Someone asked a coffee entrepreneur, a billionaire, in new york; what’s your story? And he said, somebody loaned me 50 cents, i bought a cup of coffee from a nearby stall, sold it to a customer for one dollar, invested that dollar, sold one more coffee and made two dollars. I followed the same pattern week after week. At the end of one month, i met a billionaire’s daughter and married her
…this is the story Ajith Karimpana, founder and CEO of online furniture rental firm, Furlenco, narrates as he began his talk at Startup50 Conference, about the ‘Life of an entrepreneur before and after funding’.
Now, here’s how his story goes.
Karimpana founded Furlenco at a time when the concept of online furniture rental was still uncommon in India. Being a passive entrepreneur at first, he undertook projects only from expats and ones which came through references. It was only when he decided to soak both feet into the business that he and his team began fulfilling more customer orders. As Karimpana indicates, between January 2012 and November 2014, Furlenco undertook 180 orders for customers in Bengaluru. While that enhanced the company’s value proposition, being an asset heavy model (wherein for every furniture the company invests X amount of money and receives Y amount on rentals), it soon ran out of money and furniture. That’s when Karimpana began to actively scout for external funding from venture investors.
The Early Stage
To put it in perspective, Furlenco was initially funded by family and friends (along with Karimpana’s own investments), up to Rs. 20 lakh. However, as the founder says in his own words, “80 per cent of the money goes into manufacturing assets. So, with that money we could hardly furnish ten homes.” Hence, as early as 2013, Karimpana began his search for potential investors, only to be turned down by close to 50 of them. The company was faced with several challenges at this point; lack of sufficient funds to manufacture furniture, lack of money in the bank account to pay employee salaries and more. “A chance conversation with a college senior on Facebook Messenger and my persuasion led him to invest Rs. 50 lakh into the business and eight months later, Lightbox Ventures invested a Series A of Rs. 38 crore into the business.The investors observed the company for close to eight months before investing. “With this round from Lightbox, we proved that even asset-heavy businessescan raise money from VCs,” he adds.
But, the story doesn’t end here. Pre and post-funding, a startup undergoes significant changes in terms of time, money and resources. In this article, we detail some of the key changes a venture and the entrepreneur goes through after raising capital from outside.
What happens to your employees?
“Pre-funding, my wife used to say she hardly sees me at home. Post-funding, my employees claim the same,” chuckles Karimpana. He observes that post-funding, most of the entrepreneur’s time goes into hiring, charting out growth plans, meetings with investors and of course, working with the senior team to ensure operations is on track. However, one big difference after fund-raising is that you tend to delegate more, since you have the financial ability to hire more people, setup processes and systems and the headroom to make a few senior hires.
“Pre-funding, the buck stopped with me. I used to assign work to empoyees and challenge them” he reveals and adds, “However, today, the tables have turned. When your employees are passionate about what they do, they will act as entrepreneurs and design strategies to grow the business. At such time, you need to be in a position to catch up with them and give your nod of approval.”
Drawing the line of control
As a single entrepreneur, pre-funding, Karimpana was familiar with every going on in the company; right from the office boy’s woes to progress being made growth-wise. However, post-funding, he reinstates that it is important for the founder to empower other employees to take control of the business.
Clarity of communication
When you are a small company, you communicate to five to seven senior team members who will convey the same to the other 20 employees. At such time, if you have conveyed something wrong, you can always go back and rectify it. “However, post funding, when you run a business with 150 employees, you must ensure that you communicate (especially your vision) clearly even to the 130th employee. Every decision made at every level needs to be in sync with the founder’s vision,” explains Karimpana. Internal communication needs a lot more focus after fund-raising.
“When I took the first order for my business, the furniture took 48 days to get ready. When it did, the truck (carrying it) met with an accident on the day of delivery. I was personally working on sorting this out. Then again, in January 2014, 14 days before salary was due to employees, I was left with just Rs. 5,000 in my bank account. It was upto me to deal with this,” recalls Karimpana and adds that as an entrepreneur, you will face several such circumstances where things won’t go as planned. At such time, it is important to stay motivated and identify possible solutions to the problem. For example, when the company was met with the challenge of lack of funds to pay salaries, Karimpana reconnected with a college senior who agreed to invest Rs. 50 lakh into the business. From thereon, the company began doubling in sales every month and its revenues began growing six times month on month. “Now, it would’ve been a different case if you had investor-backing. Then, you would’ve had their support to overcome this challenge.” he opines. Essentially, the point Karimpana is making is that pre-funding, it is upto the entrepreneur to steer the venture. There is very little help internally, so one has to be a hussler while dealing with problems.
These are very few anecdotes on how the life of an entrepreneur will change before and after fund-raising. The point is, as an entrepreneur, you should be prepared for this kind of a change.
Today, Furlenco has launched operations in Mumbai and has done fairly well in terms of sales in Bengaluru. As Karimpana says, tounge in cheek, “Ultimately, the basic difference between pre and post funding is just a bunch of zeroes added here and there.”
As is often repeated, from a day-to-day role standpoint, the entrepreneur’s routine may change drastically post-funding. But one thing is for sure, a good entrepreneur’s passion and commitment to the business will never die down. The key is to realize that things are bound to change, the pressure to build scale is a lot more, challenges are more, you need to manage more people and it is this passion that’ll keep you going.
Pre-funding, the buck stops with the entrepreneur. It is up to you to get everything done.
Post-funding, it is crucial to delegate and empower your team members and be there mainly to help them do better.
Even after funding, some responsibilities remain with the entrepreneur, like managing your key people, building you A-team and strengthening investor relationships