Easy Fund Days are Over, Cos Learn to Save for Rainy Day

Firms re-eval­u­ate fund man­age­ment strate­gies to stretch avail­able cap­i­tal

The Economic Times - - Disruption: Startups & Tech - Payal.Gan­guly@ times­group.com

Ben­galuru: Af­ter the ini­tial eu­pho­ria of rais­ing a sub­stan­tial fund­ing round set­tles down, it is time for in­tro­spec­tion for star­tups. The slow­down in fund­ing en­vi­ron­ment has seen star­tups re-eval­u­at­ing their fund man­age­ment strate­gies to stretch avail­able cap­i­tal a long way. “The day we got our fund­ing in Novem­ber, we re­ceived calls from our in­vestors on what we were plan­ning to do with the money. Most of the in­vestors in­sist on ap­point­ing a fi­nan­cial con­troller who can look into the ac­counts of a com­pany and let us know of the fund­ing op­por­tu­ni­ties avail­able,” says Swati Bhar­gava, co­founder of CashKaro, a cash­back and deals site. The com­pany re­cently ap­pointed a fi­nan­cial con­troller on its rolls. The move to­wards fund man­age­ment has picked up pace in the re­cent times.

Founders are keen on stretch­ing the cap­i­tal be­yond the usual 18 to 24 month run­way it cov­ers, with help from fi­nance con­trollers and in- vest­ment ad­vis­ers on board, with a lit­tle push from in­vestors. “The plan on which in­vest­ments are made is keep­ing in mind a cer­tain path­way for growth. In­vest­ment of the cap­i­tal in short term fi­nan­cial as­sets is not go­ing to move the nee­dle from cash run­way per­spec­tive but it is im­por­tant to


smartly use the cap­i­tal to gen­er­ate some ad­di­tional in­come. That said, the mar­ket is chal­leng­ing right now and the abil­ity of a busi­ness to self-sus­tain be­comes im­por­tant. Founders have to care­fully plan the spend and need to stretch the run­way,” says Karthik N, CFO at Kalaari Cap­i­tal. “Most of the com­pa­nies we in­vest in usu­ally do not have se­nior fi­nance per­son and we help them on-board the right ta- lent, given our cre­den­tials.” Deepak Narayanan, co­founder of MyCFO shares a sim­i­lar view, say­ing that the age pro­file of 70% of founders in­di­cate that they need to hire an ad­vi­sor for fund man­age­ment. “Other than the tra­di­tional modes of in­vest­ments like fixed de­posits and mu­tual funds, other in­stru­ments of in­vest­ments, in­clud­ing those based on spec­u­la­tions in as­sets and se­cu­ri­ties, are typ­i­cally not al­lowed by in­vestors. Even we per­son­ally ad­vise star­tups to in­vest in low-risk op­tions,” says Narayanan. While it is un­eth­i­cal to use in­vestor money for spec­u­la­tive and high risk in­vest­ments, term de­posits yield no re­turns. “Claim­ing tax con­ces­sions takes a com­plete fi­nan­cial year if the bulk of the money is parked in term de­posits,” says Amit Agarwal of NoBro­kers. The com­pany has parked its cap­i­tal in debt funds.

Apart from debt in­vest­ments, govern­ment trea­sury bonds are a favoured in­stru­ment for these com­pa­nies. Other than the work­ing cap­i­tal, to en­sure liq­uid­ity, the star­tups use short term in­vest­ment in­stru­ments.

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