20 Things Not To Do As An Early Stage Startup Founder

Sanjay Mehta
100X.VC
1
20 Things Not To
Do

You don't have to be a genius to be a smart
entrepreneur;
you just have to make smart choices.
2

100X.V
C
100X.VC is the ﬁrst VC to invest in early stage startups using India
SAFE Notes. We fund exceptional Indian founders. We deeply value
our relationships with founders, co-investors, and corporations.
100X.VC is SEBI registered Investment Adviser & CAT I Alternate
Investment Fund.
● Pitch Decks received: 10k+
● Shortlisted: 1300
● Funded: 39

Past
Performance
26 Crores: Class 01 – 20 startups
have raised USD 3.5Mn
11 Crores: Class 02 – 9 startups
have raised USD 1.47Mn
33% iSAFE: Total 118 investors
67% SHA: 8 VC funds, 7 Angel
Networks & 5 Family Ofﬁces
359
Jobs Created
74
Founders Funded

Truth
6
Investor engagement is selﬁsh and driven
solely by ﬁnancial outcomes.

It takes a wise man to learn from his mistakes,
but a wiser man to learn from others’.
7

Founders working on an idea which is not easy to explain
or they are unable to communicate.
8
1. Explain the business in a minute
2. They fail to develop a convincing pitch narrative that will attract and
persuade investors to fund the idea.
3. They pitch their technology product and not a business.
4. A complex idea though very useful has no value to customers or investor if
they can't understand it.

Everything can be built, but it not necessary to build
everything.
9
1. You may sink a lot of time and money into an approach that ends up
being wrong. The biggest failure happens when tech founders are
unable to release the product as they are building it ground up. They do
not believe in partnership and overbuild the product.
2. It is evident that when you roll out your custom code, everything takes
time, more time than you can afford.
3. Your priorities end up in chaos, end up wasting a lot of time.

Startup founder hired people for their track record, and not
their potential.
10
1. Have you ever managed teams or delegated tasks?
2. The mistake startup founders do is to hire people with credentials. The
startup will be in serious trouble when you end up hiring people who
have no hunger to achieve.
3. These people come with the baggage of entitlement, commitment,
expectations and way of doing things at work. For early-stage startup
companies, every hire can make or break their future.

Being successful in raising too much money
early.
11
1. Too much money is like having too much time. Founders lose the focus.
They end building a plan to spend not to build a business.
2. Too much capital at the seed stage changes the startup team mindset in
unhelpful ways.
3. Shortage of capital in early-stage forces startup to make hard choices
about what they will build and what they won't.

Building products that no one wants.
12
1. All founders have a hypothesis that they are solving a big problem and
go all-in basis on initial evidence found with anecdotal success. It puts
you on the wrong track, and you will end up building products with no
speciﬁc target users in mind.
2. The product they have built solves no one's problem. Make sure that your
customer / user / buyer / client exists.

There is no respect for money, frugality or
budgets.
13
1. Jumping the gun on purchases, advertising and promotions is one quick
way to bankruptcy.
2. These founders have little or no understanding of finance, cash flows and
prudent use of funds.
3. They spend recklessly on fancy office setups, customer acquisition,
parties, promotions, advertising, branding and doing additional hires.
4. They don't plan ahead; in reality, they have no plan. They believe that
they are not accountable.

1. A startup typically gets choked serving the big customer. The more
bigger the customer or the contract, the more time it will take to
develop & deliver the product.
2. At an early-stage startup, you tend to customise your product or services
to the big customer. It equally creates a ﬁnancial dependency.
14
Getting a large contract, a big customer very early.

1. These founders are lone rangers. They can't work with a team. They do
not trust anyone. They do not delegate.
2. Every founder is human, and no one has unlimited hours of working or
energy to solve everything. These startups can't scale as very soon; there
will be decision fatigue.
15
Superman founders become bottlenecks for
growth.

1. It tough to raise capital, but it is more lethal if you end up raising capital
from toxic investors.
2. Early-stage ideas are fragile and need lots of nurturing. If founders chase
money blindly without the understanding of the background, culture and
intentions of investors, it is bound to fail.
3. Your selection of ﬁrst lead investor is a critical decision which should be
taken on investor pedigree and not be taken based on the investment
amount.
16
Raising money from wrong investors with no reputation.

