How HapRamp raised $1M from Mr. Anand Mahindra.

Last week, I got a chance to catch up with Pratyush, Co-founder & CTO at Hapramp Studio and we discussed their journey from being a Student startup to a company that raised $1M from Mr. Anand Mahindra.


I've journaled our conversation here. In-case if you want to watch the video, here it is below:


Their Beginnings

Pratyush along with his few friends started Hapramp studios in their third year of college. The team was of 6 people who used to work on different products like audio streaming platforms, things associated with designing. They had a passion towards building something of their own with a profitable model. The thing that Pratyush and his team members got into was a creator’s community because they were all interested in some sort of art like music, dramatics, photography etc.


Art was the common platform between Pratyush and his team members. All were into tech so it also acted as a strong point. So that is when they decided to work on something that will bring them closer to what they liked and the problems that they were able to address at that point of time.


So that is when they started to build something that would act as a beneficiary to the creators and artists. Pratyush and his team members were very young when they decided to start with the process of building their startup. They were not able to understand most of the things so they took the help of many people and also got into mentorship and guidance.


There were several stages through which they went and that is how they were able to evolve themselves and ultimately right now they are building this platform known as ‘GoSocial’.




The Problem they are Solving!


In ‘GoSocial’ they are trying to recreate the journey of an artist. What an artist normally does? An artist starts as a beginner and then approaches a professional person and in between there are a lot of things that they need to cover. Here’s when they need a lot of push, motivated and a well-established structure.






Freedom from the Cycle


When someone wants to build something it forms a cycle of


Funds-->Team-->Product-->Customers-->Revenue--> Funds

Most of us fail to understand the step at which we are supposed to break it. At Clientjoy, we were able to break that cycle from the Team aspect where we able to hire a bunch of really great guys at a fairly lower compensation that fit our pocket. So, how did the cycle look for Hapramp studios? According to Pratyush the cycle broke at the ‘Team’ aspect. They were in college when they already had a team who were strongly into tech. They constantly used to update themselves with the changes in the field of tech. They already had a team before starting their startup. According to Pratyush, they were really lucky with the team. Talking about customers, the most important thing for Hapramp studios was the feedback mechanism. They tried their best to get in touch with people from this domain. His team used to encourage those people to use their app and then give a feedback. Feedback cycle helped them to establish themselves while they were still in their college which gave them a strong kick start.


So it is fair to say that the product that they were looking to build or the startup they were looking to build, however unclear it might have been at those stages but it came in from his own personal pain points, the itch they were trying to scratch in some way, shape or form and then being able to find like-minded people who are capable and have the relevant skills to build this version of product at a very early stage which then he was able to take it to the incubators or accelerators or investors and then show them and that is how he broke into that cycle.


In Hapramp studios recent equity round of financing, the round of was $1M and the leading investor was Mr. Anand Mahindra and there were also a few private investors who invested in that round.


Ever thought about the journey from first stage market validation to reaching out to investors? They were in 7th semester when they started working on a project which was a part of their curriculum so they decided to work on ‘1ramp’ which they were building at that time. While working on their app they saw the tweet of Mr. Anand Mahindra which stated that they were willing to fund someone who were working on social media stuff from India. They threw their hands off and applied without being sure about the results or consequences. They continued to work and simultaneously got in touch with ‘Huddle’. Huddle is an incubator based in Gurgaon. Huddle provided them with a lot of mentorship and guidance. This surfaced again and they had to pitch to a lot of people from Mahindra group. Mr. Jaspreet Bindra helped them on that front. He used to work with Mahindra group before and he guided them and helped them to have productive discussions that they were having about the product.





How does it feel when you have prepared for presentation since many weeks and then you get to know that it has cancelled! That is what happened with Pratyush, after a lot of dedication and hard-work they got a chance to pitch their product to Mr. Anand Mahindra and unfortunately their pitch got cancelled because of various reasons which was really heart-breaking for them. The pitch got re-scheduled. Their pitch was successful and soon they got the confirmation that they will be getting funds and they have made it through! It took 6 months for them to get money in their bank account.


