United States: Dentons Workshop At Innovfest Unbound 2019: Overcoming The Start-Up Valley Of Death And Scaling Beyond

Last Updated: August 16 2019
Article by S. Sivanesan

What is one critical factor that will make or break a start-up? Entrepreneurs will have an unequivocal answer to this question: Funding. Rounds and rounds of funding.

With 353 venture capital deals closed in Singapore last year with a total deal value of US$10.5 billion, up from US$0.8 billion in 2012, it is clear that funding is crucial to the success of start-ups. While there are a few fortunate start-ups that managed to grow without relying on external funding, a majority of successful start-ups are dependent on rounds of external funding to raise capital.

(Background: Claudia C. (2019, April 29), Enterprise Singapore, MAS to match start-ups with global investors, The Business Times)

This was the subject of the Dentons Workshop "Overcoming the Start-up Valley of Death and Scaling Beyond" held on 27th June 2019 at Innovfest Unbound 2019, which explored the experiences of founders and the ways to overcome fundraising difficulties in order to make it to the next stage and achieve revenue. This workshop follows on from last year's workshop "The Founder's journey – Has it been really worth it?" and marked the fourth year of a series of workshops held by Dentons at Innovfest Unbound, the anchor event of Smart Nation Innovations, a week-long series of events that showcase Asia's most innovative developments.

Senior Partner S. Sivanesan moderated the panel discussion, featuring entrepreneurs Hari Sivan (Cofounder & CEO of SoCash), Prajit Nanu (Cofounder & CEO of InstaReM), and Nikhilesh Goel (Cofounder & COO of Validus). The Dentons Workshop attracted an overwhelming number of attendees, with more than 100 attendees eager to hear first-hand the journeys of these founders in overcoming the start-up "valley of death" and scaling beyond to reach where they are today.

The post-Series A journey

After successfully raising funds in Seed and Series A, founders usually find themselves approaching the "valley of death". The failure to get out of this 'valley' may lead to the death of the start-up. Senior Partner S. Sivanesan invited the panel to share their experiences in raising Series B and Series C, and what were the different expectations from investors in fundraising rounds after Series A.

Prajit shared his views on the differences between each stage of fundraising. While Series A is about traction and the volume of growth, the subsequent rounds of fundraising is about economics. For InstaReM, which is currently at its Series D round, the question is about its profitability plan, revenue and vision. Nikhilesh agreed and added that at the initial stage, VCs only look at 3 aspects: (1) the quality of founders and their experience, (2) the size of the market and (3) whether they have a novel approach to the problem. However, beyond Series A, the question is whether the start-up can attract a dedicated team and whether it has traction to generate a positive response from the market. He emphasized the importance of getting the right fit of VCs to fund the start-up in order to stand out from the crowd.

The panel shared that while the colour of the money is not as important in the early funding stages, as the business becomes more mature in the Series B round, it is important to pick investors with the capabilities to solve problems for the business or provide support for its growth. One of the key advice given was to pick VCs who are capable and willing to invest in the next few rounds of fundraising. The panellists agreed that is an unspoken rule in the VC community that something may be wrong with the start-up if its key investors are not re-investing in it in subsequent rounds of fundraising.

Avoiding or getting out of the "valley of death"

When asked about what are some of the warning signs that a start-up is approaching the "valley of death", the panel stated that a rough gauge would be when the start-up only has about 6 months of funds left and has not started its fundraising process. Prajit advised entrepreneurs to start the fundraising process early when they have at least 8-9 months of funds remaining to avoid a situation where the Company may be desperate and VCs will take advantage by having a stronger bargaining power.

Another key area of discussion at the Dentons Workshop was whether the start-up should raise money even if they have enough funding, or to raise money only when they need it. While the general consensus among the panellists was start the funding process early, Hari highlighted that much depends on the type of business and the operating model. Where raising capital would give the business growth, there should be continuous fundraising. However, where there is a certain growth strategy to the business, the fundraising should only be done at certain milestones where funding is necessary.

The lonely but rewarding journey of a founder

The Dentons Workshop at Innovfest Unbound 2019 highlighted the many challenges faced by founders in fundraising and provided key insights and advice to aspiring founders at the workshop. While entrepreneurship is a lonely and difficult journey, the founders shared the joys of working in a start-up where there are new challenges to tackle every day. They highlighted the importance of having like-minded co-founders and a dedicated team on this journey of entrepreneurship. Ultimately, while overcoming the start-up "valley of death" is no easy feat, it has been a rewarding journey for the founders who managed to scale beyond this "crisis" and lived to tell their stories.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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