Growing Arastan

So, I have all but disappeared from this blog over the past few months. What have I been up to? I have been working on weaving our own collection of high quality cotton dhurries, starting to produce our own range of earthenware ceramic and focussing on growing Arastan. All incredibly exciting!

Carpets  and carpet bags

Carpets and carpet bags

Putting together our own collections involve long lead times so I have to be patient – not a virtue I commonly exhibit! May was our best non-exhibition month to date and it prompted me to think about why. I think part of it is our authenticity. I started Arastan to share and that will always remain at the core of all we do. I recently wrote to customer service of a popular online store asking why they have a voucher scheme that is illegal under contract law and completely unnecessary. Customers buy because they like your products, I said, and the price suits them. To tempt them with tricky voucher schemes (redeemable only if they spend a small fortune or split their spend across multiple orders told to them only at the time of redemption) seems to me to be contemptuous of the very customer you are trying to develop a relationship with. All seems counter-intuitive to me. Am I missing something?

My focus recently has been on another round of discussions with potential investors, with so much more learning in the process. I was terribly naive at the start of the process and made many mistakes, but I have learnt from them. So here’s my personal take on how to go about raising funds:

  1. Do it yourself if you can. Take from Friends and Family (F&F), and their friends, i.e. anyone who knows you, as that is the best bet at this stage. Have clear terms so you don’t run into trouble.
  2. Talk to your bank and if you bank with a multinational bank, make sure you talk to a nationalised bank as well as they are friendlier to small companies in India.
  3. Read up on what government schemes are available to entrepreneurs and specifically check eligibility under the MSME Credit Guarantee Scheme.
  4. If you are going to pitch to ‘professional’ angel investors, here are some things to watch out for based on my experience (with all the caveats that comes with them):
    1. Angels do not like financial advisors so use the latter for developing your plan but do the contacting/pitching personally.
    2. Angels get 200 prospects a day so you must find a connection and go through him/her or you won’t get seen/heard as you should be.
    3. You will get a maximum of an hour on the phone and an hour face to face, so keep it simple. 30 minute presentation with 15-20 slides at the most.
    4. Do the market analysis, mention your sources – the size of the addressable market is your key stat.
    5. Why are you better or different? Say it at the start, keep the thread throughout and in the summary.
    6. Do your homework on the person and organisation before you approach. They may not be for you and you need to be targeting those who are. Keep aside a LOT of time (read as ensure someone is running your business while you are off pitching). You can sign up with several sites including Startup Central, Venture Intelligence, Headstart to understand the eco-system better.
    7. Get a ‘team’ in place. No one likes complete dependency on one person, the hit by a bus syndrome will come to mind.
    8. Work out a very lucrative exit for angels, within 24-36 months,  in your numbers (via IPO, M&A, VC/PE interest) – be audacious! If your business cannot give these returns then you need someone other than a ‘professional’ angel. Try friends and family and friends of F&F i.e. someone who knows you and will take a chance on you.
    9. Generally, the ‘professional’ investors are looking for 100 Crore turnover in five years size of opportunity as it shows them a clear exit. If this is not the size of company you are looking to grow, go back to F&F, the bank and the government schemes. They are your best way forward in the Indian funding eco-system.
    10. Do not give away equity unless someone brings in money or a significant value addition. Work out other options such as phantom stock.
    11. Do not take your eye off the size of addressable market + key differentiator + growth + exit for investor.
    12. Take time out to prepare.
Ceramics in Rishtan

Ceramics in Rishtan

In this process of growing Arastan, I have met some of the brightest people I know. Some are now customers of Arastan and others, people I can go to for advice. Yet others have helped me connect with individuals/firms with whom we are a good fit. Every interaction has been an education. Taking rejection on the lip and carrying on is far easier said than done but I guess the highs and lows are all part of being an entrepreneur.

Angels to connect to in India: IAN, Mumbai Angels, Kae Capital, Blume Ventures, Seed Fund, My First Cheque, India Quotient are some to consider. If you are looking at inclusive commerce that has a significant socio-economic impact then look at Aavishkaar, Bamboo Finance, SONG Investment . Do check each one’s investment principles before making contact.

And finally, a compelling post by Andy Dunn, CEO of Bonobos. Happy reading.

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