1. The ﬁrst & only priority should be about the ﬁnancial health of the
startup.
2. Salaries are important so as not create hardships for founders but should
not be income-generating.
3. Founders own a large share of the equity percentage, which is now
valuable due to incoming investors, so the focus has to be on wealth
creation.
17
Founders are looking to generate income, not
wealth.

1. Seed stage startups trying to ape large corporate business by being
offering everything to everyone cannot scale, build expertise, nor create
leadership position.
2. To satisfy every customer, they end up burning in the capital in creating
multiple products, SKU and offerings.
3. They end up becoming a bespoke services business or living dead
startup.
18
Too many revenue models, multiple directions & everyone
is your customer.

1. Seed stage startups trying to perfect the product in their ﬁrst year
without customer engagement or user is a recipe for disaster.
2. Be it free or paid does not matter at an early stage if there is no
customer validation for the MVP the capital invested is write off.
3. Many founders to keep investors happy validate the MVP from investors is
also planning for failure.
4. They throw away money on buying technology & people for building a
world-class product.
19
Scaling The Product First Customers
Later

1. The brightest of the idea will fail if there is no visible plan to make money.
2. The so-called cool, unique or noble idea out to change the world cannot
survive by having perpetual losses with the use of venture capital. There
has to be a visible path to proﬁtability.
20
There are cost and pricing issues, weak business model
and me-too offerings.

1. Startups whose product, business or services can be easily replicated ﬁnd
themselves amongst lots of competition. They get out-competed by other
entrants in the market.
2. Some startups do not have any unfair advantage. They are either copy
cats of big existing business with no unique value proposition or no
direction become a leader. These startups fail because they can't ﬁght
competition.
21
There is no moat, unique IP or barriers to
entry.

1. Startup founders are vulnerable in early-stage and end up doling out
large chunks of double digit free / consultants / adviser equity without
understanding the importance of cap table.
2. These equity granted without vesting and without any understanding of
the buyback options. Seeing the cap table with heavy dilution drives
away venture capital.
3. Compensation by equity is the costliest way of ﬁnancing your business.
22
Not careful with their equity allocation at the seed stage.

Launching a product ahead of
time
23
● The market timing is wrong. You could be ahead of your market by a
few years, and they are not ready for your particular solution at this
stage.
● Statistics say’s that timing accounted for 42 percent of the difference
between success and failure
● Being a little early is okay, but being late is a disaster.

Running out of
Cash
24
● What frequently goes wrong, and leads to a company running out of
cash, and unable to raise more, is that management failed to achieve
the next milestone before cash ran out.
● No keeping track of the runway.
● Focus on Zero Cash Date
● Keep it transparent & aligned everyone in the company, and all the
investors (including F&F), on exactly what the runway is every 30-60
days.

Thinking that they are always right
25
● Founders are usually convinced that only they can lead their
start-ups to success.
● Smart entrepreneurs surround themselves with smart people--and
they listen to them.
● This one's easy, your goal is not to be the smartest person in the
room, it's to learn from those who have more experience, creative
ideas, and bring a new perspective.
● Many entrepreneurs are overconﬁdent about their prospects and
naive about the problems they will face.

Take uncalculated
risks
26
● Successful founders do take risks, but they are well calculated. The
smartest founders I know are able to see every angle and potential
outcome.
● Unsuccessful pivots without checking the pros and cons of the idea
● You are no longer doing whatever it is that made your investors
invest in your startup.
● At times startups think that they would be able to do multitasking by
taking too many major steps at a time.

Becoming a living dead
business
27
● Few months in the business then the team gets stuck. The founders
enthusiasm starts diminishing, there is no excitement &
self-sabotaging tendencies starts creeping at work.
● Living dead is state where in entrepreneurs business is in a
stationary state. It is neither successful nor failed just living dead.
● Majority of bootstrap business fall in this category. No excitement, no
dreams with no sense of achievement with the entrepreneurs.
● There is traction but not large enough to attract venture capitalist.
● The sunk-cost fallacy comes to play is when entrepreneurs starts to
believe that they can't quit because of all that time or money
invested.

