Looking back about 5 - 6 years, E-commerce companies catering to restaurants etc, haven’t started focusing majorly on what can be described as the ‘backbone’ of the problem that persists within the service industry i.e. The problem of Capacity planning. Irrespective of whether the business is delivery centric or dining; there is no platform with a “customer-on-demand” model in place.
Fast forward to 2015, Ressy recognises and accounts for this gap in this particular business and creates a dynamic mobile app providing customers with discounts at local restaurants in real-time.
Looking back about 5 - 6 years, E-commerce companies catering to restaurants etc, haven’t started focusing majorly on what can be described as the ‘backbone’ of the problem that persists within the service industry i.e. The problem of Capacity planning. Irrespective of whether the business is delivery centric or dining; there is no platform with a “customer-on-demand” model in place.
Fast forward to 2015, Ressy recognises and accounts for this gap in this particular business and creates a dynamic mobile app providing customers with discounts at local restaurants in real-time. It has currently tied up with 500+ restaurants in Pune.
Here is how they did it, according to Koustubh Rajepandhare, Co-Founder of Ressy.
“We at Ressy, recognized the gap that existed, within the businesses that functioned in the service industry. We realised that every merchant would appreciate and want to use a platform which is easily accessible and within hands reach for them. It needed to be built in a way that, it enabled them to play around with an application and have customers at their door within a few minutes. We then, built something on those lines i.e. a customer-on-demand platform, for the service industry. We customized it for the F&B industry, but realised that this problem was prevalent among other industries as well. After some deliberation, we decided to focus on F&B industry first and gradually move into other industries from there focusing on any industry that faces an issue which is capacity related”
PREREQUISITE:
Looking back at the fundraising journey, Koustubh tells us, what he wished he had known at the very beginning of the journey. He says “The most important thing I feel, there needs to be is, some sort of standardization in the process of valuations during the initial days. What usually happens is that entrepreneurs are completely unaware of what price they should be valued at. It is a critical phase where one possible scenario could be that, a fresher gets a better valuation as compared to an experienced person or the contrary could occur where, someone experienced gets a tremendous valuation because of the mass market structure. There is no standard structure that has been established. Ideally, if there were some kind of education in place. That would have helped a lot. To me understanding this is the most critical phase i.e. knowing the standard and the status of your product or how you compare at the stage you are at etc.
When we reached investors, we just spoke to them about the funds we would require as a runway of 8-10 months. We then worked out our valuation based on this understanding, i.e. understanding of our requirement and our dilution. This is not necessarily the case for everyone. A lot of the time people might know what funds they want for the runway of 8-10months, but are not sure of what their dilution percentage should be. SHA’s and term sheets are something entrepreneurs can learn while they’re in the fund raising mode but the knowledge of valuation and dilution needs to be something one needs to come equipped with”.
See also: Primer of Valuations for Your Startup
FUNDRAISING MODE:
We had a very detailed plan jotted down for the fundraise, and we knew what our timelines were. We never deviated from the plan. According to our timelines we needed to close the round around mid-June at any cost.
When we began fundraising both me and my co-founder Sagar Patil, handled the fundraising. We thought we would need both of us working on this hands on, and if there was a technical requirement he was present and was a part of the process. We soon realised this was a waste of both of our time and resources. So we revised it in such a way that, if a technical query came up, and the investor wanted a word with him, he would introduce himself over a call and I would be present and discuss the business the rest of the time. We made sure that the product development and modifications remained unaffected by the fundraise and we had constant output. This division of responsibilities and focus really works and prioritizing is essential.
INVESTORS:
Approaching investors:
Initially we began approaching investors based on our connects within the industry, which is what we were told i.e. it was wiser if we reached out to investors with a warm introduction. Obviously there were many others like us who were also looking for and approaching investors at the same time and the only way we would stand out was, if we had some reference.
This advice helped us a lot as, with the right references we were able to get in touch with the right people, we had our first call with an analyst and got to meet a decision making team, all of this within a short span of time”.
In retrospect, even the discussions that followed went very well and they were impressed with the product we had created. The only problem we had at this stage was with traction. We were at a very early stage in the market as far as traction was concerned. This was the only reason the ones who were interested wanted to wait and watch. Although, that gradually changed as well, when we froze our round on LetsVenture.
Following this we faced another problem. We had our first funds in hand and wanted to move faster and close the round quickly, but we couldn’t follow up on deadlines given by the VC’s because we were trying to decide the amount we wanted them to invest so as to close the round within the next 3-4 days. Ultimately we decided to close the round on Letsventure and then re-start our conversations with the VC’s”.
Lead Investor
Our lead investor was Vikram Chachra, Founding Partner at Eight Innovative.
We see Vikram as a great mentor and a friend. It was due to his presence that we saw more traction on our profile. He was very patient and spent a lot of time with us, explaining every bit very carefully and with utmost interest. We didn’t expect an investor to spend as much time with us, in helping us understand the market and the business in more depth, despite the fact that we were quite experience as a team. He gave us regular updates and guidelines to work along based on his personal experience.
Vikram Chachra, had this to say about Ressy, “The first thing that attracted me to Ressy, was their team. It is a very solid team with good market insights. Even from their tech side, their tech partner had created a great product that I could see as being evidently successful. The founders came with a particular insight and value proposition; they knew how to convince the restaurant of that they wanted to get on board. They had figured out that insight. Their stand apart feature of being a real time, dynamic app appealed to me, as I own a restaurant myself, where I noticed and faced the exact issue they were trying to solve. It is the flexibility that they bring to the merchants that works for them. I fundamentally believed in them and investing in them was a no-brainer for me.”
