Being an Investor Can be as Taxing as Being an Entrepreneur : Here's Why
When large bets are involved, the going can get really tough for investors
An entrepreneur’s journey is one of the toughest, especially in the early days, when resources are limited. And while the courage and conviction an entrepreneur shows through his journey is commendable, the investor or set of investors who back him/her have an even more challenging role to play.
As the startup market matures in the country, the VC and Angel Investor community is also taking concrete shape. Not only is the cheque amount getting bigger, the responsibility and thorough assessment into each investment is also starting to get more taxing. And while VCs are often criticized for being return hungry, most feel that’s the core part of their job, failing which not just them but even the entrepreneur will suffer.
The First Days
While some enter the sector as newbies, most VCs and angels step into the game after having been an entrepreneur themselves. Regardless, investing in companies and entrepreneurs can be as volatile a bet, as trying to figure out which business idea will work best.
“When I started, I myself was like an entrepreneur in this field,” says Vikram Gupta of IvyCap Ventures. “Although I had a fair idea of how things work on paper, getting people on board to believe in the fund and invest in these companies was rather taxing,” he adds.
Mentoring is a key part of being a VC as entrepreneurs look to them for advice beyond just monetary matters. The added responsibility that comes with being an investor, can be daunting to deal with sometimes, but when success stories comes through it also gives the investor the much needed satisfaction.
“As an entrepreneur, you are the protagonist. You have to have lots of guts to startup and hence you also get the glory. As a VC, you are more of a facilitator, a sounding board and have the privilege to ride with the entrepreneur. The satisfaction as a VC is that of being a coach and the seeing the players soar and fly away,” says Amit Somani of Prime Venture Partners.
The Failed Bets
Just like entrepreneurs have their profile of failures, an investor too has his/her list of failed bets, and in this case it can accrue to losses in millions at times.
“While the entrepreneurial stage is very fact paced and more physically taxing, being an investor it’s more mentally taxing,” says Avnish Bajaj of Matrix Partners. “ Entrepreneurs still have some control over their destiny, as VC not so much especially with the investments you make,” he says.
The Belief in Entrepreneurs
Investing is all about placing your trust in not just ideas, but individuals as well. Sometimes great ideas fail to transcend into good businesses, owing to those at the helm of affairs, and sometimes, visionary entrepreneurs can take faded ideas and turn them into great businesses.
“At the end of the day this is a business where you invest in people more than you invest in an idea,” says Bajaj. "Most of the business that we have invested in that have done well have done so because the entrepreneurs were extraordinary, and they made the business what it is," he concludes.
She was generating stories out of Bengaluru for Entrepreneur India. She has worked with leading national and international business publications, including Newsweek, Business Standard, and CNBC in the past.