AMA with Waycool.in: Building a Future-Proof Agriculture Supply Chain in India [Part 3: Fundraising]

Q. How did you realise that this was the right time for you to fund raise? How did you do the valuation for your company while approaching your investors?

We went for the first round of funds when we were repeating our actions and building scale. As long as we were building steps in the supply chain for the first time, we felt that we should work on our own steam. When we started repeating our actions, we realised that a basic, working supply chain was in place and that we were starting to scale. At this point, it appeared prudent to raise angel funds.

Our second round of funds was raised once we were able to demonstrate a trajectory to profitability for four or five months. At our stage, valuations are usually done as multiples of revenue only.

Q. For valuations,is the revenue-multiple different for digital vs. offline businesses?

Yes. It is rather odd. Most business today are structured as a product business, a supply chain business that carries the product to the customer, and a marketplace that links the customer to the supply chain. Logically the maximum value is retained in the product business. However, paradoxically, the maximum valuation is given to the marketplace!!

Revenue multiples are somewhat medium for supply chain compared to marketplaces.

Q. What percent of the company do the founders now own? Do you have any regrets taking equity early on in the business?

We still own about 55%. We diluted 25% in the first round. In retrospect we could have diluted less initially. But we were first time entrepreneurs and didn’t know. Also we did not have the managerial bandwidth to explore other levers such as debts and grants.

Q. How do you find the right investor fit? How do you know which investment opportunity to stay away from?

We were clear on a few design principles from the beginning. We were building an institution and not a valuation. Hence, we would not sacrifice the basic principles of profitability, good working capital management and strong governance, in favour of growth. Moreover, we would not drift away from our social impact goals.

This narrowed town the potential investors to social impact funds, and Private equity funds, besides HNIs with a genuine interest to address this issue. Traditional VCs had exit expectations that were not possible to fulfil without sacrificing some of the above. Given our early stage, we first went to interested HNIS, and then to social impact funds.

Q. How much runway did you have left at the start of your fundraising outreach?

Not much. We had a couple of months money. So it was very tense.

Please budget a 9 month runway for fundraising; agritech takes more time.

Q. Did you ever feel like things were not working out in your startup and you should shut shop and do something else? How did you cope with that feeling/phase? Any advice to other founders?

Every two or three months! It is gut wrenching. Especially since this is a problem that many have attempted to address but have not yet gotten success (including us in a way). We have many many naysayers.

The only way is to break down the problem looming in front of us into many small steps and taking 1 step at a time. Each step being climbed gives us more confidence and we pull ourselves out of the hole.

Part 1: Origin Story

Part 2: Challenges in AgriTech

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