The critical question:
How difficult is it to replicate your business model?
I think this is a question almost every startup that has ever raised funds is familiar with, but it is also the most critical question to consider. For us personally, our framework was not about the idea per say but focused more on the execution of the idea.
Interaction
Convincing the VC’s at the initial stage was a bit of a task because they weren’t convinced our idea would work. They were a bit sceptical to say the least. We did try and convince them by showing them this model of flexible pricing was already in place within the airline industry and the hospitality industry, and felt it was high time we made it accessible to the service industry. They remained unconvinced to quite an extent. Our interaction with seasoned business players went a lot better, as they instantly related to us. To give you an example, when I met Vikram for the first time, I knew he had his investment in the hospitality business, so he connected with what I was presenting instantly. Similarly with Rahul and Mr. Pai, they could instantly relate because they were all familiar with the business and had faced the same problem that we were presenting a solution to. They have seen the business closely and understand what the prevalent problem with capacity planning was. It was much easier to convince the VC’s after we had our lead.
Feedback
We got varied feedback from a lot of investors and every investor gave us a different insight. Right from Vikram to the all the other investors who participated in our fundraise, we received continuous updates and evaluations .Some of them suggested that we should not restrict ourselves to the F&B sector, few others advised us to incorporate ourselves in Singapore and tap the international market first, before coming to the Indian market, three of them asked us to consider sticking to our vertical and not venture into other verticals etc.
With respect to all the feedback we got, we felt every one of them from each and every person was very important to us, as it gave us different perspectives to look at our business from. Obviously in the end it was up to us, what we applied to ourselves. We knew our business the best and knew how we wanted to go about executing it. We did take all the feedback into consideration, but filtered it according to what our priorities were.
When you get so much feedback, it is only natural for one to doubt their own approach. Moreover this feedback was coming from investors. During this process, you do tend to ask yourself questions like “Am I doing the right thing? Is this the wrong step?” etc. But you need to be sure about what you want to do because the ultimate execution is in your hands. We were sure we wanted to execute this particular model, although we weren’t sure about what sectors we would look at just yet, we knew that we wanted to begin with the F&B sector. After that we had a complete business plan that was only slightly branched out once we took the feedback into consideration and integrated it within our plan as per our timelines.
Funding Platform:
Before we got on to LetsVenture, we had already met a few investors and knew how difficult it to reach out to intermediate investors, meet them at their offices and wait for their responses without any solid timelines in hand. LetsVenture changed that for us and was a great experience.
Although, since we had never used a platform like LetsVenture before, I assumed we would have to go through the same circle we went through before and I was sure it would take us at least two to three weeks to close the rounds. Instead LetsVenture made our lives much easier.
We attended LetsIgnite and got to meet top investors from the sector. We followed that up with a few telephonic pitches and got investors on board who were serious about investing in Ressy. LetsVenture fast tracked our process by quite an extent and the only delay was from our end as, the VC’s we had met previously were interested in investing in us. When this happened we were obviously keen on having a big VC house associated with us. But this time we were clear it would be on our terms, because we wanted the angels to give us initiative to support us and really wanted them on board. Somehow things worked out well for us.
I think our reputation within the market improved very quickly due to our association with LetsVenture and we were almost oversubscribed twice.
WHAT WORKED FOR US?
Deck:
Initially when we created the deck we included a lot of information within the slides. For example, when we spoke about a specific question on a slide we also spoke about the market size, who has acquired the shares etc.
We never got a chance to modify the initial deck too much up until Vikram came in. He looked at what we had and helped us create a simpler version of the same. Most of the slides were cut down to just one liners that explained what the problem and the product were. 1/3rd of our slides were problem statements and we just presented the solutions in the rest of the slides. This format helped the investors develop an instant connection i.e. this is the question, this is our product, this is how we can create the right fit etc.
We already had a problem statement and solution format that worked for us, Vikram just helped us refine it and present it in a simpler way using the right words.
Ressy - Deck from Koustubh Rajepandhare
Investor email
As I mentioned earlier, even after listing on LetsVenture, we didn’t see as much traction when compared to the traction we saw once Vikram became the lead. He sent out an email letting other investors know that he was leading the round and had committed 1/3rd of the amount. Once this happened we were able to close the round within the next one and a half weeks. I think that phase is really critical where the lead sends out an email. It just shows the other investors that the lead investor trusts the business and the co-founders which in turn is a subtle nudge for the other investors to go ahead and invest.
Cold Email:
When we sent out cold emails, it worked to some extent but it was nowhere close to being, as effective as the lead investor sending out an email to the other investors. Both these emails give out a different impression. When you send out an email as a founder you are subconsciously pushed into a different categorization in the investor’s head where in you are trying really hard to get them to notice you. What worked for us was uploading the deck and completing our profile then, Vikram sending the mail.
ADVICE:
If I had to give my peers any advice it would be three fold i.e.
1.Team: You really need to work on your team, because investors don’t fund just your idea, rather they fund your team. They want to know that the team you have curated is capable of seeing this idea through to the stages of execution and delivery
2. Market Size: The market size you are at is essential knowledge. You cannot formulate a good business plan where the market size is of say $0.5 million. What you need to consider at the least is the scope of your idea that needs to be implemented i.e. it needs to be a billion dollar idea. You obviously cannot predict if a company can be a billion dollar company or not, but the basic point is that, if the industry is large enough and you are able to get even 2% or 5% of it you will be able to add a significant value to your company.
3.Traction: You need to have something in hand to present to the investors. If you come up with just an idea saying I want to do this, build that etc. They are not going to buy it. You need a prototype and should be able to present that along with showing them traction.
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Ressy website : http://ressyapp.com/
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