Instead of getting into a meaningful conversation
with investors, founders end up blocking out
themselves by asking for silly information, most of
which can be easily searched on Google.
28

Investor
Engagement
29
● Do not put investor on spot by asking their views and immediate reply.
Focus on getting the next meeting
● Do not ask investors to sign a NDA and make life harder. It's an
unnecessary friction.
● Do not ask for a call with the investor before sharing the pitch. Most
investors require the information beforehand. No investor likes to be on a
blind call.
● Do not ask about the deal closure process. Interested investors will
always end up the pitch by a sales pitch of themselves.
● Do not give fake deadlines to investors. The deadline bluff rarely work.

Smart startup founders avoid these mistakes and
make emotionally intelligent choices instead.
30

100X.VC Investment
Thesis
31
We look at
1.Founding Team
2. Market Size Opportunity
3. Business Model Strength
4. Unfair Advantage, Moat
5. Conviction of a minimum 20X returns.

iSAFE – India Simple Agreement For Future
Equity
33

Be a Unicorn in a Sea of
Donkeys
34

Whatever you do, don’t be an
amateur.
35

Raising First Cheque, Seed
Funding From VC
37
Sanjay Mehta Founder
& Partner 100X.VC

Contact
38
pitch@100x.vc
Comments on the session
Post on Twitter
@100X_VC

Seed funding is integral to getting ideas off
the ground and giving a potential company
and idea life.
39

Hop
e
40
At seed stage the investors fund you on hope
& not on performance metrics.

Ideas are fragile,
needs lots of nurturing with seed capital
41

Seed Funding &
Why
42
● Without seed funding the vast majority of startup ideas will die.
● The timing and the manner of raising seed funding often determine
the long-term success of the startup.
● High velocity startups will need to burn capital to sustain their
growth prior to achieving proﬁtability.
● Capital not only allows startups to live and grow, a war chest is also
almost always a competitive advantage in all ways that matter:
hiring key staff, public relations, marketing, and sales.
● The goal of any startup founder should be to raise as much money
as needed to get to their next “fundable” milestone, which will
usually be 12 to 18 months later.

When founders are ready to tell their story, they
can raise capital from VC.
43
Questions to be answered by
founders!

What is the reason for your company’s
existence
44
● The Mission - Problem You Solve
● The Value Proposition - The Solution
● The Elevator Pitch - The Ask

Imagine Where You Could
Be
45
● The Potential - Market Size
● Addressable Opportunity - Your focus
● The Positioning - Segmentation

Why do people want this product more than any other product in
the market
46
● Painkiller - Sells by itself
● Need to have - Fills the vacuum
● Non linear growth - Virality with velocity

Why is this the right time to build the startup
47
● Economic Impetus - Better ways to do things
● Enabling Technology - Trajectory of innovation
● Cultural Acceptance - Reprogramming of
consumer behaviour

Understand Where You Are
Now
48
● Metrics - Measuring traction
● Capital - Funds you need to scale
● Team - Identify competency gaps

Why isn’t everyone working on it
49
● Competition - Know the landscape
● Unfair Advantage - Your moat
● Disruption - Entry Barrier

Why will you do better than established incumbents
50
● Execution - Monthly Rolling Business Plan
● Delivery - Product/Service Consumption
● GTM - Distribution & Sales Channels

Implicitly raising a seed round is function of
convincing an investor that the idea has potential
of raising Series A funding
51

Tips to improve your VC
Pitch
52

Boldly Pitch When
Ready
53
● Fundraising is a process. It takes time — more time than you think.
● The “runway” is the amount of time you have until your startup runs
out of cash. Prepare for a long haul.
● Don’t underestimate the power of relationship building,
recommendations, referrals and networking.
● The majority of your meetings with investors will end with “no” or
“not right now”. Remember every “no” gets you closer to a “yes.
● Get an answer, even if its a rejection.
● Practice to pitch business, opportunity and then the product.
● Target right investors with reputation who do seed funding

Elevator Pitch Template - Crafting an Elevator
Pitch
I intend to offer ( insert product/ service) to a (
insert name/type of customer) so that they will be
able to (insert the beneﬁt/value to the customer).
Like anything else, practice makes perfect.
Remember, how you say it is just as important as what you say.
54

Convert Product to
Business
55
1. I have built 128 bit encryption - So What
2. This security is unbreakable - So What
3. It can transfer valuable credit card data safely
without theft.

