A year ago, Sunil Mahajan, CEO of Kleeto, approached a few seed funds and venture capitalists to raise working capital for the record management solutions company. Forget funding, many of them did not even give Mahajan a patient hearing.
Kleeto faced an unusual problem — its capital requirement was very small. That made it a pariah for the investors it contacted. The investors were besotted with ecommerce startups, which required bigger capital and ergo, represented bigger ambitions and bigger markets, although they carried bigger risks. "VC funds had no appetite to invest in B-to-B profile like ours," says Mahajan.
Mahajan had many fruitless meetings with investors for several months. Then one day, he was introduced to Grex Alternative Investments Market (Grex), a newly launched exchange-like platform.
Platforms like Grex help startup companies to raise funds from multiple investors. On the face of it, they are similar to crowdfunding platforms that help companies raise money — often small amounts — from the public for a definite purpose. But there are a few key differences. Startup platforms charge a commission from the company raising capital. In the case of normal crowdfunding, investors do not expect any return from their investments. In startupcrowdfunding, investors expect dizzy returns from their investments.
The number of investors would be limited in startupcrowdfunding whereas in normal crowdfunding, investors would number hundreds, if not thousands. Last but not the least, startups usually dilute their stake in favour of investors when they raise money through crowdfunding platforms. Hence, the name equity crowdfundingAfter several rounds of discussions, Mahajan agreed to list Kleeto on the Grex platform. The fundraising was a breeze. Kleeto raised Rs 1.5 crore (with 10% oversubscription) from 13 investors in 12 days. The company had to dilute 4.8% to raise the desired amount. Kleeto was also the first company to collect money on the Grex platform. "It was not easy convincing the Kleeto management to list on Grex,"
Equity funding through online platforms has become the newest channel for start-up companies to raise working capital. In recent months, a bunch of crowdfunding platforms such as Let'sVenture, Termsheet, Equity Crest and Grex have sprouted, helping startups catering to businesses as diverse as energy companies and matchmaking platforms, robotics and art, among others. These platforms have completed nearly 60 early-stage fund raising deals, each ranging between Rs 25 lakh and Rs 6 crore till date.
Source : newspaper
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