Frequently Asked Questions
How does Angel Investment differ from VCs?
What is the most important document a startup founder needs to have before going for fundraising?
Business Plan – This is the Bible for raising capital from any investors. A Business plan is a 5-year vision statement of the founder of how he/she wants to start, build, and scale the business. It shows the entrepreneurial side of the founder. This document highlights the Revenue model, cost structure, capex, opex, Cash-breakeven point, operating break-even point, Unit economics, Go-to-market strategy, sales plan & funnel, no of products the company will sell, valuation, exit strategy, etc.
2. Pitch deck – Pitch deck is a 14-16 slide investor deck that highlights all the business points in the most beautiful manner possible. The pitch deck has to be made in the most amazing manner which eventually gives a wow experience to the investors. As it is said – The first impression is the last impression.
Is it possible to raise funds or approach an Investor before I have an Efficient Business Plan or a Pitch deck?
What if I don’t have a Business Plan or a Pitch deck?
There is no need to worry as we, at LFS, can help you prepare these documents in the most comprehensive manner with the help of our professional team.
How will LFS help us in making it?
We have made a thorough research on what Investors like to see in a Business plan and deck. We don’t use any template which would likely be available online. We go very in-depth in preparing the Business plan and deck. For the preparation of a business plan, we sit with the founder (either on zoom or hangouts during lockdown) and work with them for 5-7 days in order to prepare the plan. We brainstorm with the founder, do research with them, have detailed discussion about how to grow the business, how to cut costs, etc which leads us to a very sustainable business model. We don’t work like many other advisors who just hard-code the figures without any logic. So, when we prepare the business plan all our data points are backed by proper logic, reason, and rationale.
Pitch deck is prepared by our creative & graphics team who understands the startups, does a lot of research on the business and its industry, and prepares the deck in the most amazing and wow manner. We send a questionnaire to the founders which highlight the details that we require from them in order to prepare the deck.
So this is a Professional Value-added service that LFS provides over and above the main funding?
Yes. That’s right.
Do you’ll charge for this service?
Yes, we do charge a very reasonable professional fee to provide this service as our time, manpower, knowledge & resources are being used. For more info on the fees please do get in touch with us at (email@example.com).
Is there any additional cost?
Legal fees for due diligence, Shareholder’s agreement will be borne by the startup. These are not our fees but the professional work to be done by our associate lawyer which will be a reasonable cost.
What’s the guarantee that we will receive funds after we prepare this Business plan and Pitch deck with you?
Dear, we are not selling a TV or a fan. We cannot give you a guarantee as to you will receive so and so funds once you have worked with us to prepare the Business Plan & deck. We still need to analyze what stage you are at, what team you have, what’s the execution capability of the team, how much traction you have, and so on. However, We can promise you one thing that once you have made the Business Plan & deck with us, you will have the most confidence in your business model that it can be successful because of the brainstorming we would have done while preparing it. This will be your flag-bearer in terms of the model. Also, the pitch deck will be the best one which you would have seen ever which will impress anyone you show it too.
We daily reach out to all startup founders through our platforms:
For Angel Investors
How does the deal flow work?
The primary deal flow comes directly through our platform itself. LFS does branding and marketing activities in order to generate a deal flow of startups. However, few deals can also come through our investors or associates which will be set by us and then only taken ahead.
Is this model similar to other angel investing platforms?
No. They work majorly on member-sponsored deals and we work majorly on in-house deals.
Basis of Investment decision
Once we receive a startup proposal we will vet it and suggest changes if any to the business plan or model to make it
1) more sustainable,
2) profitable in the medium to the long run and
This will ensure we have a fundable startup in hand which can be sent to investors. If the startup does not have a business plan we will sit down with them to make it and guide and hand-hold them to make a fundable plan first. Once all things are in place we will go to investors for funding.
What is the process of Investing?
Once the above things are in place, we will be sending out the pitches to our network of investors and arranging calls with them so that we can start raising funds asap.
What are Angel Investor’s rights?
Angel Investors will receive financial and business progress reports from the startup on every 7th of the next month.