Pitch - Talk
Numbers
56
Dream - We want to become a
biggest security software startup.
Goal
-
100Mn
We want
to become
in ARR as
security
software startup in next 3 years.
The deﬁnition of your startup
success should be as precise as
possible number so that any
investor can review it from time to
time to check that you’re on the
right track. It aids startup founders
make many important decisions
that can help them get closer to
the deﬁned end goal.

Pitch - Numbers
Talk
All statements in the pitch deck
has to have a number associated,
a measurable metric.
We have built the fastest cheque
image processing software - No impact
to investors
We build software
that
process cheque
image under 5
seconds, whereas
industry average for others is 40 secs. This
can save banks every year upwards of
USD 500K. - Full impact to investors as
now there is clear deﬁnition of
impact magnitude.
Talk numbers, get
57

Use one metrics for
money
58
It is irritating to decode Rs. 1K Mn
or
raising 1 crore at USD 2.5Mn Valuations.

Become a possibility personality
59
Entrepreneur is someone who jumps of a cliff and
builds the plane on the way down.
Take a decision and make it right.
Is Comfortable with Unknown Has
Irrational Perseverance

Entrepreneurs build wealth not income
60
Funding for founders salary at seed stage is a big red ﬂag.

VC
Objections
61
In pitch meetings with VCs, if you
see no objections from them on
your assumptions, questions on
your projected numbers or inputs
on your business model then you
are not getting their money. They
are not interested.
It takes minimum 7 meetings with
a VC to close an investment deal.
Check the list of VCs pitched, no
of meetings done, if it crosses 7
meetings then mark them as a
good qualiﬁed VC lead, till then
it’s only prospecting or discovery
mode.

Understanding VC
Objections
62
Questions around market size,
VCs do not believe your idea can
scale.
Talks on business model, VCs do
pricing
in your
unit
ability to
not
belie
ve
economics,
make money.
Objections on the go to market
strategy or customer acquisition,
VCs do not believe in your
execution plan.
Queries around competition, VCs
are worried on the founders
ability to raise the next round as
there is no moat or unfair
advantage.

Understanding VC Objections
Continued
63
Discussion on founders, team
then interpret that VCs are
ﬁnding the team incomplete or
incapable to build a unicorn.
Lastly more information
requested on products, VCs do
not see your product market ﬁt
readiness.
After every pitch, analyse the
meeting and recalibrate the
pitch for success
A term sheet is a logical outcome
of pitching to a VC when the
founder is able to get the VC to
stop doubting & start trusting

Hear money 3
times
Founders Talk
Unmet need, Market Size
Solution
Team, , Execution
Financial Projections
Terms of Investments
& Exit
What VCs hear
Is there money to be made
Are these people who can make
me money
How much money I can make
64

There are many investors that speciﬁcally focus on seed
funding opportunities, because it allows them to purchase a
part of the company’s equity when the company is at its
lowest valuation.
65

When To
Pitch
● You have an MVP, or minimum viable product, that shows early signs
of traction
● You can demonstrate potential for product-market ﬁt
● You have a strong founding team with relevant background and
experience
● You’ve begun onboarding customers to use your product or service
● Your business has begun generating revenue
● You need cash to scale your product offerings
● You’re ready to make critical hires

Email Pitch
67
1. Keep it short. Ensure [that] the pitch has a human aspect.
2. Give investors the chance to learn something new.
3. And make investors feel fear of missing out.
4. Investors mustn’t feel awkward sharing the deal to fellow investors, it
must feel authentic.
5. Images, advisory board and customer case studies work.
6. Point investors to speciﬁc content which they should not miss.
7. The headline & closing line must be persuasive, with call for action and
direct.
8. Always attach PDF deck.
9. Mention your contact details

Reasons why startups
fail
68
1. Built something which no one wants
2. Lack of focus, spread the investment too thin being perfectionist
3. Lack of team, single founder, living dead
4. Too much pride, too much press, superman founder- unwillingness to see or listen
5. Taking advice from their own trusted people but useless ones.
6. Not coachable, Does not trust anyone.
7. Boy in costume, Lack of respect for ﬁnance
8. Raising too much money too soon
9. Inability to inspire, no X factor hence unable to raise next round
10. Timing - ahead of time
11. Premature scaling up - hiring big boys early, over building the product, GTM
spending

100X.VC Investment
Thesis
71
We look at
1.Founding Team
2. Market Size Opportunity
3. Business Model Strength
4. Unfair Advantage, Moat
5. Conviction of a minimum 20X returns.

