The first StartUp Grind event of 2020 was a smashing success! I had the pleasure of hosting a fireside chat with Prem Talreja at our Startup Grind Fremont Chapter.

Prem Talreja has lived in Silicon Valley since the 80’s and has spent time in the technology ecosystem as a marketing and management executive. Currently, he is an Investor with The Fabric, EmergentVC, and Bascom Ventures in the Silicon Valley software industry and serves as an advisor and mentor to founders of several startups, with a focus on product definition, positioning, and customer acquisition, at the early stage.

At the meetup, Prem shared his perspective on the Idea to Funding journey and had great interaction with a room full of entrepreneurs and wantrepreneurs. Below are some useful insight into the fundraising process.

Q. Tell us about yourself and your experience as early-stage VC with the Fabrics and EmergentVC firms.

After getting my BEE from BITS-Pilani, India, I came to Univ. of Wisconsin for my Masters, and later on, I got an MBA from Duke. Over the 40 years in the USA, I spend 30 years in the semiconductor industry in Engineering /Marketing/Sales working at startup and midsize semiconductor companies. At first we competed with Intel, and later, collaborated with Intel and AMD.

In 2012, I transitioned into the VC world with The Fabric, as an investor and VP Marketing. Fabric’s focus is on co-creating early-stage cloud infrastructure ventures. The fabric material vested in twelve startups, with three still existing. I learned very quickly about cloud computing and working up close with entrepreneurs, investors, and customers.

I am an investor with EmergentVC since 2018 and part of their mentor network. EVC has invested in seven ventures. Besides that, I have made six personal seed investments. Of those, 2 have exited, 2 failed, and 2 are going into Series A. My experience can be summed up as – SaaS, Cloud first, B2B, seed to exit, market analysis, customer validation, messaging.

Q. Any suggestions for the folks who are looking to raise VC funds for their startups? Can you share key funding stages involved and tell us some do’s and don’ts of fundraising. 

Funding is necessary and hard. Entrepreneurship in the tech industry is hard because of the following risks: Technology, Market, and Timing. The seed is pre-evaluation and in the form of a convertible note. Series A and above are priced rounds. Funding at any stage is a balancing act. At Seed and Series A, it’s about upstream development – product-market fit and MVP. Series B and above are for downstream development – team, Customer/Revenue growth, scale.

DOs and DON’Ts:

  1. Talk about the language of the VCs. Don’t invent your vocabulary.
  2. Figure out your category. (Don’t build category)
  3. Spend time on validation: Talk to customers, research (don’t build in isolation)
  4. Product-Market Fit: features, prioritize to reduce risk (Don’t overload the features)
  5. Elevator pitch: “who we are what we do, and why.” Describe the product in easy to understand terms they can understand and relate to (don’t make it too complex to understand, or lengthy).
  6. Have a permanent Beta mindset: Build – measure – learn – repeat (Don’t stop)
  7. Team is key: Team-Market fit (don’t go solo)
  8. Business Model: How we make money? It has to be simple. One business model. (Not too many)
  9. Growth Playbook: It’s an art and science. Capital efficient growth.
  10. Seek help: Advisors/Mentors/Consultants (don’t underestimate what insights, the experience they bring)
  11. How do early-stage investors decide which company idea to funds from so many choices? 

VCs are past technologists, GMs, MBAs, consultants, and analysts – good with numbers, and they want you to succeed! They can break an idea to its core risks unemotionally from their investment point of view. They focus on Market opportunity, and Team: experience, work-life stress, confidence and open to suggestions or rigid, the balance from Idea to MVP can they, as early investors, help shape and de-risk.

Q. Why some ideas fail and why do others get funded? What do angels /VC look for in a startup? 

Angel/VCs look for the track record of founders. Sometimes entrepreneurs have difficulty in communicating their idea to VCs and customers. Other times they try to start a new category, which is challenging unless you know the right people to convince or, in other words, the high-level people. They seek answers to the following questions:

  • Is the product Real? What about the market?
  • Is there a need, will people buy it, and what is the customer’s response?
  • Is there a clear concept, can it be copied?
  • Can the product be competitive? Is there a sustained advantage?
  • Are there superior resources?
  • Is there a good management team?
  • Can we respond to the market?
  • Will the product be profitable at a reasonable risk?
  • Does it fit our strategy?

