The 'How Funding Works' deck by Raghuveer Kovuru is an educational presentation focused on the Indian startup ecosystem circa 2016. It is not a pitch for capital but a teardown of market conditions, common failure points, and the mechanics of the venture cycle. The deck highlights a brutal year where deal value decreased despite increased volume, and 67.9% of deals were concentrated in pre-series stages. It provides a grim list of 'Brilliant Performances' that ended in shutdown, such as Askme ($300M raised) and PepperTap ($50M raised). For founders, the deck offers a checklist for finding fun…
Key takeaways
- Total deal value in the Indian startup ecosystem for 2016 was US$ 4bn, representing a 55% fall in startup funding (Slide 3).
- Delhi led city-wise funding in 2016 with 1366 million dollars, followed by Bangalore at 1266 million dollars (Slide 4).
- The deck identifies 'Immature & arrogant founding teams' and 'unviable biz models' as primary drivers for the 2016 funding scenario (Slide 3).
- A 'Brilliant Performances' table lists high-profile failures, including Askme (Shutdown after $300M funding) and Fabfurnish (Sold for $3M after $30M funding) (Slide 16).
- The presentation outlines typical equity dilution: 5% to 10% for Pre-seed, 10% to 15% for Seed, and 20% to 30% for Series A & B (Slide 8).
- System failure is attributed to explosive Customer Acquisition Costs (CAC), unmanageable blitz scaling, and the use of vanity metrics (Slide 17).
- The deck lists nine distinct valuation methods, ranging from the Berkus method to Discounted Cash Flow and the First Chicago method (Slide 20).
- Future outlook for 2017 predicted a focus on AI, Machine Learning, Healthcare, Fintech, and IP-protected deals (Slide 19).
Introduction and Market Context
The presentation titled How Funding Works by Raghuveer Kovuru acts as a retrospective analysis of the Indian startup ecosystem during a period of significant correction. Slide 1 introduces the author as a founder and startup consultant. The deck immediately pivots to the core question on Slide 2: ARE FUNDS A MANDATE? , setting a skeptical tone regarding the necessity of venture capital for every business.
The 2016 Funding Scenario
Slide 3 provides a data-heavy overview of the 2016 Funding Scenario . It reports a total deal value of US$ 4bn for the year, noting that while deal volume increased, total deal value decreased. The slide explicitly states there was a 55% fall in startup funding compared to previous periods. The author attributes this to the reality of 'unviable biz models' that were previously invested in, resulting in multiple startup failures and pressure from investors. Crucially, the slide blames 'Immature & arrogant founding teams' for the downturn.
Slide 4 breaks down funding by city. Delhi led the pack with 1366 million dollars , closely followed by Bangalore at 1266 million dollars and Mumbai at 1079 million dollars . Other cities like Hyderabad ($55M) and Chennai ($152M) lagged significantly behind the major hubs. Slide 5 visualizes the volatility of the year with a line graph showing monthly funding amounts, peaking in August 2016 at 782 million USD before crashing to 177 million USD by December.
The Mechanics of Fundraising
Why and How to Raise
Slide 6 asks WHY FUNDING? and lists four primary drivers: Ambition, Growth, Sustainability, and Profitability. This is followed by Slide 7, which features a stark image of a handgun with the text FUNDRAISING IS BRUTAL , emphasizing the difficulty of the process. Slide 8, titled THE USUAL FUNDING CYCLE , provides a roadmap for founders. It details stages from Pre-seed to IPO, including typical raise amounts and equity dilution. For example, it notes that Pre-seed deals are typically for 5% to 10% equity, while Series A & B range from 500k to 5Mil for 20% to 30% equity.
Slide 9 uses a Wikipedia-sourced graphic to illustrate the Startup Financing Cycle , mapping revenue against time and highlighting the 'Valley of Death'—the period before a startup reaches break-even. Slide 11, titled FINDING FUNDS , offers a checklist for founders, including 'Chalk out a vision,' 'Target right investors,' and 'Create a winning pitch deck.' It uses a quote from Master Yoda: 'Do or do not. There’s no try.'
The Investor Perspective
Slide 12 features a quote from Gabriel Weinberg of DuckDuckGo: "Traction trumps everything." This leads into Slide 14, THE INVESTORS' SIDE , which reminds founders that 'Investors have investors too' and that they look for 'great product and team,' 'trust factor,' and 'Product - Market Fit.' Slide 15 asks YOU GOT THE CASH – NOW WHAT? , using an image of Scrooge McDuck to transition into the consequences of mismanagement.
