We Are A Value, Not Volume Business: Founder, Interface Ventures
Right now, nobody wants to invest in early-stage ventures that consistently burn cash. But if the business model is sound and scalable, then there is a lot of liquidity in the investment market
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Interface Ventures is a high-end operational and fund raising advisory services platform for companies operating largely in the Financial Services domain.
In an exclusive conversation with Karan Desai, Founder, Interface Ventures. He sheds some light on the recent developments in the startup ecosystem. Below given are the edited excerpts-
What is your checklist for investing in a company?
The quality of the promoter comes first because, at the end of the day, you are investing money in the person leading the business to find value. Secondly, the business perspective I look at is the ability of the business to deploy affordable technology because, these days, a lot of people burn a lot of money on technology. You have to ensure that the business can scale with the help of technology, as opposed to making technology the business. I try to participate actively in the business and I normally don’t make any passive investments. I participate all along the journey.
How cautious are investors in the midst of the funding winter?
Right now, nobody wants to invest in businesses that burn cash, especially in early-stage ventures. But if the business model is sound and scalable, then there is a lot of liquidity in the investment market. I would say the funding winter is more applicable to the early-stage businesses which are burning cash.
How early-stage startups can tackle the funding crunch?
Entrepreneurs need to understand their business model clearly and should have an idea of when it will turn a profit. A lot of founders show insane growth to grab funding. 9 out of 10 times, it does not happen. First and foremost, they have to get the basics of their business right. Early-stage businesses will burn cash, but it has to be controlled and there has to be a clear timeline on when the business will start making profit. Without this clarity, it would be very difficult to raise funds in the midst of the funding crunch.
Since you have been a part of the credit business ecosystem, how does your experience as a banker help the company grow?
Quite often, people are only aware of the very obvious financing solutions such as working capital, term loans, etc. With my network and experience in the domain, I can suggest different financing solutions to the companies basis their business model and help them grow. Interface Ventures offers a customised financing solution to its client. Therefore, businesses can optimise the cost of borrowing and their capital structure to grow at a much faster rate. This is one example of the value addition I bring to the table for the company in which I invest or advice.
What is the USP of your firm as far as the financial services domain is concerned?
We not only help our clients raise capital in the form of debt or equity, but we also take positions in those companies and sit with the promoters operationally to help them grow their business while putting our shoulder to the wheel. We are not a volume business, but a value business. We believe in long-term value creation with our clients and partners.
How to tackle the situation when an investor and founder are not on the same page?
There is always a difference of opinion between investors and founders. What is important in these cases is to be able to figure out what the other person wants to tell you. Personal differences can not hamper the business; it is the foremost thing for all the stakeholders. You have to be aware of the right time to bite the bullet in the best interests of the company. So, finding a middle ground and moving forward is the only way out.
How does technology advancement help you formulate the right approach towards fundraising?
After the pandemic, every business, whether tech-driven or not, is looking at technology to disrupt the business model they currently have. Tech is a great enabler to help companies grow and raise capital, If deployed at an affordable cost and smartly. Businesses can scale at a much faster rate. We make existing large-scale profitable businesses tech savvy and help monetise them as well.
Advice for young entrepreneurs
These days, a lot of young people are starting their own businesses. While everyone wants to make the next unicorn, one should not forget the basics of the business, which is how to cover your costs with revenue. There has to be some thought process behind this. Running a business by simply raising equity capital all the time is not going to work because the music will stop somewhere.
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