The Malpani Ventures team made a short but sweet trip to Chennai yesterday. We met some amazing companies and want to share 2 key learnings from our trip:
Early stage companies need validation - and the best form of validation comes from paying customers. We learned that when companies are open and transparent with their customers about their product development process & future roadmap, customers become involved in the journey and help the company build the product out.
This not only reduces the amount of trial & error in product development, but also deepens the relationship between customers & the company. One of the best ways to do this is to build in public (or semi public, if in beta stage).
Further readings:
SaaS Public Product Roadmap and how to build it
11 Public Roadmap Examples for SaaS Companies
It is imperative startups have a clean cap table - this does not just mean a pretty cap table with very few names, but one which has accorded for all updated transactions & accurately reflects the true & fully diluted ownership of the company.
Firstly lets understand what causes a messy cap table?
Stock swaps in early days instead of cash payments mean a random vendor is sitting on your cap table occupying precious real estate.
Raising too much money from angel platforms or small angel investors mean you are suddenly looking at 20-25 small entries on your cap table. Do remember, every one of them may have share certificate, compliance and related requests.
Vague or no agreements between & among co-founders and their potential exit means their (often significant) equity sits on the cap table which is now at par with common shareholders.
It is very important for founders to keep cleaning up the cap table at regular intervals - by trying to offer exits to smaller investors, pooling smaller investors together as a single entity, having co-founder agreements in place with defined events and actions in case of a co-founder exit, avoiding stock swaps etc.
Further readings:
Founders – Use Your Down Round To Clean Up Your Cap Table
How a clean cap table helps you with an acquisition
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Chennai was kind, and we hope to be back soon! This time with a surprise!