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To fill the vacuum created by no pre-series A funding happening in the market, and lack of enablers for the startups to help them achieve it Venture Catalyst, India’s Seed Investment and Innovation platform, recently initiated an ‘Interact Day’ programme where it brought together 14 startups and 15 VCs on one platform to help startups get pre-series A funding. The programme helped startups to raise pre-series. On the occasion of the programme Dr Apoorva Ranjan, Sharma, President and Co-founder Venture Catalysts spoke to Entrepreneur.com.
Why pre-series A funding is not happenings and what are the gaps that you found should be filled?
The biggest gap today in Indian startup ecosystem is there is no pre-series A happening. And most of the startups, which have got seed investment are struggling to get pre-series A funding as there is no enabler. There is a lot of help available for startups to set the expectation or guide them through seed funding. However, there is no help available to tell the startups what is required for VC round. There are investment bankers who take a mandate, but they are also failing.
Basically, most of the startups are failing to control their unit economics. Some believes only in creating traction, but not money. Startups are so busy in their daily job that they don’t even evaluate or understand what are the criteria for VCs to invest are and that’s where they fail. It is important for startups to graduate and learn that VCs requirement is very different from angels.
All our funded startups are going through incubation programme in every three months.
With this platform how are you helping startups to raise pre-series A funding?
Through this Interact Day (incubation) platform, we have tried to create a platform where VCs can meet curated startups. We give good startups an opportunity to express themselves towards VCs like Sequoia, Blume Ventures, Kae Capital, Nexus Venture Partners among others. We help these startups with guiding through matrix required, through standards and requirement of VCs while organising the mock sessions. Readiness is something very important for startups.
In most of the events, there are 600 startups and 10 VCs. But we bring together only 14 start-ups and 15 VC investors so that investors can meet only five to six startups of their interest. Hence, the startups can learn what VCs are looking at. We try and ensure that there are at least 3-4 startups or at least 50 percent of them succeed in achieving Pre-series A funding.
We are also running such initiatives in Surat, Ahmedabad, Delhi, Mumbai and other cities. In any startup, where VCs decide to invest, we have promised to invest half a million dollars in it.
On what basis you have selected these startups and what are the domains are they from?
We have our own evaluation of the pre-series A startups. With the recommendations from top incubators, accelerators and angel investors we choose to select only those startups which have raised seed round, kind of traction they have achieved, space there are in and kind of founders are. We have done the assessment of what could be attractive to a VC. There are B2B, B2C, product, logistics, nano- technology, healthcare are the preferred areas. B2B lending is another attractive space and there are new spaces opening up. Our larger focus is on B2C.
VCs first choice is the people. If they are good, then automatically the business that they plan to build stands a good chance to succeed. We don’t assess the people on the basis of previous failures but capitalise on the qualities of an entrepreneur.
Why do you think B2B startups don’t have a scale in India?
The timeline of sales conversion is very low in B2B and by that time VCs money is dead. B2B doesn’t work especially in Indian market primarily due to corporate corruption. I have seen many good startups failing because of that. Startups are not been able to execute their ideas because people’s willingness and acceptance is not there and internally they do not want to do that.
How are the sentiments of the investors functioning, amid drying,up of funding in the current startup ecosystem?
Investors should not worry about burning their hands. Our ecosystem is very small, thereby, even if there is a loss it isvery small compared to US and China ecosystem. We are not even 30 percent of the US and China.
Do you think market is in grave need, for more such enabling platforms?
India is in need of strong enablers. There are very less enablers, like us in the country who are taking such initiatives. The existing platforms are also not doing their job effectively. The government has to be unbiased between private and government bodies and then only things will get better. Today government only want to tie-up with government startups and it is not open for the private players. The real efficiency comes only with the private players being involved in the system more aggressively, otherwise, it’s not possible.
How many startups the Venture Catalyst have invested in the last five months on?
All members of our Venture Catalyst group have done the individual investment in five to six investments in the last five months. There is no corpus of amount defined, but in the individual capacity, we invest Rs 50 lakhs to a crore into the startups in a year.
What will be your advice to these startups?
Getting money should be their last priority. They should do their matrix right and money will automatically follow them.