Common Mistakes Startups Should Avoid While Fundraising w/ Shosh Shetty | Thim Ventures

Shosh Shetty: 0:00And that's where it really comes in about. I think one of the biggest things is being thoughtful about how you can really position that as an investment narrative and then also, on top of that, managing the process to improve your conversion with a lead investor.

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‍Anshika Arora: 0:18

Today, we're talking about all of the common mistakes that startups should be aware of and avoid whilst fundraising. We discussed the difference between pitching to consumers as well as pitching to investors, and also touch upon the 4T framework, which covers team technology, traction and TAM. And there's one more bonus to you that you'll have to listen in to find out more about. We're honoured to have Shosh Shetty on the podcast. He's the managing partner at Thim Ventures, which is an advisory practice that specialises in helping startups to fundraise, achieving ambitions and turning their visions into ventures. He's worked with and advised hundreds of different startups in various industries, and so we're so excited to have him impart a handful of his knowledge onto us today.

Anshika Arora: 1:02

I'm Anshuka, I'm the founder of Eternity, a web tech startup, and I'm so excited to be hosting the BAE Lab podcast today, which is powered by HSBC Innovation Banking. Let's get into it. Thank you so much, josh, for joining us on today's lab podcast episode. We're so excited to have you and talk all things around fundraising rounds and maybe what I wish I knew as a founder before fundraising. I know it would be really valuable for me, as well as many other founders out there. All right, Shosh, so let's jump straight into the deep end. So what do you think is the most common reason that startups fail to get the right funding nowadays?

Shosh Shetty: 1:38

Yeah, really great to be on here, Anshuka, and thanks for having me.

Shosh Shetty: 1:47

So I think number one is timelines and managing the process. I think people just dive straight in and aren't very thoughtful around the timeline process in terms of how you're stimulating, transitioning and closing that interest in communicating. The other one, I really think, is a lot of people are very close to their companies in describing almost the products and features and you can almost lose the investor with what I call the Zoom zombie stare and just being very tangible in terms of the value proposition, of describing the impact, the capabilities and the results, ie the value you're creating, rather than just describing the features and the product itself. And that's where it really comes in about. I think one of the biggest things is being thoughtful about how you can really position that as an investment narrative and then also, on top of that, managing the process to improve your conversion with a lead investor. So that's what we do a lot in terms of where we focus our work and experience.

Anshika Arora: 2:39

I think that's really interesting, especially around the the value proposition, because I think a lot of founders that I speak to nowadays, like you said, we are very emotionally attached to the problem and the solution. But you're right, oftentimes we need to take a step back and really think of it as okay, but what is the absolute end goal and what are the opportunities that someone will gain from this investment? So I think that's a really interesting point that you've just reiterated there.

Shosh Shetty: 3:06

Yeah, and if I could add to that because there's obviously just to break down that jargon in terms of what that means to me as a value proposition is, for me, it's about being able to articulate who the target end customer is. Sometimes people have multiple stakeholders, so who the end customer is. What is the value specifically your business is creating for that end customer is? Sometimes people have multiple stakeholders, so who the end customer is. What is the value specifically your business is praying for that end customer and how much of that value are you uh capturing and being able to quantify that. So, to use like really, I think climate tech is is a good example of this, where people say we're doing great things. That's why this is going to be really exciting and compelling but they don't necessarily aren't very specific about the value proposition itself in terms of quantifying that impact and how much they're capturing.

Anshika Arora: 3:50

So I think that's a really key thing um towards in terms of really being able to excite and get investors compelled in a tangible way. Yeah, and also touching on what you said there, with the first mistake often being that founders will jump straight into the deep end and just start fundraising and not have perhaps the right documents, the right data room prepared. What do you find are some of the consequences that founders face? Do you think it perhaps delays their fundraising process? Do you think it just deters investors away because investment, if investors talk, or what do you really think we need to be quite wary of as founders, uh, when we're starting that journey?

Shosh Shetty: 4:30

Yeah, I think as sort of seeing the process not just early stage but even later stage something that a lot of you know it's very difficult to appreciate at the moment but sometimes a real rushed fundraising process. It means that you're making very much short-term decisions that do have quite consequential impacts later on in terms of the cap table rushing to secure any investor. The inability to sort of secure funding can push you into sort of positions where you're then sort of negotiating around unfavorable terms. Then sort of negotiating around unfavorable terms, I mean the classic one in terms of shorter is, it is whilst early stage investing is human capital gain, first impressions matter a lot when you're going to investors.

