Many of our portfolio companies will start raising their Series As in the coming 6-12 months. I use this as an opportunity to curate a list of the ideal 'due diligence data room' which will help them prepare for their Series A raise. The idea is to start at your last round and keep building it from time to time.
Please note: Most of our current investments are B2B, enterprise software and this list will lean toward the same
Intro Deck (5-7 slides)
Keep it simple- Problem, Solution, Benefits, Market, Team, Ask, Contact
Deep dive deck (15 slides + appendix)
Expand the above deck and add supporting materials, and detailed materials in the appendix
Demo
Record a video which can be accessed via a password. Loom/youtube video works too.
Product roadmap
Detailed competitive landscape
List all players in the market, their offerings, and what their USP is. Explain how is your approach different and more likely to win.
Industry reports
Industry reports, white papers, research papers
FAQs from investors & customers
List all questions that you've been asked, and put them into FAQs so you don't waste time going through the same things again and again
Last 12 months investor updates
Investors will like to see how you've progressed. Good to show you take investor communication seriously and diligently
P&L
Past 12-month and future 24-month projections from revenues, variable costs, and fixed costs (BD, R&D, G&A). Split your revenues into service, product, one-time, and recurring revenues. Have your ARR waterfall ready. Show how COGS evolves, don't punch in a percentage.
Balance sheet & cash flows
Show how cash position changes MoM
The 12-month org hiring plan
Have a hiring plan with JDs, compensation, and ESOP allocation ready. Use it to ask incoming investors to help find talent
Revenue analysis
No of customers and revenue per customer over time
Usage Data
Important for usage-based pricing companies to see how deeply entrenched is your solution
Retention
Cohort-based retention over time
Churned customers
List of churned customers, revenue churn, reasons
Case studies
Case studies of key customers, how your solution helped them achieve X
References
Investors will want to talk to customers. Make it easier to provide an intro
Material
Your sales deck, marketing collateral etc
Pipeline & movement
What does your current pipeline look like? How does your pipeline move? How do you qualify leads from one level to the next?
Customer recordings
If you have CX/demo/user interview recordings, please add them with a double opt-in
Systems architecture
API docs
This is not an exhaustive list. But this covers pretty much what every investor will ask for. If you have most of these ready, your fundraising process can be smoother.
Over the last 2 weeks, I spoke to 15 founders to understand what they want from their pre-seed investors. Conversations ranged from brief WhatsApp conversations to hour-long calls or email threads. But the common points were:
1. Capital
2. Connections
3. Metrics
4. Talent
Let's dive in:
Capital: $100k to $500k
A pre-seed startup in B2B software typically has a working prototype and beta customers. Founders need capital ranging from $100k to $500k under different scenarios and business models in order to develop the product further after beta customer feedback. This capital will take them toward a more refined MVP which can help make early revenues and move from an idea to a business. Founders are ok diluting up to 15% equity for this round which gives a baseline valuation anywhere between $1.5mn to $3.5mn depending on the stage and requirements of the business. Founders are not fussed about valuation but are laser-focused on dilution which is a welcome and positive sign.
Connections: Next-round investors and customers
Pre-seed founders appreciate any and all introductions. Considering the stage of the business, the model is a bit fluid and every interaction with domain experts and potential customers helps. Pre-seed founders have requested introductions to potential customers within the ICP both domestic & global. They also prefer if their pre-seed investor connects with possible seed and Pre A investors to understand how will they look at the opportunity in 12-24 months, and potentially start building a relationship via a mailing list to explore an investment conversation in due course.
Metrics: To reach before the next round
Pre-seed founders are hyper-focused on building their products and want to their investors to wear the hat of a consultant. They want investors to keep interacting with multiple next-round investors to understand which metrics the company should hit in order to become an investment-worthy opportunity in the next round. Connecting founders with peers who have a slightly mature business model also helps as founders can bounce ideas off each other.
Talent: Identify & fill
While pre-seed founders understand the kind of team required to do the job, they sometimes need help in identifying what to prioritize keeping in mind the limited resources available. They want to understand what other, successful founders have done in the past, in conjunction with what their business needs today. It can be as simple as prioritizing a UI person before a Finance person in the very early days, to formulating the JD of a seed stage BDR the company needs to hire today in order to meet targets 9-12 months out. Founders prefer if investors have a small cache of vetted talent available to be hired in a 30-45 day period.
