process of fundraising, and what investors look for in potential investments. The document covers key topics such as the stages of startup financing, differences between angel and venture investing, why investors provide funding and how they make money, common reasons startups fail, and details on term sheets, valuations, and deal structures.

1. HOW TO RAISE ANGEL/ SEED FUNDING FOR
AGRIBUSINESS: INVESTOR PERSPECTIVE
Ravi Trivedi
Indian Administrative Fellowship, Agriculture
Govt of Karnataka, & The/ Nudge Foundation
Twitter: @trivediravi, ravi.trivedi@gmail.com
28-Nov-2021
360 degree Perspective

2. BACKGROUND
Principal – US Venture Capital Fund
4 investments, 2 exits
Investments
Angel Investments
Entrepreneur, Finance, & Tech
Coupons for India, Malaysia, Singapore
Web Push Notifications Platform
150+ Countries - [Acquired by Awesome Motive group]
Founder
Founder
7 investments, 3 partial exit, 1 exit
Agriculture
Equity Analyst
Software Developer
Focused on increasing
farmer income
Social Sector
Mentor
Advisory Board
Parivaar

3. AGENDA
Types of Startup & Funding Needs
Basics on Venture Capital & Angel
Why & What of Angel Investment
Typical Process of Fund raise
What do investors look for in Investment
Typical valuation in various stage
Term Sheet Basics & typical term sheet in seed
round

4. TYPES OF STARTUPS
Fast Growth, Funding Likely
Required
Organic Growth, Cash Flow
Positive
Example
Software as a Service,
Consumer, Agri-tech,
Services Company, Ad
Agency, Taxi Service,
Restaurant
Revenue Spend First, Earn Later Revenue from Operations
immediately
Funding Required May be needed at later stage
for growth
Risk Higher.
[ Over 95% fail]
Moderate
Time Longer time to build a
sustainable business. Need to
commit 10 years ( 5 years
min.)
Building a sustainable business
requires shorter duration
Focus of this discussion

5. STARTUP FINANCING CYCLE
Source: Wikipedia

6. ANGEL INVESTING VS VENTURE
INVESTING
Differences & Similarities

7. VENTURE CAPITAL 101
 Venture Capital Funds are professionally run
 Fund life is often 10 years. Means Investment to
Exit is between 5 to 8 years.
 Offer Advice, HR management, Office Space etc.
 Typically, Series A onwards or >$1M investments
 They fund 1 in 100 plans
 Often company > $1M in revenue at time of
Venture funding
 Often the next stage after Angel investment.

8. VENTURE CAPITAL/ANGEL 101
Why?
• A Pension fund needs to
grow its funds to match the
needs
• Investment Diversification
Source of Funds for Venture Capital

9. VENTURE CAPITAL 101
How do VC make money ?
 Sell or IPO the Invested Companies
 Target 33/33/33 Rule
 33 % Success – Most 2x to 10x,
but Superhits can be 50x to 200x
 33% Breakeven – 1x to 2x
 33% Failure - 0x
1) 0.33x0 + 0.33x1 + 0.33x 10 = 3.66x
3.66 x in 8 years is 18% IRR
2) 0.33x0 + 0.33x1 + 0.33 x 20 = 7x
7x in 8 years is 28% IRR

10. WHY ANGEL INVESTMENT
Investment Diversification
 If you have Rs 100 lakh to invest, how much will you allocate to Angel/Venture
Investment
5 to 20% of total assets
Example Asset Allocation US Pension Fund
 Private Equity/Venture Capital/ Angel , also known as Alternative Investments
 High Risk, High Return Asset Class

11. TYPICAL ANGEL INVESTMENT IN INDIA
Invest investor invests between 2 lakhs to 50 lakhs in one startup.
Expect returns in 5 to 10 years.
High Risk High Return Asset Class. Upto 40% of startups may return 0.
Expect 3x to 50x return. Unicorn return 100x+
In India an accredited investor should have a net worth of Rs 5 Crores.
Average Return for India Stock Market = 13 to 15%.
Expected Return from Venture/Angel hence is +5 to 10% over Indian stock
market = 18% to 25%
The broader the risk is spread, the better is risk diversification.
Typical Angel Round deal sizes = 50 lakhs to 5 Crore
As Angel investor you are investing in the person/team largely (more on it later)

12. GOAL OF AN
ANGEL
INVESTOR
1. Help startup with Funds
2. Guidance & Mentorship – aka Smart
Money
 Help startup with guidance, mentoring & connections
when asked for.
3. Help the company reach next stage –
 Where they can raise Venture Capital Funds, and
pass the baton

13. POSSIBLE WAYS TO EXIT
1. Exit during Series B or later, when Venture funds buyout the stake.
2. Company Sale – Strategic or Financial Buyer
3. IPO.
4. Company shutdown return partial money or AcquiHire.