Industry Gaps Leading
to Product Creation
72
Fundamental
Innovation Leading to
Market Disruption
Technology
Trends Leading
to Product
Creation
Market Gaps Leading
to Product Innovation

iSAFE – India Simple Agreement For Future
Equity
74

Closing
Notes
76
1)Learn the art of investor conversations. You think programming software is tough, try
communicating with investors to get their attention. Invest time on what to speak
and what not to speak when pitching.
2)Build your network of startup founders who have raised money and ask for investor
introductions. This works with investor appointments all the time.
3)Solo founders have tough time running both business and funding so get a co-founder.
Split roles as funding and business both are on going activities. Get a real co-
founders who can contribute to help close the round.

Closing
Notes
77
4)Work hard on your deck content & design, elevator pitch and the whole investment
proposition in detail, especially numbers. Investors love founders who understand
ﬁnance well. Genuine deals close the round quickly.
5)If you have factored 2 months to raise funds basis on your ability by self assessment
then multiply that that months time by 3 for the money in the bank. Plan real, practical
timelines for quick closure
6)Ability to digest rejection and move quickly to next investor opportunities helps
founders raise funding quickly
4) Rehearse, Rehearse & Rehearse.

Visit https://www.100x.vc/research
78

Contact
Us
81
● A Startup: Email us a short blurb, demo link and pitch
deck at pitch@100x.vc
● An Investor: Email us at hello@100x.vc
● Press: For speciﬁc enquiries, email us at press@100x.vc
● Location: 100X.VC, 91springboard, Godrej & Boyce, Gate
No.2, LBS Marg, Vikhroli West, Mumbai, Maharashtra
400079.

Importance of Lead
Investor
82
Sanjay Mehta
Founder & Partner
100X.VC

Contact
83
pitch@100x.vc
Comments on the session
Post on Twitter
@100X_VC

Online
Poll
84
Are you raising your first institutional cheque?
1) No, we have already raised first investor funding cheque
2) Yes, we are looking to raise the first investor cheque
3) Still thinking if we want to raise money or not
Share your answer in the chat. 30 secs to answer

When raising startup capital, ﬁnding a "lead
investor" is the most critical ﬁrst step.
85
Securing a lead investor is vital for 99% of startup fundraising
rounds.

Good deals do not get
funded
No 1 Reason:
86
Investor rejection comes with the viewpoint that
why no one else is doing it.

Most VCs, angels and angel networks are all
going to want to know who your lead is.
87
A Lead Investor Is Social Proof To Other
Investors

Family money is great. It just won't buy you
"lead investor" status.
88
The Lead Investor Shouldn't Be Your
Mom

Lead Investor - First
Cheque
89
Few want to go first.

A lead investor is a marketer
90
Precious hours in raising funds that are being sucked away from your ability to
code and market and clock up real customers and
sales.

Define a Lead
Investor
91
Lead investor is the first to invest, then advise and finally
attract other investment sources of capital for your
business growth.

Lead Investor
Role
92
● Negotiate terms
● Hire a law ﬁrm to handle the paperwork
● Advise your startup
● Take a seat on the board
● Make introductions and connections
● Help structure future fundraising rounds
● Help manage other investors
● Bring other investors, ﬁnancing and distribution channels
● Participate in follow up funding rounds

Online
Poll
93
Do you believe that a lead investor in important?
1) Yes, It is very important to identify the lead investor
2) No, Not required we have ﬁgured it all out
3) Still confused on the value of a lead investor
Share your answer in chat section with a Yes / No 30 secs