This list is not exhaustive. But at the early stage rarely do other things matter in B2B software. Founders know their businesses and investors help them execute better by taking on tertiary responsibilities.
At Malpani Ventures we welcome this feedback positively and will try to do our bit to help our pre-seed founders succeed.
If the above resonates, and you are a pre-seed stage B2B SaaS founder with a working MVP and beta customers looking for up to $200k as first round of outside capital - please reach out to either Siddharth (ss@malpaniventures.com) or Dhruv (ds@malpaniventures.com).
Tracxn filed for its IPO recently and we pored over some of their filings to deepen my understanding of Indian SAAS companies. For context, Tracxn is a venture-funded SAAS platform and has raised ~ 💲 17 Mn 💲over 2013-18. Key takeaways below :
Tracxn is used by VCs, PEs and corporates to discover & track private companies/ startups and transactions/ M&A primarily in India, though the platform also claims to cover 16 other countries as well incl. UK, Singapore
Having got that out of the way, lets dig in
Learning 1: Selling SAAS from India is a slow grind, especially when a significant part of your TAM resides in India 🐢 I have profiled the company's revenue since it crossed $1 Mn 👇
The rule of thumb for #SAAS cos - 3x, 3x, 2x, 2x goes out of the window. Tracxn has grown at a CAGR of only ~23% over the last 5 years
Learning 2: USA is NOT the only place to sell for SAAS startups🆕 The company receives ~40% of its revenues from territories other than India and the US, This ratio has been fairly consistent over the last 3 years
Geographies such as Singapore/ SEA, parts of LATAM are prime for Indian companies to target! Takeaway 3: ACV for the company has largely remained flat over the last 3 years at ~$ 7,500 or Rs 6 lacs As expected, Indian VCs and PEs pay in line with Indian businesses whilst negotiating for software ! Who knew!? 😸 😄
While the data is unclear, a big part of this in my view is the company's inability to grow its user count i.e. capture large accounts PLUS develop high-value adjacent offerings for enterprises The company has also not shared NDR rates in its filings to really assess growth
Final:
The company has clearly benefited from tail-winds in the Indian VC ecosystem and increasing appetite from both Indian and global investors to look at private investments. The company is likely a leader in India but future potential will lie in developing other territories
Imp Note: This is not investment advice nor a recommendation to buy or sell the stock. All data sourced from company filings/ website
If you are building a B2B SAAS company from India for the world, write to us at pitch@malpaniventures.com
Want to close your round quickly?
We'll let you in on a secret - write one-pagers!
Written material is usually sent to investors by entrepreneurs. And this mostly means whatever they could chalk up.
We want more and more entrepreneurs to share one-pagers. Why? Because they are a pain to create. They entail thinking, and crisp writing and ruthless editing!
What purpose does a one-pager serve?
Should all investors insist on a one-pager?
We absolutely believe so. Summaries and one-pagers are akin to currency in the venture capital world. Do you want to invest in a particular company? Summarize in 3 bullet points. Do you want to pass on an opportunity? Summarize in 3 bullet points. We love the Rule of 3. Who better than an entrepreneur to share 3 bullet points on why their venture is a good fit? A good one-pager is one foot in the door for an entrepreneur. Why?
Slide decks are easy, and once made can be sent as a blast to 100s of investors! A true one-pager is a customized summary showcasing the important pieces of your venture, the value addition that can be provided by the investor, and how it is a good fit for the investor's portfolio. And more often than not, writing helps to achieve clarity and makes the thoughts and words crisper.
So what do we look for in a one-pager?
The same things as in a slide deck. But shorter, more concise, and crisper! It need not be a word doc, can also be a notion doc (for the nerds out there, we love notion)! Ideally not be more than 500 words or 1 page. And should contain the following:
Condensing all of these on one page is a very difficult task, and that brings the thinking hats out. Often, the entrepreneurs get the utmost clarity about their business while writing the one-pager. Sharing a one-pager customized to each investor will ensure your pitch is well received amidst a sea of me-too emails.
Try it out!