Just saw a couple of side discussions on some comments posted elsewhere on VW. Am bringing this up as a main post as it might be of interest to others as well.
Rad said
What applies to the rest of world, doesnt apply to India. Everybody – Indian Entrepeneurs, Indian VCs, Indian Angels need to think and act differently. If you guys think about your country and strive for a pride that comes from having a Sony or a Google, you would find yourself spending more time with young guys nurturing and mentoring them, rather than than just chasing fund targets.
Whats missing in India is Idealism, Romance and long term vision.
Rad, I understand what you are saying. What we also need to understand is that in the investment business, there is no “long term” unless the fund targets are met. As important the long term vision is, it is equally important one understands how to get there. Sony and Google are prides of their countries because they are business successes, not because they are romantic.
… please tell us what are the things a VC is looking at when he invests in a startup ?
Anon, I think at 30,000 feet, we look for the ability for ourselves to make good returns on investments. That typically requires large markets, great teams and sustainable differentiators in the business. At a high level, it is really that simple. As you dig in, some factors become more important than others. In Internet, a great team might mean passion and understanding of the medium; in enterprise sales, it also includes past experience in selling to enterprises. Sustainable differentiators might exist on day one due to technology, or you might be able to build them over time (as in case of consumer internet companies, where brand and first mover advantage can be significant).
And then, our own understanding of the space and our ability to address risks in that specific business become important. Most successful early stage investors are conscious of the fact that all good investments are not necessarily good investments for them.
Would love to continue the discussion,
and yes, we are adults — we can use our names here 🙂
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Alok and Pink,
Thanks for the responses.
Since angel funding in India is definitely much different from what we have heard about happens in the west (“i’ll write you a check and we’ll see the equity later” kinds), what do you suggest should be the dilution at the angel funding stage.
I know again, there are no right and wrong answers. But what i want to know is, if one goes for angel funding for the first round and then approaches a VC like you for next rounds, what is the kind of equity structure you would be expecting given the indian context.
It would be great if you can give some realistic ranges given your understanding of the indian context.
Also i feel the agreements i enter into with angel funder will also decide to a great extent the terms of my second round of funding.
What are the points one should look out for (while entering into agreement with angel funder) given this situation ?
I personally find both the start-up and funding cluture less mature in India than in the US.
Indian entreupreuners generally tend not to be team conscious, they don’t know how to partner with people to form a team to make the idea a success.
Indian VCs are also less mature. They tend to be very slow and far more conservative than in the US. You can’t blame them (Yet!) as its still a young industry here.
The good news is that we’ve got this blog to keep discussing issues…
I have a simpler take on this rather complex topic:
As an entrepreneur looking for funding, I don’t EXPECT that someone should fund me, anyone – friends & family, angel, VC etc. I hope they would, but it’s their money ain’t it? So the choice to invest or not is also theirs, I think.
I just don’t question that. Just expect to be treated with respect, given the best advice and confidentiality promised on the concept.
Lotsa comments!
Glad that atleast some guys got my point to some extent – PINK, Alok and Pukhraj.
Krish:
“Rad, who doesn’t chase the next cool thing…? Why that `you indians’…? This kinda’ comment normally is heard from folks whose Jobs have been offshored. If you belong there, let me tell you our BPOs are hiring…!”
>Are Indians chasing the next cool thing? Seems to me they are chasing the ones who chased the next cool thing. Even Alok Mittal has stated at times that Canaan would initially be interested in businesss models that have been already proven successful in the US and elsewhere. So lets say max. funding is available to a team with enough implementation experience rather than innovative thinking (bunch of middle managers from TCS etc. VS young guys with cool ideas). How it would help us in long term? What kind of startup culture would it create in India? Do we want more Rediff.coms?
And, Yes BPOs are hiring. But if I have to work for one, I have a large choice available now – from Eastern Europe to Far East.
Himanshu:
Things are different for India because there is no other place in world where there is a larger gap between “What they are” and “Where they can be”. For a moment think about the larger picture. In India are we just creating or funding companies? NO! We are making an attempt to solve so many other problems through this. Therefore Indian VCs (and entrepreneurs) should change their behavior. Not just for one specific company, but for the country. Think about it. You will understand.
PINK:
Maybe they havent understood your BP. But do you have a prototype/pilot? I think thats something every Enterprenuer should have before looking for investments. You owe it to yourself.
Mukund:
I am glad you found my comments funny. Atleast you got something out of it!
Alok:
I am disliked by enough people already. I dont need more exposure 🙂
Anon,
My take would be, given the scenario you are painting out, you might find better success with a angel funder or a HNI who is passionate about your space. The early stage funds and VCs might only end up frusterating you
A contrarian view would be that many years into the future, when you are successful and look back at these times of your life, all these thoughts and convesations will seem much less complex than what they appear today – So, it does not matter where the funding comes from, as long as it does not hamper your plans, but facilitates your progress in the way you have planned it out!
Tough, but it may be worthwile to walk both these roads.