In my limited opinion which is clearly wrong, I always thought that tweets like this were a PR stuff. I felt like the things that they say on social media are not taken seriously. That is the one thing I learnt today! Pratyush was of that opinion that the person they were talking about is Mr.Anand Mahindra who is a completely different person among other people. My assumption was completely invalidation.


Method Of Valuation


I have always had that one question in my mind, at an early stage of a startup I always feel like valuation is more like an art and not science, you cannot actually apply any formulas or valuation because we are very early into the market. Well Pratyush felt like this was a very tricky thing for them after they got their confirmation. No early stage startup has got those numbers but it is extremely important to put it in a framework so that it is legally correct and which will help the investors to agree. Pratyush incorporated ‘Comparable Valuation’, they looked into similar companies based in India or abroad, figured out the cost of building the product. In order to put it in proper terms they had to do projections, cash flow valuation etc.


Let’s talk about ‘Comparable Valuation’. If you have direct competitors, that is great because you look at them when they were at the stage where you are now and then you look at the valuation that they would have gotten at that point of time depending on the articles that you find online and some educated guesses in terms of how much they have raised from which investors. In case, if you do not have competitors which is very unlikely but if you do not then you look at indirect competitors as well and then you discount those valuations in terms of your expectations and then back those valuations with typically 18 months to 36 months of financial projections and the cash flow statements that you build for yourself. So that is the interesting thing, most of the startups either do Discounted Cash Flow Model (DCF) if they are in it for couple of years or the Comparative Model in their first or second round.


Let’s think about this, what are the points that convince the investors that would actually allow them to take the risk and invest in your team or invest in your startup? According to Pratyush, the most interesting thing that they found in Hapramp studios was the team itself. A bunch of tech geeks working on something that they are motivated about and also they were interested in our story of boost-wrapping the story of our startup for 1.5 years even after moving out of college and leaving the jobs. The investors felt pretty confident on that front and the product that they were building at that time, they used to install the app and use it in their phone which was a very pleasing factor for them. So the team and the product that they were able to build motivated them.


Blockchain market was hot at that time. Luckily they had people who actually understood what Blockchain was instead of just talking about it at conferences! That is how they were able to convey value!


In all the events that I have been a part of, as an attendee or as a speaker, I have always heard investors say that ‘they invest in the team’ and that is absolutely correct however while it talks about the quality of the team and skill sets that they bring on the table, it also involves the persistence that the team has shown in the past. One needs to keep in mind the opportunity costs that the team has incurred to work on this idea or product.


I come across some investors who would look at the products or at times even product screenshots but very few of them actually look at the product as a potential customer and check out what the experience is exactly like. According to Pratyush, no matter how early you are, if you have an Minimum Viable Product (MVP) that you can show to people rather than just showing the screenshots and designs, that takes you a BIG step ahead!


Whenever you talk to someone regarding how much time it takes to raise around a fund, if it goes well then typically it will 3 months and if it takes a long time then a year. So the timeline is like there is a 300% error margin in the timeline! This is what an investor says. This doesn’t allow the startups to plan things properly.


For Hapramp studios, from the first confirmation that they got regarding the funds to the first tranch that they closed, it was around 6 months but in between they had several rounds to help them keep the operations in flow. From the time they started reaching out to getting the money in the bank it took approximately 1.5-2 years.


Apart from the funds, what would you actually look for in an investor? For Hapramp studios this investment was a blessing! It is not just about the funds, it is also about the person who with whom you get on-board and your team members. The fund was more of a vision fund from their end when compared to them trying to get high returns from this investment in the next 5-7 years. This provided them with a freedom to experiment on the idea that they are trying to build on versus them getting pressurised to shape the operations to get to the revenue faster. Vision fund helped them to gain motivation on what they are working.


It is very important to have an investor who shares your vision than just having an investor who gives you money and wants it back within a short span of period !





If you found that this blog added value to your existing knowledge and you enjoyed reading this blog, share it with your friends and colleagues!


If you want to know more about how other startups raised their funds, stay tuned and wait for the next blog! Happy reading!


Until next time,

Yash





Connect with me on Social Media

  • White LinkedIn Icon
  • White Facebook Icon
  • White Twitter Icon
  • White Instagram Icon

©2021 by Yash Shah