Q. Raising money is good, but what are some of the caveats of fundraising. What are convertible notes and their pros and cons?

Do not take loans for your startup. Convertible note: seed with accrued interest converted at Series A. SAFE is the right way to extend the record. No side deals with anyone; things can get messy. Documented and transparency on all aspects of agreements is a must.

Q. For many founders, a more attainable exit strategy is getting acquired v/s going IPO. Let us know if VCs are usually supportive or may become a roadblock if you choose to get acquired early in the life cycle. 

It depends on the stage and size of the investment. Time horizon. Series A and B want exits in 2-4 years. Series C and up are big rounds, and significant funds have 7-10 background. Investors are busy and hard to get hold of. Getting an Introduction by a trusted friend and having advisors can be very helpful. Also remember, your network is essential, so continue building it! Accelerators are great. If you meet anyone to make the most use of the meeting, seek help, feedback, intros. Always be ready with your elevator pitch as you never know when you will run into an opportunity.

Q. How do accelerators help? 

Accelerators are very helpful and set their bar high. Their network is extremely beneficial. They help you refine the business model.

Q. Can you give some advice around finding the right co-founder/team, and what are the different channels for the team to explore and what to keep in mind before bringing them on board?

Like a marriage – divorce is not an easy option. Even founders need to show commitment and vest over time. Clear equity models. Written understanding from day one. Risk mitigation. Exit option. If there is no understanding, don’t do it. Not worth the loss of friends. Get help/advice to help you set up a fair partnership. Look for complementing skills that will make the team balanced and frictionless. Great communicators, Advisors, and Investors make for good teammates.

Q. Would you please tell us what successful companies had in common and what are the key ingredients to have a successful exit. What other advice do you have for entrepreneurs? 

  • Luck, timing, and team – the track record of founders. Turnover of top management hurts.
  • Execution – no false timelines.
  • Cost and spending efficiency – know your numbers.
  • Customer validations.
  • Do your research and validation – listen to seek advice.
  • Meditate/run/bike, yoga – to reduce stress SWOT analysis – very crucial to plan and communicate.
  • Branding and messaging – vital to delivering.
  • Keep revisiting plan and progress.

Q. What are some core ingredients of a pitch deck? Any suggestions on do’s and don’ts?

  • The Company – grab attention
  • Define the hook, or “The Problem” – critical slide.
  • Credibility of the product and the marker.
  • Is there a compelling event? Define the reason, or the timing.
  • Competition
  • Acknowledge/explain the category
  • Subtly sell your self – why do your product stand out – competition advantage
  • The Solution – Differentiation Demo
  • The Value Proposition
  • Hammer it home
  • Use Case

Q. What to cover in an Elevator Pitch?

Here’s a checklist:

  • Traction/Revenue
  • Research, validation
  • Projections
  • The Business Model (One model best first and keep it simple)
  • Growth/Plans (show projections ability to hit the numbers)
  • Have a plan – best case / worst case
  • Capital efficient go-to-market plan
  • The TAM/Market Size
  • Top-Down – are big but don’t oversell penetration rates
  • Bottoms up – TAMs are realistic and smaller, channels, geo, number of users, etc.
  • Sensitivity Analysis
  • The Team (very important and not solo)
  • Founder-market fit – the only diff between success and failure
  • The Ask/Use of Funds
  • VC has targeted and checked the size, that’s how they filter deals – so tell them, why you need the money, how much, by when
  • Leave them wanting more – try to end with how they remember you – hammer home.

Q. Are you free to advise more companies/individuals, and what is the best way to reach out to you?

Yes. Happy to schedule an initial pro bono meeting, and then we can decide how to proceed.