Investors And VCs: The Real Picture
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They are loved and they are loathed. But then Investors and VC firms are misunderstood, too. Here are four myths about them.
1. What do they want?:
What the investor is really looking at is your team. Sadly, most times, entrepreneurs get lost in numbers, forgetting that a good team is a key driver for an investor to get excited about your business. Not to say numbers aren’t important; they are needed as they give a sense of where your business is going.
But more important is the team, which is overlooked when you are too busy getting the business model right. You have to remember that you can’t always get the business model right. Look at Snapdeal, which started off on the Groupon model. When it didn’t work, however, Kunal (Bahl, co-founder, Snapdeal) changed the model. But he could never had done it if he didn’t have a team that pulled it through.
2. The real agenda:
The general view about investors is “the vultures have landed”. There are 100-page agreements, intricate details and endless paperwork they ask for. In our experience, some of it is true. But you have to understand that investors, too, need to maximize value. A part of the rationale is that the investor wants a larger stake because there is bound to be more dilution at a later stage.
While a VC is looking at maximizing what he can get as an investment, he is also cognizant that the entrepreneur is thinking the same way. What is also true is that 99.9 per cent VCs and investors want to make sure the entrepreneur is motivated and incentivized to meet success.
A lot of VC firms in India and many in the Silicon Valley have entrepreneurs as a part of their team, who have been there, done that. It is not just the money that they are looking at. They don’t just want to get into the business side of it, but also add a lot of significant value to the business.
Kalaari Capital (the venture capital firm that has invested in CashKaro.com) has a phenomenal board of directors. There is the awesome Ram Gupta, and we have probably had four or five meetings with him. Now, getting access to someone like him isn’t easy, but we do, and a two-hour chat or a phone call with the likes of him can give you a whole new perspective on things. People like him make you think, “Where’s the bigger story? How can I be there?”
4. More than investors:
All businesses, especially startups, face challenges. A number of entrepreneurs feel these should not be shared with the investors. “Let’s paint a rosy picture,” they feel. But VCs understand it is a startup; they know that things will never be perfect. It was not that way for Uber, Facebook, or any of the many ventures that were startups once. And this is a huge mistake that entrepreneurs make – shifting the burden of challenges only to themselves. On the contrary, VCs are keen that you go and talk to them. It’s important for entrepreneurs to look at VCs not just as investors, but as partners.