Salil Thanawala on raising and optimising startup capital

Entrepreneurs typically devote their full energies on building a business. However, founders need to focus on using the capital efficiently to sustain the business.

“Optimise it because everybody's focusing on efficiency and this should also be effectively managed. Let us not be inefficient on the most basic raw material that you need,” Salil Thanawala EVP & Principal Partner, Edelweiss said.

He was speaking at a fireside chat at the TechSparks 2022, YourStory’s flagship event. With over a decade of experience with Edelweiss in various capacities, Salil has a deep understanding of market trends and risk management.

While a loss of control is bound to happen when it comes to equity, if the founders choose a certain amount of debt, then they aren’t going to be taking equity to the financer. “So your dilution becomes lesser. Today, very simple things like managing a company treasury is not in the focus area of most founders or the funds,” Salil said.

ALSO READ

Investment opportunities are too big to miss, say VCs

“If you are keeping the money in a bank account or even a bank fixed deposits, today you will end up only saving about 5%. If you actually move that to a simple liquid, you get 6.5% nowadays. Now, if you earn that kind of money, you will have your marginal amount of money available for your expansion, for your hiring people on the team,” he explained.

According to Salil, the key indicators for raising capital includes developing a business model and a differentiator, and how to monetise the business.

“Investors want their capital back. How are you as a founder going to enable return on capital if there is no business model which leads to profitability? There will always be a gap then. If you can solve these two things of what is going to be your business model and your way of monetising, then it can brew a lot of engaging conversations,” he added.

While Salil admitted the presence of a funding winter in the startup ecosystem, he advised the founders to think positive and get the best out of the situation.

“At the end of the day, they don't start becoming positive, they are not going to be right for the secondary market. And not many people are going to invest in it right now without the sort of liquidity available. For the late stage companies, it is going to be a challenge. But for the early stage company there is enough capital in the market,” he said.