DTU Times interviews Aditya Arora, the CEO of Faad Networks who recently graduated and was present as a mentor for the E-Cell Startup Weekend.
You’re the CEO of Faad Networks, why is something like Faad needed in the industries of today?
When you hear about startups, startups raise million dollar IPOs, but before they raise this amount there's this early seed fund that it needs in order to grow and to sustain in the early stages, something like 25-50 lacs and although its a small amount compared to a million dollars, sometimes it proves to be the deciding factor in the survival of the startup. Thats how Faad started, we are solving the pinpoints of early-stage startups by raising capitals from the investors because that's the hardest to raise, but once you have done that the path becomes a bit easier. We are helping them not just with capital but also to grow, because what will we do with the capital, capital gets no returns when the company doesn't grow.
You’re a startup that helps other startups by giving them money, wasn’t it challenging building a company around this and get the investors and the necessary funds?
There were lots of challenges, for one it was a 20 year-old boy pitching to investors asking for money, I don't come from a background of investing or startups, my partners also, one is an engineer and the other an Ayurveda doctor. No one in this company comes from a typical VC background hence raising money was hard.
Locking these investors and their capitals with us was also a big challenge, because there are so many enterprises out there and as we say, money will be put wherever they sniff the best returns. We have to lock in that capital with us, so whenever that startup comes to us for funding we can always supply them with funds, it shouldn’t be a supply demand problem.
Money is invested where they see the most returns, so what do you look for in startups that make you want to invest in them?
We have the 5 Ts of investing.
1. Team - The biggest factor, because business models, everything can be altered but the people themselves cant be altered. If the team has passion and dedication then its the key to success for the firm.
2. Technology - What level of tech are they using in order to help them scale up to the next level of the market and increase their operations.
3. Traction - Basically metrics of the startups reach and activity. What sort of revenue the company is clocking or if its an app how many daily, monthly active users, customer retention, average time on the app etc.
4. Ten x Potential - If you are a startup and you have a value of 5 crores today, I want you to become a 50 crores entity, since that is wherein the profit lies for me. So do you have that potential, can you crack the market and 10x from the baseline. X to 10 X as we say in the industry.
5. Terms - What are the terms of investment, what is the equity you are offering me, the payout of the equity, what's in it for me basically because that’s a very important factor for investors. Lots of options are there, debt funding, pure equity, convertible equity etc. What keeps me interested, what's the skin in the game for me etc.
What are some of the core factors where entrepreneurs have the potential to “crack the market” and establish themselves?
Investments themselves by virtue of the concept is an ever booming market, startups right now also require funds and 30 years later will also require funds to grow. But we are seeing almost replicas of startups that are already out there in the market, we are seeing someone is trying to create the next Amazon, someone the next Google, so innovation in itself is not at the pace it could be happening in India, as compared to other countries, even our neighbouring ones, that is one of the biggest challenges to our industry.
Another thing is the validation, people are looking to raise X amounts of capital and not justifying it, either the business is too frugal or its too early to raise that capital, or they should wait for some time and try to grow the business from bootstrap and not risk capital on that. On the government's side as well there is still a lot of clout over taxation issues, there is an angel tax which has to be properly addressed, hence a lot of issues remain.
Overall, our economy is in a recessionary phase as our consumption has slowed down, so we don’t know how the next set of consumers from India will come and approach this. But overall, money is there in the market. People are sitting on huge piles of cash, but where to put in the money and why is how we at Faad try to help.
We have an incubation facility in DTU which also aims at the same thing, you talked about government policies also, are there any ways the government can assist entrepreneurs from both the college and outside?
DTU in itself is one of the five colleges that has been funded 100% by the Delhi State Govt. Taking into account the technological prowess the college has since an incubation centre is known from its students who’s ideas it incubates. It’s not known as the DTU IIF but by the people who work here and who make DTU the college that it is. In terms of scouting, there needs to be a lot of help, there is a huge scope for more collaborations since this phase in any startup is about collaboration, not competition. At the end of the day you, me and the incubation centre have the same purpose. We all want to see your startup grow. Either we do it in our own individual ways, or if we can do it better together, let’s join hands and make it happen. The government should step up not just as a liaison for startups and incubation centres, but also work not just as a mediator, as a third entity where they can help these startups and connect them with the right investors since each investor has their own mindset. Additionally, they should look at the profiling of these startups at the grassroots level and sit down to get what the investors’ doubts and issues are and help resolve them. Obviously the most important thing is what happens after the incubation. During the incubation you are in a protected environment, you have the resources and the knowledge with you. But once you step out its the outside world and its a dirty dirty world as we say. So stepping out, what can incubation cells give as a post-incubation process and how can this communication be managed, all can be improved.
A lot of the students here do not have much experience in the fields of business, so what is some advice you could give them to help them also take their ideas further?
I decided to intern at a company called Faad which I’m now the CEO of, but my journey wasn’t easy, I went through it the hard way. My office was based in Saket and I lived in Rohini with a college in East Delhi, alongside that I had to manage my social campaign as well called Education Yatra for which I’m a Microsoft Chain Maker under the age of 20. The point is that you have to take a leap of faith by trusting your instincts and the kind of work you are doing, as a youth I believe why people don’t get returns because they are highly erratic and they are very impatient. They expect quick returns in short periods of time. I stuck with Faad throughout, there was one single room in which we were where we used to do everything. I stuck with them because I saw the vision of what Faad could be. Seeing the vision for not only the company but yourself and whether your wishes aligned with them or not is one very important factor you need to have. You need to know the Y of your life, even my TedX talk revolves around this only, in mathematics you always have to find the value of x, but if you know the value of Y, trust me you can find the value of X.