Choosing The Lead Investor - 5
Tips
94
1) Find a lead investor you can trust - verify their credentials
2) Find a lead investor who can solve your current problems - check
their interest, domain expertise and match your needs
3) Find a lead investor who is a thought leader - a brand and with
successful investment history
4) Find a lead investor who is accessible - is a coach and a mentor.
5) Find a lead investor who has ﬁnancial resources - a risk appetite with
long term horizon with investments

100X Role As A Lead
Investor
95
● Invest the ﬁrst cheque
● Funding through iSAFE (India Simple Agreement for Future Equity)
● Be part of a cohort, Class 01 funding in Dec 2019
● Make the startup business VC investment ready
● Scale up business planning for growth capital
● Make the startups discoverable in the complete VC ecosystem
through VC Pitch Day
● Funding simpliﬁed by playing a role of investment banker by
helping them raise the next round of funding
● Unlimited mentoring

Online
Poll
96
Have you heard about 100X.VC investments before?
1) Yes, I have heard about 100X.VC
2) No, This is the ﬁrst time I am hearing about 100X.VC
Share your answer in chat with Yes / No 30 Secs

Lead investor is the magic key to
successful funding or building
syndicates
97
A lead investor helps the startup to establish
credibility in the market

Who Should Your Lead Investor
be?
98

Why iSAFE notes should be preferred by lead
investor?
10
1
● An iSAFE is neither debt nor equity, and there is no interest
accruing, (though for legal compliance purposes, iSAFE note
carry a non-cumulative dividend @ 0.0001%).
● If the startup fails, whatever money they have left after
discharging other liabilities, will be returned to investors/iSAFE
note holders in preference over the equity shareholders until
iSAFE note holders receive their investment amount. Such
liability is on the company, not on the founder individually.
● A convertible note is debt, while an iSAFE note is a convertible
security that is not debt.

Description Standard iSAFE terms
terms
Rationale / Remarks
Post money Valuation
Board seat
Yes, No. Decided
Important later at
equity clause in all
pricing round term
sheets
Early stage companies (Start-ups) are generally
at Idea
stage and hence it’s unfair to assign a valuation
to such Start-ups at the initial stages.
Yes No Board seat A board seat is generally ineffective (where it’s a
minority stake in favour of investor) in
situations, where an Investor and Founder
don’t meet eye to eye.
SHA Yes No 100X wishes to keep documentation as simple as
possible, though there will be certain
necessary amendments to AoA to comply
with Indian Laws.
Consent rights /
Reserved matters Long list by Very Few
items
way of an included in
a Annexure
single
term
sheet
Objective is to provide the founder with the
freedom
and ﬂexibility to operate.
ESOP Pool Standard No such 100X does not wish to force founders to keep

Description Standard
terms
iSAFE
terms
Rationale / Remarks
Voting rights Yes No 100X does not wish to take voting rights in the company,
and
hence provide greater ﬂexibility to founders / company
to carry out its operations / seek shareholder approvals
Employment
agreements with
founders – Investor
consent
Yes No 100X does not wish to force employment terms with
founders.
We want the same to be a more consultative process
than a consent one.
Exit Rights Yes No 100X does not wish to force exit rights on founders /
company.
Only transfer rights available to iSAFE note holders
Change in
Founders
Remuneration
Yes No 100X does not enforce a say in this matter. We believe in
mutually discussing and arriving at a consensus.
Commitment and
Non-Compete
clause
Yes No We believe in trusting the founders and working with them
to
build and scale their start-ups.

Online
Poll
10
4
I would recommend iSAFE to my lead investor
1) Yes, deﬁnitely it makes sense to use iSAFE notes to raise the
ﬁrst round
2) No, I believe going to big VC funding and do a priced round
SHA
Share your answer in chat section with Yes / No 30 secs

VC’s Views on
100X
10
5
Discovery Platform

First investor in your startup
deﬁnes the probability of future success
11
0

Online
Poll
11
1
I want to engage with 100X.VC as I am
1) Raising the ﬁrst cheque
2) Want mentoring
3) Discover right valuations
Share your answer in chat, 30 Sec

Closing
Notes
11
2
Lead Investor is the ﬁrst investor to indicate their ﬁnancial funding
support for the startup, contributes time and expertise to make
business ready and discoverable with investors for the future
funding round.

Questions or
Comments
11
3
Email: pitch@100x.vc
Twitter: @100X_VC

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