Post-Mortem: Failure and Valuation
Brilliant Performances and System Failure
Slide 16 is perhaps the most critical slide in the deck, titled Brilliant Performances in 2016 . It is a table of failure. It lists Askme (E-Commerce) as 'Shutdown' despite $300 Million in total funding. PepperTap (Hyperlocal Logistics) is listed as 'Shutdown' after $50 Million . Fabfurnish , which raised $30 Million , is noted as 'Sold off for $3 million.' The slide also labels Snapdeal ($1.56 Billion) and Flipkart ($3 Billion) as 'Struggling.'
Slide 17, SYSTEM FAILURE , diagnoses the causes of these collapses. The author points to Explosive Customer Acquisition Costs (CAC) , Unmanageable Blitz scaling , and the Use of vanity metrics . A particularly pointed bullet point mentions 'Me too Models and aping western businesses' as a reason for the systemic breakdown.
Financial Modeling and Valuation
Slide 18, titled AS SIMPLE AS THAT , shows a simplified graph of Costs, Revenues, and Cash over a 5-year period, marking the 'Cash Burn Phase' and the 'Break Even' point. Slide 20 provides a comprehensive list of Valuation Methods . It covers nine principles, including the Berkus method (assessment of 5 key success factors), Scorecard (weighted average vs. similar companies), and Discounted Cash Flow (sum of future cash flows). This slide serves as a technical reference for how startups are priced in the market.
What Works and What is Missing
What Works
Historical Data: The deck provides specific, cited figures for the 2016 Indian market, making it a valuable time capsule of a specific venture bubble. · Technical Breadth: The inclusion of nine different valuation methods (Slide 20) provides a more nuanced view of startup finance than typical 'rule of thumb' advice. · Honesty: The 'Brilliant Performances' slide (Slide 16) is a sobering reminder of the high mortality rate of even well-funded startups.
What is Missing
Company Specifics: As this is a general educational deck, it lacks a specific business case, team bios, or a product roadmap. · Actionable Unit Economics: While Slide 17 mentions CAC as a failure point, the deck does not provide examples of 'good' unit economics or how to calculate them effectively. · Modern Context: The deck is firmly rooted in 2016/2017. Current trends like SaaS dominance, AI-native startups, and changed interest rate environments are naturally absent.
Founder Takeaways
Founders should copy the Usual Funding Cycle breakdown on Slide 8 to manage their own expectations regarding equity dilution at each stage. The System Failure list on Slide 17 should be used as a 'pre-mortem' checklist: if a founder finds themselves relying on 'vanity metrics' or 'aping western businesses' without local adaptation, they are following the path of the failed companies listed on Slide 16. Finally, the Valuation Methods on Slide 20 are essential for any founder entering negotiations; knowing that there are multiple ways to arrive at a number—and which one favors the startup—is a significant advantage.
Frequently asked questions
- Is this a pitch deck for a specific company?
- No. This is an educational or consultative presentation titled 'How Funding Works' by Raghuveer Kovuru. It analyzes the state of the Indian startup market in 2016 and provides general guidance on the fundraising process, valuation methods, and common reasons for startup failure. It does not contain a specific business model, product, or 'ask' for investment.
- What were the major startup failures cited in the deck?
- Slide 16 lists several major failures from 2016. Notable examples include Askme, which shut down after raising $300 million; PepperTap, a hyperlocal logistics firm that shut down after $50 million; and Stayzilla, a homestay marketplace that shut down after $34 million. It also notes that giants like Snapdeal ($1.56B raised) and Flipkart ($3B raised) were 'struggling' at the time.
- How does the deck define the 'Usual Funding Cycle'?
- Slide 8 breaks the cycle into five stages: Pre-seed (<$100K), Seed ($100K to $1M), Series A & B ($500K to $5M), Series C+ ($5M & Above), and IPO. It specifies expected investors for each stage—such as Angels and Incubators for Seed—and typical equity stakes, noting that Series A/B investors usually take 20% to 30% of the company.
- What valuation methods are recommended for startups?
- Slide 20 lists nine methods: Berkus (5 success factors), Risk Factor Summation (12 risk factors), Scorecard (weighted average vs. similar companies), Comparable Transactions (KPI rule of three), Book Value (tangible assets), Liquidation Value (scrap value), Discounted Cash Flow (future cash flows), First Chicago (3 scenarios), and Venture Capital (expected ROI).
- What does the deck identify as the main causes of 'System Failure'?
- Slide 17 identifies six core reasons for failure: explosive Customer Acquisition Costs (CAC), unmanageable blitz scaling, lack of market knowledge, use of vanity metrics, pressure to achieve exit multiples, and 'me-too' models that aped Western businesses without adapting to the local context.