Investor Zoom Calls with the founder will be arranged by us within 20 days of every quarter-end for which early reminders will be sent to all investors for that particular startup. For example - maximum by 20th July for the quarter April-June. Here the founder will speak about the quarter highlights and performance and will take on questions from the investors. The same can be attended by all investors of LFS and not only restricted to investors of that startup. Please note this will be the only forum where an investor will be able to ask his/her questions to the founder otherwise it will become very difficult for the founder to always keep answering questions from different investors at different times.
What is the Role & Responsibilities of an Angel Investor?
Angel investors will play the role of an angel by investing in an early-stage startup to help it scale up to bigger heights.
Angel investors will also play the role of a mentor to startup founders with their experience in that specific industry if any, their knowledge and any strategic networks that the investors will connect founders with.
What is the ticket size & form of investment?
The ticket size for every angel investor starts from Rs.50,000 per deal. The form of investing will be SAFE notes.
With a higher ticket size amount, the form of investment can either be by way of CCPS or Equity stake depending from case to case.
Remember this is no loan funding so please do not expect any kind of Interest related funding.
In some cases, Profit-sharing or a Royalty based deal can also be considered provided it’s a win-win for all parties concerned which we will analyze.
What are SAFE Notes?
‘Safe’ stands for Simple Agreement for Future Equity. It is a convertible instrument that an investor [Safe note holder] gets in return for making a cash investment in a startup. Like an option or warrant, a Safe note allows the investor to buy shares in a future priced round. It is automatically convertible into equity shares, either on the occurrence of specified liquidity events such as the next pricing or valuation round, dissolution, merger or acquisition; or at the end of three years from the date of issue, whichever is earlier.
What is the difference between SAFE Notes and a traditional convertible note?
A convertible note is debt, while a Safe note is convertible security that is not debt. Startups prefer Safe notes because, unlike convertible notes, they are not debt and therefore do not accrue interest. Neither is it equity—though, for legal compliance purposes, Safe note carries a non-cumulative dividend @ 0.0001%. If the startup fails, whatever money is left after discharging other liabilities will be returned to Safe noteholders, in preference over the equity shareholders, until Safe noteholders receive their investment amount. Such liability is on the company, not on the founder individually.
Safe notes were originally created by Silicon Valley-based seed accelerator Y-Combinator [in 2013]. We have used that format but made it applicable to Indian law. The Safe notes take the legal form of compulsorily convertible preference shares. (Inputs from 100x.VC)
What are the benefits of Safe notes over regular shareholder agreements?
The reason to use the Safe notes for early-stage fundraising is that founders can close a deal with an investor as soon as both parties are ready to sign and the investor is ready to wire money, instead of trying to coordinate a single close with all investors simultaneously. Also, as flexible, one-document security without numerous terms to negotiate, Safe notes help startups and investors save money in legal fees, and reduce the time spent negotiating the terms of the investment.
So is it that you will not raise capital through normal equity/ convertible process?
No. If any investor wants to invest a major amount or lead the funding round then we will help them deal with that particular method.
Who is the Point of contact?
LFS will be the point of contact for any queries regarding the portfolio, investments, and deals.
Why is Long term commitment from Angel Investors necessary?
As a rule of thumb, it is expected that our angel investors will invest in startups for the long term. We expect them to understand that a long term commitment of over 5-7-10 years is required to make actual huge wealth. This is not a short-term trading game.
Why is it important to form a portfolio of Startups in a disciplined manner?
All investors, just like in stock markets, should enter the world of angel investing with a view to forming a strong and robust portfolio where they believe this business can grow and scale-up. Without having this kind of a view it will become difficult to create wealth in startups.
Why is reserve capital for follow-on financing important?
It is strongly advisable to reserve some capital for follow-on financing rounds because this will not only keep your stake at the same level but also help you participate with the big VCs as and when do participate.
What are the expectations of returns an Angel Investor should keep?
If all the above advice is strongly followed by an angel investor, then the odds are in your favor to join the rarified band of successful, professional angel investors who shows average IRRs over their investing years of over 25%.
What additional benefits you get by joining us?
Access to filtered startups across various industries
Access to business synergies with investors and startup founders.
Networking and collaborative knowledge sharing, partnerships, brand visibility.
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