Shosh Shetty: 5:15

So just being able to be really thoughtful about not only managing the process and the communications and having the most compelling pitch with an investment narrative you don't want to failure to do that can just learn through. You see so many people burn through leads and you're missing six-figure investment. That is very difficult to reengage someone. The other one is just for you as a business. Is that the lack of efficiency in your process can just everyone has a burn cost that they're going through and you don't necessarily. I always ask how much is your time worth as you're going through that. So the longer you are just going and you see so many people make the, the mistake of the sort of fundraising just is bragging on like towards infinity and there is a cost to that, uh, that people don't see. So I think it's just so important to be really thoughtful about phases and the stages because that will affect the external comms that you set the expectations internally within your team and also externally.

Anshika Arora: 6:11

Yeah. So actually, as you said there, the length of time that someone sends spends fundraising. Obviously there's a burn cost to it. What do you think is the average timeline that a founder should aim for when they're doing a fundraise? Because I've seen both sides to it, where you don't want to be over ambitious and say I'm going to complete my fundraise in the next month, especially if it's summer season. That's just not going to happen. But then alternatively, like you said there are, there is the negative side to having a fundraising round that just keeps going, keeps going, and I think as founders we sometimes hear, oh, create Fomo. But what do you think is? Is that sweet spot there?

Shosh Shetty: 6:47

Yeah, it's a really good question and I feel a lot of it, you know, depends on the starting point you're starting with. You know, you hear, I would say always try and avoid comparing stuff to hearing another company that done it in three months, for example, because what you really know is actually they've, um, the network they've built beforehand or etc. There's certain things there. For me, I think you should at least have six months, like as a minimum, is how I feel, and we sort of have those defined stages of how we would set about doing that. But for me, at least six months, and I think it's it's okay, you know it's okay. If it does take a lot, it is meant and you're more interested in the outcome of finding the right relationships rather than just getting the first thing. But I would say, from a timeline perspective, the general rule of thought.

Anshika Arora: 7:32

Yeah, and I think a question that, again, most founders would benefit from say, in your first three months you do get some interest, but you've not hit your goals in terms of your fundraising amount. Interest, but you've not hit your goals in terms of your fundraising amount. What do you think founders should be aware of in terms of keeping that interest from those investors who have said, yes, I do want to invest up until the end of the round, whether that be they come in at the three month mark. But you know that you still have another let's say 200k that you want to raise and you're officially closing in six months. You also don't want to lose them. So what would you suggest to most founders there?

Shosh Shetty: 8:05

Yeah, so I had a company I worked with that was in this position when they came to us and I think one of the most underutilized but effective tools is the investor update.

Shosh Shetty: 8:18

I think they're so good at being able to control the planning.

Shosh Shetty: 8:22

We had a company we worked with and they were able to get you know.

Shosh Shetty: 8:27

Essentially the first few months they were struggling with any traction and they started to just be very consistent and also be able to control the conversation in terms of the framing of where they are on the fundraising and just purely by having really organized investor up there, even without minimal outreach, they were able to raise a million plus just through that because it just kept people in line and I think from my view I think actually one of the highest and I don't know if it's coincidence, but what I've seen as an angel investor group that we've done through our network the most successful ones that have gone through have been the ones that have been consistent with their investor updates. I feel like there's a huge correlation in that. So I think that's a really good way of being able to not only just build relationships but just control the expectations and the communication around that and, obviously, the quality of the update matters as well. So for me, I think that's one really good tactic to use. So for me, I think that's one really good tactic to use.

Anshika Arora: 9:23

So, on the quality of investor updates, what would you say for a founder who's perhaps, let's say, pre-revenue, because post-revenue you expect the updates to have a bit more around the financial metrics that you're following Pre-revenue, what would you say would be the top three things that a founder should be putting into their investor updates?

Shosh Shetty: 9:42

Yeah, I think what people like to hear you know at a pre-revenue there's also different ways of validation, right, even non-diluted funding. A lot of folks who are pre-revenue are able. So I think I would really think about it in terms of traction in other ways. I think there's also, you know, for example, letters of intent, commercial conversations. There's so many things that at the end of the day, it's showing a compelling and exciting direction that the company is going in and there's lots of different data points that you can use for that.

Shosh Shetty: 10:14

So for me, I think if you're pre-running, there's a lot of folks, obviously when you're starting out and getting funding, that are on that point. It's being able to be super clear about look, these are the milestones we want to get to, and there's nothing more impressive than seeing someone as you're going through that journey over two, three months, that you don't have to exactly hit the milestones. But the momentum in fundraising is so important. If you're able to show that momentum as you're going through that journey, I think it really stands you in good favor through that, even if you're not generating the revenue from that. So, again, it's supply and demand as well. So if you're able to show those demand as you're going through letters of intent, orders that will be coming through and you have a real clear plan and you're able to show demonstrable execution. That's one of the biggest things that investors want to see. Can this person not just think and vision, but execute? Putting that whole picture together through a story of your investor updates? I think it's so crucial yeah, I love that.

