Common ground among unicorn startups Twitter, Medium, Dollar Shave Club, Sureand empty call? All of these are built in “startup factories” and multiple other businesses that have gone from mere ideas to VC-backed startups.
One start the factoryalso known as Entrepreneurship studio or Risk Lab, is not a new concept. In fact, before the rise of accelerators and incubators, Bill Gross’ IdeaLab was one of the first and most successful labs to go one step further – a risk-building platform.
Although they both appear to be synonymous and are often used interchangeably, there are certain differences in how they work, what products they offer, the level of project involvement, and at which stage they choose to stay involved in a startup’s journey.
India has a range of incubators, accelerators, startup programs and startup studios.but a concept Risk Builder (VB) or a Entrepreneurship platform Compared with its momentum abroad, it has not had a chance to fully release.
In very few, is one of India’s homegrown VBs that identifies, develops, launches and scales startups by providing a focused portfolio of services including capital, in exchange for equity. It starts with idea validation, business modeling, product building to releasing product revenue and investment.
The platform came out of the woods after an average 15-month “risk-build” period as startups continued to raise follow-on funding.
Founded by Serial Entrepreneurs Pranav Chaturvedi, Nischaiy Pradhan, and Hasht Josh, Favcy was established in 2015.Delhi-based VB has as many as 26 startups, manage an active Assets under management (AUM) is around Rs 500 crore.
a hand rest
Pranav has been working in the financial field for over five years and he started his entrepreneurial journey in 2008. Institute of International Financial Markets (IIFM) and test ready to start Platham (Co-founded with Ankit Kapoor and Satinder Sood).
Since 2014, Pranav has stepped back and played a passive role in the startup, but continued to actively participate in board meetings and hold shares in the company.
During Pratham’s tenure, the co-founder put on the investor hat as the startup looked for deals in the edtech space.
Taking a paranoid point of view, Pranav ran into a peculiar problem with many founders burning through angel investor money due to their inability to understand the nuances of the ecosystem and their subsequent failure to enter the market.
“This problem is more prevalent among founders from non-technical backgrounds who are building digital-first businesses while struggling to understand the digital paradigm. They are often founders with a service-based mindset and can’t adapt to the product mindset required by a digital-first company. At the end of the day, the angels will end up bearing the brunt,” he said.
This issue requires a dedicated organization to develop a standard format or risk building an assembly line to help digital startups go from stage zero to stage one and beyond.
Already gaining traction in the West, Pranav decided to launch Favcy in 2015, thus launching the concept of venture capital in India. Later, three other partners joined the co-founder trio—Yamika Mehra, Ashish Ajmani and Milapsinh Jadeja.
How does Favy work?
The first part of the process involves Evaluation and selection. The Pre-term sheet phase can vary from 25 days to 60 days, founders have to undergo in-house development courses while their business idea/product is validated and validated by Favcy’s team of analysts.
The startup leverages its proprietary “Idea Validation Tool” Call Drake It uses input from founders to scan the market and examine specific ideas for differentiation and relevance.
“The tool can help us find relevant time points with less competition. As more data comes in, the level of accuracy continues to improve,” Pranav said.
Once basic checks are in place, founders will receive term sheet and formally employed.
Then start the holding process.first of all Idea Verification and business modeling The team works with experts to arrive at the most suitable business model. The investment and compliance teams further validate the assumptions in the model.
After that Product assembly The customer life cycle (CLC) of the product is mapped out, and based on that, the technical team picks Related applications Assemble the product and integrate it with the front end. These applications are provided by Favcy’s internal platform, FavcyXand a shared technology platform, FavcyOS, which enables a fast digital start. Founders can also choose to bring their own developers.
In addition to measuring traction, teams production And help with engineering and team building. VB back to founder Office Space (through partners), and other support resources.
“We have our own checkpoints and have built a great team of partners who independently research every aspect of a venture builder,” Pranav said, adding that VB won’t play a role in startups until a request is made Active governance role, but does offer help in finding co-founders.
On average, companies were “risky” at least 15 months ago break away from Favcy and “leaving the nest”. Startups get help with office space, servers, and more.
Equity game
Favy claims about 15% stake in startups Right at the beginning of the journey. With the advent of angel investing, liquidate Partial stake (usually 2-5%) and keep the rest.
It’s like any other typical VC who gets a fraction of the equity from a group of angels to provide these expensive but organized services. Also, angel investments are done through SAFE notes (simple agreements for future equity).
Favy has its own investment network –first check, Led by one of its partners and Chief Revenue Officer (CRO), Yamika Mehra.
The team claims to be managing a approx. More than 3000 angel investorsInclude Sumit Ghosh (Founder, Chingari), Akshay Salma (CFO, Capital Flow), Sujayat Ali (Co-founder, Shop Up), Sumit Mehta (MD, Arrow Capital), hrishkesht (Partner, 10Club) Rohit Tavoca (MD, Everstone Capital).
In addition to this, VB has partnerships with various independent funds such as OpenBook VC, Actively invest in Favcy’s portfolio companies.
Business Attraction and Plans
Favcy remains industry agnostic. It is important to note that in the first few years (2015-18), Favcy did not operate as a full-fledged VB platform, but provided its assembly line (FavcyX) and shared technology platform (FavcyOS) as assets to help the company Digitize their existing business.
This product is made by IPL team like KKR, Pune City, Kerala Shockwave and media group, Including Hindustan Times, Dainik Bhaskar and Network18.
In 2019, Favcy launched a mature startup platform and started operations. It also continued to offer its shared services.
Out of a total of 26 startups to date, 3 are dead, 8 have successfully raised angel rounds from VCs, and 6 have seen organic revenue growth. The rest are either in beta or in-process. The platform, which is a team of 50 experts, claims to receive up to 300 inbound founder requests per month.
Some of its key portfolio startups include PalateMkt, OfExperiences, SkillsKonnect, UrjaBolt, GoodGood Piggy, Majig Capital, LeagueUno, CallXP, CompassTot and Qthrill.
“Apart from evaluating founders, the biggest challenge is identifying a unique assembly line for each startup,” says Pranav.
Not an incubator or accelerator
While the ideas and origins behind incubators, accelerators, startup studios or VBs are very similar, their approaches and stages are quite different.
Incubators (mainly public institutions) bootstrap early stage startups by providing mentoring, referrals, shared resources (including space) and networking without any capital or executive power, while accelerators work with more established startups and invest a small amount to in exchange for a small stake.
The third is the startup studio, which is somewhat similar to how VB works.
even The venture capital company like The surge of Sequoia, 100X.VC, or antlers Operates as a “quasi-venture investor”. However, VCs continue to follow a capital-driven model compared to VB’s operator-driven capital model, Pranav explained.
Of all the support organisations in the world, VB generally has the most hands-on approach and provides the most support of all the organisations mentioned, he added. At the same time, virtual assets also tend to capture the most equity from their corporate portfolios.
Some popular global names include Rocket Internet, it takes up to 90% of the equity, like a quasi-PE company. The most popular native names in the field are—growth story, has been a huge success , , and . Platforms such as Ant farm and smile group Also follows some similar models.
“The concept of venture capital has been around for a while, but it never really took off in India. There are startup studios, but they charge a fee for their services. This model has to operate through equity, and we are lucky that our angel network trusts us and buys it through Our startup equity is involved. It allows us to do what we do best and keeps us cash positive,” Pranav said.
consciousness is another major challenge that needs to be addressed, and according to Pranav, will eventually be addressed as strong startups emerge from VB and see long-term growth.