14. WHY STARTUPS FAIL
❖ No Market Need
❖ Founder Conflicts & Team
❖ Run out of cash
❖ Product without Business Model
❖ Ignore Customers
❖ Outfunded/outcompeted

15. TYPICAL ANGEL INVESTMENT
PROCESS
1. Startup Pitch or Introduction
2. Subsequent Discussion to Screen the Idea
3. Lead Investor & Investor group formation.
4. Term Sheet to Founder
5. Due Diligence Process
6. Shareholder agreement Negotiation
7. Deal Close, Fund transfer
8. Monitoring the Deal/Company & Helping
9. Exit the company

16. HOW TO RAISE FUNDS What do investors look
for?

17. ENTREPRENEURSHIP
“ Entrepreneurship is the pursuit of
opportunity without regard to resources
currently controlled..“
Howard Stevenson, Professor, Harvard Business School

18. BUILDING A BUSINESS?

19. BUILDING A INVESTIBLE BUSINESS

20. CUSTOMER NEED
Unless the idea addresses an
apparent or latent need/pain point
for a customer, it cannot be turned
into a business.

21. CUSTOMER NEED - EXAMPLES
Bus Ticketing industry in India was largely
unorganized.
Consumer – Booking Buses tickets in peak season
was a Pain
Bus Operator - Inventory Management in real time
was a challenge.
Effective directory services
Consumer - Local yellow page
search with validated merchants

22. ABILITY TO MONETIZE
There has to be a clear, simple and
easy way to monetize your
service/product either directly by
users or indirectly (e.g. by advertisers
etc)

23. USP / COMPETITIVE
ADVANTAGE
Your edge over other players in the
market or the clear & unambiguous
Unique Selling Proposition for your
idea that makes a difference for the
customers

24. WHAT DO INVESTORS LOOK FOR ?
1. The Team [ 40%]
❖Integrity of Founders, Track Record
❖Complementary skills
❖Skin in the game of Founder
2. Investible Business [30%]
➢Market Size, High Growth
➢Product & Technology
➢Marketing & Sales Execution
➢Differentiation & Moat
➢Scalable
❖3. Valuation [ 20%]
❖4. Clean Structure [10%]

25. TYPE OF SEED INVESTORS & DIFFERENCES
❖Individuals
 Friends/Family
 Entrepreneurs/ Industry leaders
❖Groups
 Networks
❖Incubators/Accelerators
 Infrastructure only
 Accelerator
❖Seed Funds
 Institutional Funds -
 Individual LP funds –
❖Other Funds
 PE funds, Special Situation Funds
 Hedge Funds
❖ How do you reach out to investors
Best through a reference
a) Portfolio Company introductions are valued
Angel.co/Linkedin/Conference/News

26. WHEN ?
❖ Idea in a slide
❖ Prototype Ready
❖ Customer Traction
❖ Paying Customers
❖ Product-Market Fit
❖ Multiple customer segment
❖Business Model Fit

27. HOW MUCH ?
❖Raise Enough to reach the next milestone
❖What is the next Milestone ?
➢Venture Round [ $1M and more]
➢Institutional Angel Round [ $1M and less, typically below $500k ]
❖How do you know you are ready for
➢Venture Round
➢Institutional Angel Round

28. WHO TO RAISE MONEY FROM
❖ Depends on the stage
❖ Some thought processes
➢Smart Money > any money
➢Any money > No money [ If can’t bootstrap]
➢Institutional Money > Individual money
➢When given a choice of investors, choose based on
(1) Chemistry with investor,
(2) Willingness to help you,
(3) relevant connections/domain knowledge

29. MILESTONES, VALUATION AND RAISE
Milestones Stage Age Revenue Pre-Money Raise Amount From Whom
1 Venture Launched 0 to 0.5 yrs 0 50L 5 - 20 L Self, Friends, Family,
2 Beta Product Launched 0.5 to 1 yr Small amount 5 to 10 Cr 50L to 3 Cr
Self, Friends, Family,
Individual Angels, Accelerator
B2C : Product used by real customers, Few
paying customers
B2B: Good customer Pipline, 1-2 customers
in trial
3 Stable version 1 - 1.5 yr 10 - 15L /yr 10 to 20 Cr 1Cr to 6 Cr
Self, Accelerators, Seed
Funds, Individual Angels,
Regular Customer growth
4 Product-Market Fit Found 1 - 2 yrs 20L to 1 Cr/yr 15- 40 Cr 2Cr - 20Cr
Individual Angels, Seed
Funds, Few Venture firms
Strong and Consistent Customer growth
Clear product and revenue for next 2-3 yrs
5 Business Model Fit found 1.5 - 3 yrs 2Cr - 10Cr/yr 30Cr - 50 Cr 10Cr - 50Cr Venture Funds
Clear growth Path for next 3 - 5 yrs
Consistent growth in paying customers
Potentially breakeven

