Can VCs Add Value Beyond the Money?
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Dave McClure of 500 Startups had a very interesting remark about the VC environment. He said, “Most VCs don’t work hard, they think they are great stock pickers!”
Post this comment in one of the key VC panels at the Global Mobile Internet Conference in Bangalore,which was chaired by marquee investors from the Indian ecosystem and was moderated by Entrepreneur Media, we decided to kickstart the session with this remark of Dave!
The panel was chaired by Aakash Goel of Bessemer Venture Partners, Hiro Mashita of M&S Partners Founder, Anand Lunia of India Quotient Founder and General Partner, Venkat Raju of Kyron Global MD & CEO, Nikhil Khattau of Mayfield Fund Managing Director, Sunil Rao Lightspeed Indian Partners.
Can VCs add value beyond the money?
“Off late depending on the stage the VC gets into the company, whether its seed/Series A stage, There is a scope for VCs to provide a huge amount of value,” Sunil Rao of Lightspeed.
Venkat Raju added that entrepreneurs should go to a VC the empathy, who has been in your shoes and add critical value to what they are going through.
“Apart from selecting a VC who has entrepreneurial experience, you would also want to pick someone who understands your business in the industry,” Aakash added. “It’s clearly a pick business!” he adds.
According to Hiro, it completely depends on the person. While some VCs don't work that hard, he believes in completely pledging himself to the startup and work along with the entrepreneurs.
Corporate firms – the new VCs
“I think it’s a very good thing to happen to the ecosystem because it’s a dream come true and an icing on the cake where if you are able to get your first customer as your large customer. The only words of caution out there which I’ve seen in past experiences that these people lock you for a couple of years,” Rao said.
“ Here the entrepreneurs must be looking at this as a stepping stone. If the opportunity size is large enough then you can afford to get locked. But if you are able to get that as your very first customer who is able to validate your product , who can use it, then it’s the best thing that can happen,” he adds.
“My advice to entrepreneurs is to keep it simple. If you are able to raise capital from institutional investors, or a VC at an early stage, it always makes sense to go with that. Because a corporate venture does not have a single bottom line, the perspective is mixed. It’s always a yes I want to make money, but yes I also want something else,” Nikhil adds.
Should B2B companies shift their focus to international markets
“There are two questions that we are looking to answer when we are looking at B2B or SaaS companies, one is how big is the market and second is what is your inherent unit economics and what is it driven by, “ Aakash said.
Anand further added that the more he hears that India B2B market is difficult, alongside he also sees success stories emerge from similar dark areas and he believes that B2B industry will make a comeback.
Is AI yet to prove itself?
“Frankly I am not very impressed with the implementation of AI in India. If you look at the chatbots in Indian startups, large armies of people sitting in the back end operating transactions perform chatbots, but going forward definitely... In specific categories for example healthcare and education we are seeing some interesting applications of AI,” Anand said.
Agreeing with Anand, Hiro further added that he understands that Indian companies are struggling to make money and he is keen on working with companies and help them monetize this technology better.
On a parting note, here are the following sectors the investors picked the sector they thought is the most promising sector for 2017. Sunil –fintech, Nikhil – food, Venkat – healthcare, Anand – online fashion brands, Hiro –food, fintech, healthcare and digital media and Aakash –fintech.