Anshika Arora: 11:14

I think, like you said, momentum and especially the transparency side of things, because investors and founders founders do so much on a day-to-day basis and you're not gonna tell your investor and just let them know every every few weeks. Oh, by the way still working on this, glad we've got your investment, so I think that's that's a really, really helpful tip. Thank you, shosh, and I guess, where we're talking a bit about the differences between financial and non-financial metrics when you are fundraising, what do you think is really important to be aware of on that maybe non-financial and financial metric side? So I know you touched briefly on the importance of the right cap table. Would you mind elaborating a bit more on that?

Shosh Shetty: 11:54

Yeah. So I think there's a there's a couple of things as well. You know that important street, I think certainly early stage, you have very limited data points. You know around around looking it's on the non-financial side, um of different best for a different value. But I personally, you know, I think for us the team is is the most critical and we're really sort of looking at you know as an investor from that mind. So you're trying to make an asymmetric bet, like there's information that this team is going to win and what are all the different areas. So you know, I certainly when we have worked with investors and companies, does this founder have some type of skill, experience or insight on the on the technology of the market? Obviously, just what we said about in terms of demonstrating execution. Are they proactive and resourceful, and that's what the sort of updates are a great way of showing that. Are they also, I think, especially if it's a venture, scalable company, are the founders capable of showing that they're able to attract great employees? So all of that around the team and the founders is really understanding what's the edge, what's the competitive edge and how you can demonstrate that credibility. So that's what I would call the start of the four Ts for me. Then you've got the technology Understanding. Is the technology validated? Does it have potential to be scalable, defensibility these are all things so typically run through an investment memo.

Shosh Shetty: 13:20

Then the third one is is 30 for me, is traction? And if it is commercial, are there signals of product market fit? And if not, what? What is? Do we have direct metrics and direct plans in terms of how to get there? And that's different for each company in each different sector as they look at that. And then also traction can be, as we've said, with pre-commercial. Are there other signals of customer or market validation?

Shosh Shetty: 13:51

And then the fourth one is what I would call TAM, your target addressable market. Is it well defined? Is it large enough to be venture scalable, if you're going for that type of funding? And is the market? You'll look at the competition in terms of what's the competitive landscape and is the market actually? Also, timing's a big thing. Is the market open and ready to adopt new solutions? So for me those are the four Ts and I also look at the bonus fifth, which is trends. You know there is an element of timing and you can say quote, unquote luck as well with when sort of new innovation comes. So I would look at that as a real framework and certainly I've worked with a lot of investor groups, that sort of dive into each of those, and I would then be really clear on a fifth one, which is not a T but maybe, but just around the value proposition that we discussed about being able to articulate that to a non-expert. If I can see someone can make that super simple, then that's always a great sign.

Amardeep Parmar: 14:55

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Anshika Arora: 15:37

I think that any founders listening when they're creating their pitch deck at any stage of their fundraise those 40s and maybe the fifth bonus around trends or value proposition. I think that's so, so helpful because, especially when you start fundraising a new round, even if you've done it numerous times before, you're positioning yourself very differently in the market and specifically to investors. So I know that that would be super valuable. And actually there we're talking around multiple rounds of fundraising. What do you think are important skill sets that founders should have within themselves or within their team to really set their business up for that long term success which is inevitably what investors are going to be looking for?

Shosh Shetty: 16:12

Yeah, I really love this question because I think there's a I feel like a lot of the conversation has moved away from skill set and more about like quick tactics and kind of strategies, and I can kind of go into that as well in more detail. But actually, you know, one of the big motivations that I sort of started being in terms of the consulting, advisory side we do was a way to bridge that gap between founder and investor expectations by making sure that we can help founders with building the right skill set that has a long-term value for multiple fundraisers, not just for this one, and often as so like, the reason I like this question is that I think it's about thinking about those fundamentals, foundations, because as an investor, you kind of break the, the story and the vision is great, but it's how do you build the fundamentals, rather than searching for the golden bullet that doesn't exist. So what I mean by golden bullet is, I think, the myth that a perfect pitch deck is going to get you funded, or if I have this investor list, it's going to be, it's going to, or if I have the perfect introduction, it's really difficult to then diagnose what. What are the ways to help you in your fundraise because often then you kind of come up with a reason oh, the issue is we've maybe not met the right person, and that could be valid, but there's also probably some some other uh reasons. So I think, with what you're saying, what builds consistent success in a fundraiser is skill set, and I believe that's actually in any aspect of life. I think the difference between where you are now and want to be, whether you're not the CEO of the company, is a difference of being able to get that skill set. So for what I believe like there is also so I'll go through the general ones in terms of get thrown about, in terms of ability to be accountable, because that helps you have self-awareness, of knowing which areas, the resilience, execution, determination.

