The merits of value investing, especially in public markets, have been long espoused — thats the stuff legends are made of in that domain. Even late stage private equity follows largely the same route. Venture investing, on the other hand, is all about having the right momentum — how fast can you go from no product to a beta to some customers to sales rampup. The difference perhaps arises due to higher state of uncertainity in venture markets, as well as higher return expectations.
The difference should be understood while pitching to potential venture investors. It is important to demonstrate and plan for momentum, rather than worry too much about the specific valuation, or try and give that up too early. Venture investing is not about getting a 10% lower valuation. Its about getting a 50% faster company.
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Balaji, I think the real speed breaker is in not thinking in terms of what the risks in the business are, and how they can be systematically removed — in essence, getting the priorities wrong. If you are shooting to build a large business, profits is not always the first priority.
Krish, I think your perspective is grossly misplaced — look at any venture backed company and follow their growth path, and you will realise that VCs dont make money for nothing. By your logic, there wouldnt be any venture backed companies out there.
Rohit
I couldnt agree with you more — I think very few plans land up on the VC table. The question is also how many plans “worth funding” land up on the VC table, and the answer might be somewhat higher.
We are probably not going to advertise (its expensive :)) but definitely would want to go out and make sure we are open for business. We also like to work with other VCs a lot, in terms of coinvestment, so that the best resources can be pooled at the board room.
And then of course, rely on friends such as yourself, to refer entrepreneurs to us!
Alok
Bringing it on the new thread ….
How many ideas do you think that are genuinely floating in India and how many of then actually get an opportunity to meet with a VC. I can assure you many more than one can think about our put on a paper.
Unless VC’s come up with a plan to be far more approachable and planning to invest time “ as Alok eloquently said” I feel that there will be a lot of great ideas and people who will never see the light of a new venture thanks to the VC’s and VC’s in turn can keep their bags full of money trying to fund the best or the worst.
VC’s need to make sure they go out in the market and set themselves up for interaction. It is still time for the first “S” curve which needs to flourish and the growth fueled by volume over Value…which I guess is the next logical “S” curve.
What do you think you would do differently to make sure all possible ideas come to your table… maybe advertise … why not if you want to be heard and also compete with others… Alok?
Rohit
The real problem lies somewhere in the middle. Between zero stage entrepreneurs and investors.
At zero stage, investors are not willing to buy in. While calling themselves as early stage investors, they expect startups to have a full blown company, top notch team ( including lawyers costing $ 400 an hour ), great revenues and fantastic track record all in about 2- 3 years of its founding. If some startup founder is resourceful enough to achieve so much in so little time, he might as well manage the rest without VC support. Any Bank or Institution would lend to him at sub PLR without insisting for equity / Board seat as VCs normally demand.
At growth stage, naturally entrepreneurs demand higher valuation. They say we don’t need VCs since IPOs give us better valuation. They don’t want VCs to take away the fruits of their toil, unless VCs partake in the risk.
Now the question is who will move the cheese first….! I see VCs already getting real with their strategies in Web 2.0 space owing to its low initial capex.
Indeed, Speed is of Essense!
What are typical speed brakers faced by Indian Startups?
How are bottle necks transforming Now?
I wish everyone can share their thoughts and expreience.
In my experience let me share the ills of lack of speed:
When speed is not there, the extended time leads to inflation of scope. Which derails the planning and execution. Meanwhile execution team gets reconstituted( key players leaving/new hires etc) throwing out of gear the scope/planning/execution/closure process!
The scope increase is further aggrevated by keeping the initial client(s) fruitfully engaged for extended time.