174 Hyderabad-based entrepreneurs, professionals and investors met on 26th August at an event at T-hub 2.0 to discuss about Art of Business Valuation during Fund-raising and M&A. This event was jointly organised by eChai (startup community network), Startup Login (Business Exit experts for Tech companies) & IBGrid (Valuation expert for M&A and Fund-raising).
We have summarised the learnings into specific sectors from each of speakers and their Q&A with others.
Startup Login founder Sunita shared 3 proven tips on how to plan for a profitable exit
Sunita’s team has successfully completed 12 transactions in last 18 months. Startup Login enables M&A, Acqui-hire for tech teams/companies from across India.
Sunita shared 3 practical tips for a successful M&A transaction in a timely manner, as per
1) The right timing is important for an efficient outcome. If you wait too late- you may not even get a transaction and if you start too early- you may get a little pessimistic because of unfavourable responses you would get from the investors.
2) Getting the pricing right is utmost crucial. If the founders value the business based on the efforts, time and resources they invested so far and not based on the value it represents the other side- they are unlikely to get the deal done.
3) Getting multiple prospects is highly preferable for a better negotiation power. Also, getting invested too much into single prospect delays the whole process and also may not allow to negotiate for a higher value.
Rakesh Gupta from Loestro advisors shared 2 common mistakes to avoid during M&A
His team routinely helps growth stage startups raise funding from leading main-stream VCs and corporate VCs especially from Edtech sector. He shared two solid tips to get the best valuation from a transaction.
1) Identify targets who would get the most value from the available investment/acquisition opportunity. He meant spending a good time on researching deep into investors who could potentially get significant value from the transaction. He also shared that having a deep sectorial focus gets them an undue advantage to get a dozens of successful transactions since they started this boutique investment bank in 2014 in Hyderabad.
2) Valuation range is arrived from the value drivers of the company for those identified targets. To get the maximum valuation for an opportunity, his team reaches out to multiple targets.
There are 3 Types of Strategic Investors (apart from financial investors) who might be interested in a transaction:
1. Someone from the sector who does not have this product/service
2. Someone from the sector who is not present into this customer base/location
3. Someone from outside the sector who is looking to get an entry into this sector.
Outside industry investor(s) may be willing to pay more for the entry vs someone from the industry with similar/different products.
Prashanth Gowriraju from Popicorn, Timla Foods shared his entrepreneurial journey very candidly.
He passionately shared how he raised capital from friends and family, financial institutions, and even angel investors. He suffered many setbacks because of internal and external factors incl COVID and how he came back on top in his journey from those setbacks. Top message from his talk was to stay true to the cause. He also shared that to do the primary research for consumer’s feedback how he stood outside busy junction to offer free pop-corn to strangers and how he collected feedback for the optimum pricing range for his products. He shared on how to stay very considerate in terms of the valuation at SEED investment as those investors take biggest risk.
Bhavin S Bhagat from IndiaBizForSale & IBGrid shared 3 key takeaways from his talk and Q&As from the audience.
1) Build your own narrative before going out in the market while raising or exiting. The narrative sets the tone for communication with the investors and acquirers. The narrative helps in the valuation negotiation, structuring and more.
2) Funding winter is not the case for most startups raising seed, pre-series A, and series A type funding. Certainly for growth stage startups who have already raised previous rounds at the peak of 2021 and now facing down round.
3) There are different types of investors for different types of business opportunities. Services company with decent margins and looking for capital may have taker from HNIs, Family offices and PE (when they are raising 100Cr+), however this opportunity is not suitable for VCs.
Overall, there were many questions and answers from the audience, the learnings are unparalleled. We all learnt a lot, and networked post talk with Chai and Samosas while enjoying stunning view from the 5th Floor at T-hub 2.0. We also met T-hub team, very impressed with their continual focus on building and advancing the startup ecosystem while collaborating with industry partners.
Stay tuned, we have a similar themed meet up coming up on Saturday, 3rd September in Mumbai. Check here.