Unlocking growth: Perspectives on AI integration, debt readiness, and the funding landscape

Creating a successful blueprint for fundraising involves a meticulous and strategic approach.

At TechSparks 2023, the destination for deliberating, deep-diving, and understanding the promise of India's Great Indian Techade, a panel of eminent experts discussed how organisations can create a solid fundraising plan. The panel included Prayank Swaroop, Partner, Accel India; Saravanan Nattanmai, Partner, Premji Invest; Anant Vidur, Partner, Bessemer Venture Partners; and Anurag Ramdasan, Partner, 3one4 Capital.

What do investors look for in a seed-stage company?

Swaroop, who comes from a multi-stage investment firm, discussed the criteria for investments during an interview. He shared that Accel invests in startups at various stages, and has a history of early-stage investments in successful companies like Flipkart and FreshWorks.

Swaroop emphasised the importance of founders having a strategic plan for their company's growth before raising capital, and the significance of the market size in their evaluation process.

“We look for founders who combine hustle, thoughtfulness, and a strategic mindset in executing their ideas within large markets. In the early stages, founders often lack expertise in areas like finance and compliance, so it's crucial for investors to support and handle these aspects until the founders can hire the right people,” he added.

Ramdasan highlighted the dynamic nature of the Indian market, where new substantial opportunities emerge over time. He provided an example from 3one4 Capital’s portfolio, Cuckoo FM, which ventured into India's relatively uncharted territory of audio content subscriptions.

"Successful founders anticipate market shifts and grasp the potential for expansion, leading to distinctive and defensible companies,” Ramdasan shared.

Empowering founders and navigating challenges

Vidur emphasised that investors and partners work to do something other than run the company; , they aim to support founders who are experts in their business. Raising growth capital changes the expectations for the business's scale, and it allows for delegation to a team, even though many founders prefer staying deeply involved in the company's operations.

Bessemer Venture Partners sees itself as invited guest on the founder's journey, providing honest and unfiltered guidance. In the growth stage, the challenge lies in managing expectations and building a strong team to navigate scaling efficiently.

“As investors, we are invited guests on your journey. We'll offer our honest opinions, or we'll stay silent if you prefer. We're here to support you, providing unfiltered truth and unwavering intellectual honesty,” Vidur said.

Nattanmai's insights shed light on how Premji Invest tailors its investment approach, based on a company's growth stage and evolving market expectations.

“As a funder, we span from early stage to public companies, adapting our strategy to the growth stage. We focus on understanding growth levers, unit economics, and profitability, working closely with founders to align with the board-approved plan. We recognise the shifting levers of growth, emphasising unit-level economics and profitability as a company progresses,” he shared.

For growth-stage investments, Premji Invest works closely with founders and existing investors to align with a board-approved plan. As a company nears an IPO, stability and profitability take precedence over rapid growth, in line with the expectations of public markets. Premji Invest leverages its expertise to add value beyond capital infusion. This adaptable strategy aligns with its risk-return framework.

Funding, AI adoption, and debt readiness

The panellists addressed the state of funding in the startup ecosystem and shared their perspectives on various aspects. Many founders are deeply engaged in their businesses and often do not have the bandwidth to explore AI. Therefore, the responsibility of educating founders about the benefits of AI falls on the investors and board members. They said t that the practical application of AI can significantly reduce costs and enhance customer experiences.

The panel also deliberated on how startups can be ready for debt financing, particularly traditional debt. They concurred that founders should prioritise financial basics, including audits, cash flow management, and attention to balance sheets. A strong financial foundation prepares a startup to consider debt financing as a non-dilutive capital source.