Shosh Shetty: 18:18

I think from a fundraising perspective, it's really important in terms of being able to have the skill set of what I call empathy from knowing your target person and how they would think about it. So what I would say is like an investor mindset, so curate what would really resonate with an investor, which is why just knowing those frameworks are really helpful to be able to get you out the head of just describing your product to your mom, dad, customer and how an investor would interpret it. Also, I think very early stage, when you've got limited data, is storytelling. How can you concisely and precisely craft an investment narrative? And that is very difficult. That's not easy to do, I do think, just as a caveat, one um thing people can improve on that I see that really helps is people, I think, over index on storytelling when it comes to a like c, to series a and, and don't necessarily able to be able to provide a quantifiable story as well. So once you do have the data, I think people are then looking at the actual execution and result.

Shosh Shetty: 19:22

Um, I think adaptability and strategy is really important in a fundraiser being able to iterate quickly. You're going to be consuming lots of data points, lots of feedback. Often a lot of it may not be contextual and accurate to what you're going. So I think it's your job as also as a founder which is a really difficult discipline to see what's consistently being saying, to then be able to take what's actually useful. And then there's the strategic element of being able to look at the clouds and what would call the dirt, being able to understand the fundraising strategy over the longterm and execute.

Shosh Shetty: 19:55

And then I think actually the fundamental one comes down to. You know, early stage fundraising is ultimately about human capital. So it's about how can you build a system where you're really developing these relationships but it's not just developing it for the sake of it. You know you have an end we end goal in terms of being able to get the finance. So how can you develop systems that can generate great leads and relationships? So we do a lot of that work as well, helping do that on the coaching side.

Anshika Arora: 20:20

Yeah, no, I think that's so interesting and I think, especially when it comes to skill sets of founders you touched a bit briefly on how we're all in this kind of fast-paced bubble of this is what the ideal fundraise should be. So, with the investor lists or with the data room, so in terms of importance would you say, they're all equally as important as each other, and so founders really need to have sort of some strategy around having elements of all of them. So those skill sets within themselves, the team, the actual data points, and all of them cohesively come together for a successful fundraise I do.

Shosh Shetty: 20:55

Yeah, it's not to say like, those things aren't, you know, not important at all. I think there's a certain play obviously, obviously having a good presentation material, but I think to think that that's going to be the solution that is going to do everything is really not, I think it really for me, the most important thing when you put it all together. I think a lot of people underestimate the value of investor objection handling, because when you think about if you can reverse engineer, the pitch is the most important thing really. You know the vote.

Shosh Shetty: 21:28

I think I much prefer and I encourage the founders we work with to actually I'd rather much see a one minute video than a pitch deck. To be honest, I get much better sense, but I would really. For me, I think the most important thing is reverse engineering from the outcome to know, okay, these are actually what I think are the FAQs or the type of questions an investor is going to ask me. It's so much more effective to try and front load that and pepper that into your pitch and then be able to have really effective objection handling skills, because I feel the Q&A is where it's signed or not really, and being able to manage that particular process, I think has a disproportionate impact compared to all the other aspects.

Anshika Arora: 22:10

So I think that's really interesting around objection handling, because, as founders and I've noticed this when I've spoken to many of them that we're not usually building our ideal product on day one, and so we know that there's caveats and flaws and iterations that we're not usually.

Anshika Arora: 22:21

We're not usually building our ideal product on day one, and so we know that there's caveats and flaws and iterations that we want to make. Now how much of that should we bring to to an investor in that objection handling? So, like you said, where you want to pepper it within your pitch, but you equally don't want to make your investor aware of so many gaps, right? So how do you, how do you kind of balance that to say, look, I know what I'm talking about and I know this is missing, but then there's only so much as a founder in a pitch, you can keep saying, well, we've done 20, but actually 80 is missing. Or do you think that that's actually okay to say and that we should be more comfortable with saying, well, actually I've done this 20 and I've got the traction and I understand what I need to do, but your funding is really what's going to get me that 80%. How do we really balance that?

