Raising investment is a skill. Having an excellent idea, even sometimes early traction does not guarantee that you will be able to raise investment. Sometimes you might end up raising investment from the wrong investors. So you must spend time learning the tricks of the trade.
Shuttle Co-founder and CEO, Reyasat Chowdhury, puts this beautifully: “For me, the key takeaway is the importance of being connected with the right people who can teach you the process and the tricks of the trade. It could be an international accelerator program or an international venture capital firm. It is not something you can learn from talking to someone. You have to go through the process and learn by doing. You have to spend time behind it. Initially, it would be challenging, but after a while, it gets easier.”
Shuttle has raised two rounds of investments over the last few years. The company raised a $750k seed round in June this year.
In a recent interview with Future Startup, Shuttle Co-founder and CEO Reyasat Chowdhury generously shared his fundraising lessons and tips for other founders who want to raise investment. Below is a lightly edited version of his responses. You can read the full interview here.
Future Startup: You have raised a seed-round investment recently. What's your experience of raising investment? What are some major challenges startups face in raising money? What are some lessons you have learned?
Reyasat Chowdhury: It was challenging at first to find potential investors and build relationships with them. I had no idea where to look for investors or how to approach them. In March-April of last year, I put a lot of effort into learning and got in touch with a few key people who helped me understand the whole thing. After that, I didn’t have to worry much about connecting with investors.
As soon as I realized I could connect with an investor anytime, my primary concern became whether investors would see Shuttle as a good opportunity to invest.
The importance of confidence cannot be overstated. Now I'm confident that I can connect with anyone and have a meeting. That has been the biggest change in the last year or two. The more meetings I had with potential investors, the easier it got.
I would like to thank Accelerating Asia for this, the accelerator program that we were part of last year. We were able to connect with several investors through Accelerating Asia. We have not raised a great deal of money through Accelerating Asia. Working with them, however, I gained a good understanding of the process and the game of fundraising — how to connect, build relationships, and deal with investors. After I learned that, the rest of it got easier.
For me, the key takeaway is the importance of being connected with the right people who can teach you the process and the tricks of the trade. It could be an international accelerator program or an international venture capital firm. It is not something you can learn from talking to someone. Everyone has to go through this process and learn by doing it themselves. You have to spend a lot of time behind it. Initially, it would be challenging, but after a while, it gets easier.
From your experience, what are some dos and don’ts of raising investment?
First of all, you need to be clear about your fundraising requirements such as how you want to raise money — equity, SAFE, etc. and for how long (the runway) you want to raise the fund.
You should not play around with valuation. In my opinion, one of the things we did right last time was to base our valuation on the market price. We were like, We're building this company and we want to raise this much money. Then, we observed what kind of valuation people who wanted to invest were willing to offer. After that, we chose a valuation that we thought was suitable for us, as opposed to putting together our own valuation and explaining why it was justified.
We realized that my valuation is what people are willing to pay. If people are willing to pay me a high price then that is my valuation and if they want to pay me a low price that is my valuation. It does not matter what my justification is. If an investor wants to pay you 5 million dollars and another 10 million dollars, I suggest you take the 10 million dollars and don’t try to convince the 5 million investor to make it 10. We found that was very important.
My suggestion for new entrepreneurs would be to decide on a valuation that the market is willing to accept and lock the lead investor as quickly as possible. Conversations with potential investors become considerably easier if you already have a lead investor and the valuation for the round is already locked.
Also, I think it is better to set your valuation at 75-80% of your actual value. It becomes a lot easier to lock in investments once you do that. If I want to get the highest valuation in the market, it will shrink the investor pool for you. The deal would not be lucrative for investors. Instead, I wish to offer an investor a deal in which he would feel he is getting a great deal at a great price. By not haggling with valuation, you can raise money relatively quickly, which has many benefits.
Preparation is very important. Preparing your data room where you have all the relevant information in one place is super useful. For example, you meet an investor and he wants to know more about your company. If you have a data room with all your data and all the details in it, you can simply send him the link to the data room instead of preparing documents one by one as the requirements come.
For example, investors may ask for your pitch deck, financial model, and legal documents. If I send these documents one after another, the process gets lengthy and complicated. However, if I can share a link with the investor right after the meeting where he could find the details and everything in one place, it makes the entire process easy and quick. At the same time, investors also get the vibe that this person is prepared for fundraising.
Also, thinking about the shareholding structure from day one is very important. The first investment you are raising, the terms of the deal, and its implication — these things are important for your later stage fundraising.
In the early days, I used to think that getting money was everything. But now I understand this is not the only important thing for the business. Who are your previous investors, how much equity did they take, how much do the founders own at the moment, where is your company registered – all these things play a very important role when you want to raise a new round of investment.
Any final takeaway or lessons you want to share with other founders.
Reyasat Chowdhury: For early-stage founders in Bangladesh, the most important thing I would say is knowledge. Startup is a relatively new thing for us as a market. As a result, it is not easy to get the proper guidance on how to start and build a startup in Bangladesh.
For example, there are things about fundraising such as raising in equity, or SAFE, registering abroad vs registering locally, and so on. I did not know these things when we started and I had to struggle a lot for that. Hence, my suggestion for aspiring startup founders: spend a significant portion of your time gathering the relevant knowledge and continue learning.