30. UNDERSTANDING VALUATION
❖Pre-Money Valuation + Invested amount = Post
Money Valuation
❖ Investor invests 1 crore at 4 crore valuation
 Post Money = 4 Cr + 1 Cr = 5 Cr
• Investor Stake = What is the right answer?
A) 25% (1Cr/4Cr)
B) 20% (1Cr/5Cr)
❖Typical Valuation Models apply for revenue companies
❖Revenue Multiple
❖DCF

31. DILUTION OVER LIFECYCLE

32. TERM SHEET BASICS – ECONOMIC RIGHTS
❖Liquidation Preference – Defines how cash is distributed on
liquidation to preferred stock-holders vs. common stockholders.
❖Participating vs. Non-participating.
❖Cap vs. No Cap
Participating Preference
2.0x
Non-Participating
Preference 2.0x
Investment Amount $5M $5M
% Stake 30% 30%
Equity Value in Sale $20M $20M
Investor’s share 2 x5M +30% x10M =
$13M
Max of {2x5M = $10M ,
30%x 20 = $6M } = $10M
Management share $7M $10M

33. TERM SHEET BASICS – ECONOMIC
RIGHTS
❖ Anti-Dilution
➢Clause comes into play when there is a down-round and the earlier
round investor can to protect his stake
➢Down –Round = Lower valuation in future rounds.
➢Series A = $1/share, Series B = $0.5/share
➢Two Types - Full Ratchet & Weighted Average
➢Full Ratchet – Series A is also brought at = $0.5/share, conversion rate 2:1, i.e 1x new
shares issued. Less common
➢Weighted average - More common.

34. TERM SHEET BASICS - CONTROL
INTERESTS
❖Tag-Along Rights
➢Management agrees not to sell without giving investors a right for pro-rata
participation in sale.
➢ If Promoters are selling some part of their shares in next round, the minority
investors also have the same rights.
❖Right of First Refusal
➢Existing investors have first right to buy any shares transferred (new fund raise or
buyback)
➢At-least pro-rata participation
❖Board Composition
➢Voting (Director)
➢Non-Voting positions (Observer, Advisory)
➢Investor Seat vs. Majority by founders
❖Investor Rights
➢Reports, Appointment of Auditors (internal & external)

35. CONVERTIBLE NOTE VS. STRAIGHT
EQUITY
❖Solves for Mismatch in expectation in Valuation & Investor
Expectation
❖SHA negotiation can take longer
Solution:
❖Deferred Valuation to next stage of funding
❖20% discount to Series A
❖Convertible Preference Shares (India Company law), compulsory converts to
Equity
❖Reference - https://www.100x.vc/isafe

36. TYPICAL TERMS IN SERIES AA
TERM SHEET
➢Liquidation – 1.0 participating or 1.5– 2.0x non
participating
➢Anti-Dilution – Weighted Average / Full Ratched
(common in India)
➢Tag Along/Drag Along
➢Board Seat + Board Observer
➢Valuation
➢Founder Vesting – 3 to 4 year

37. NON-OBVIOUS REASONS FOR
REJECTION
❖Structure/Others
➢Cap-table – Dead equity, Too much dilution
❖People Related
➢Founder and Team Chemistry
➢Reference Checks/ Litigation Threat
➢Coachability
➢Single Founder
➢Location
❖Market
➢Portfolio Company Competition
➢Bias regarding a space

38. SUMMARY
❖Angel investment is mainly an investment in the team + large
market size.
❖Entrepreneurship is like running a marathon. (with
several 100 meter sprints in middle)
 You need to set goals
 The beginning is the best part
 Its easier to do with support
 The preparation has a huge impact
 Things you don’t expect to go wrong, will go wrong
 You are crazy to think you can do it
 Running out of money (water) is bad
 Mental game. Emotional Roller Coaster

39. READING MATERIAL

40. ANGEL INVESTING
RESOURCES?
Resources
❖Book : Angel Investing: by David Rose
❖Naval Ravikant – Founder AngelList -
https://nav.al/angel-1
❖Series AA Term sheet – Techstars, YC
❖Angel.co - List of Angels
Entrepreneur Pitchbook – How to create one by
Canaan.
http://www.slideshare.net/canaanpartners/canaa
n-entrepreneur-pitchbook-presentation