Shosh Shetty: 23:06

Yeah, I think it's a lot on the position and I think there's really effective ways. It's almost like the M&M 8 mile strategy where you just put it all out there but then also you can do it. So give an example like you know, maybe you're going to get some objections that you have a hardware product or some bricks and mortar thing. I think there's really, you know, if you can use, say, look, this is what we're doing, but we are scalable. And you know, maybe the objections you may have got or will get is about scalability market size, x, y, z.

Shosh Shetty: 23:37

I think just mentioning that you first just showing to an investor you're aware of, maybe you know certain risks or certain things, but being able to position and frame it as actually a strength is a really good way to say it.

Shosh Shetty: 23:50

And you can use that by using comparisons presidents, to say, look, we've done this, this, this industry had done this. We're looking at this strategy and just being able to take something which could be perceived. And again, I think all of this also comes down to perception. It's a meaning that someone is creating based on previous experiences or things they've seen. And one of the really great things of the opportunity you have as a founder is to be able to reposition that perception and how you can use other areas, other comparisons to really position that as a strength or your own area and conviction to be able to show why you believe actually this is a strength, or at least something you've been thoughtful and mitigating, and that there are other areas which are really got huge potential. That positioning is really hard. I think it all comes down to the framing around it.

Anshika Arora: 24:42

I love that. I think that's something that we should all remember is reposition the perception, because that's so important. Amazing. Well, it's been an absolute pleasure, Shosh, having you on the podcast. Before we round off, I'd love to ask you our three quickfire questions that we ask everyone. So number one is who are three Asians in Britain that are doing incredible pieces of work that you think the audience should check out?

Shosh Shetty: 25:04

Sure I'm going to mention three different fields. Um, so I know a guy called Ali Tariq who's um, I think, one to watch out for early on the journey started a consumer beverage startup called Sabeel, which is first in the market bring day war, but, I think, incredibly talented guy. Um, another one is one of the angel investors that I work with. I've got someone called Raul Suresh. He's been a backer of a lot of exciting early-stage technology and we've probably done eight angel investments with him, so he's probably a big fan of the angel investing community. And then the third one, I think, putting any politics aside, I think Rishi Sunak, having been the first PM of South Asian descent, is a monumental moment that really shouldn't be forgotten, in my view. As a kid growing up, I never thought we'd ever see a British Asian prime minister in my lifetime. So those are the three that I would highlight.

Anshika Arora: 25:58

Amazing, and how can people find out more about you and your company?

Shosh Shetty: 26:02

Sure, I'm um. If you want to contact me directly. I'm a um shosh@ thimvc. com. You can also contact me through through LinkedIn if you're interested in anything. We also on my LinkedIn there's a an intake form. If you're interested in either pitching to our angel investor network or if you want some consulting advisory service to help you with your fundraise, that's the best way to help you because that way I can be able to see exactly where you are, what your goals are. So those are the three main ways.

Anshika Arora: 26:30

Amazing and, as you know, the BAE HQ is all about giving back, so is there anything that our audience can do that will help you?

Shosh Shetty: 26:36

Yeah, no, I appreciate that. Actually, I think the three main areas where I'm really looking to put focus and add value is we do advisory, paid consulting services. So taking a new batch of clients in October 2024, we want to build their skill set around fundraising success. So if there's anyone who knows anyone who could really get some real expert support and help, we do that. And then also we do pitching events monthly, uh amongst a group of angels. So if you're an angel investor or really strongly uh positioned, start that's flying. We'd love to love to hear with you. So really the best way to help is just to spread the word about Thim Ventures to early stage founders and angels who uh could benefit with.

Anshika Arora: 27:19

Sounds good and any final words from you today?

Shosh Shetty: 27:21

Yeah, I think it's also, um, I probably say, you know fundraising. You always hear all the glamorous headlines and I think maybe what can't work is to say, uh, it can take a huge emotional toil, and I've I've been there myself and so it's okay if it's it's difficult and I would just say, um, you never know what's happening in other people's fundraising. So always I think you know it's natural as humans to compare. But I would say, don't you know, try and avoid playing the comparison game, because there's a lot of context behind what's going on, behind a lot of people, and stick to what you can control. And for me, you know fundraising. For me, why I passionate about is, I think it's just it's more than just raising capital. It's about making sure you find the right partners who can support you on your journey. It's a long term relationship. So control the controllables, stay focused, build genuine relationships and just keep your long term vision in sight. So that would be sort of my final encapsulating thoughts.

Anshika Arora: 28:24

Amazing. Thank you so much, Shosh. It's been so great having you on and there's been so many useful bits that founders will definitely learn a lot from during their fundraising journey thanks, and she got really glad to be on this.

Amardeep Parmar: 28:34

Thank you for watching. Don't forget to subscribe. See you next time.

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