This Global Investor Shares His Mantra For Selecting the Right Startup
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How do investors evaluate a start-up? Before investing, they weigh up the potential of a startup on the basis of its business idea, market trends and demands, uniqueness of its business model.
For San Francisco-based Ankur Jain, Managing Partner, Emergent Ventures, it's not just about good product or revenue, the ability of an enterprise to be culturally fit is equally important.
A company's culture ensures its employees' happiness and productivity. It simply means that workers' beliefs and behaviors are attuned to their employers' core values.
90 per cent of the exits happening in the past few years were private, maintained Jain, but only a small section of companies go public through IPO.
"The key thing is that these exits don't happen by accident. A lot of pre-work goes into deciding which company can exit and how. In our case, it's about the 'cultural fit'," stressed Jain.
Investing in Company Culture
As a Venture Capitalist, Jain is helping startup founders understand their potential and grow. Emergent Ventures is an early-stage venture capital firm operating in Silicon Valley and India. The company invests in Seed to Series-A stage of IT and IT-enabled businesses.
"Our screening process takes into account the culture of the company. We evaluate whether the firm will be a good fit for future M&A (Mergers And Acquisitions) by Silicon Valley companies. In addition to that, we understand roadmaps, markets and even partners that a company is looking at," explained Jain. While investing in any company, Jain does a thorough research and relies on his instincts to understand if a team is culturally fit for the organization it's working.
Why Should 'Cultural Fit' Factor Matter?
But Jain clarified that this is not the Plan A of his company. "Our plan is to make these companies self-reliant, so that they grow independently. But often at times, we have to resort to Plan B when the revenue growth is not very fast. It often happens with companies outside India that even after building a good product and customer-base, if they are not 'cultural fit', they may not be able to get an exit," he stressed.
Jain's previous investments include Mertado (acquired by Groupon), Cyvera (acquired by Palo Alto Networks), Mobsmith (acquired by Rubicon Project), BringIT (acquired by International Gaming Technologies) and Arkin (acquired by VMWare).
One of the key focus areas of Emergent is to invest in global tech companies out of India. He earned name and fame in the 90's by investing in several Israeli startups and helped them target the US market.
Sectors That Will Bring Profit to Investors
Jain shared a list of a few sectors for investment that will get money from investors in 2018.
"Artificial Intelligence is creating a new shift in solutions that existed in B2B software, whether it is sales, marketing, IT or HR. So it will provide an opportunity for growth. Another area of interest for us is technology for retailers. Retail is going through a big flux right now, especially in the US. We have made 2-3 investments in retail already. Another area where we are actively spending time on is automation. In the near future, job roles will shift in a big way," he said.
Jain is expecting a massive change in the way employees will be recruited, trained and engaged. That's why he feels training, recruitment procedures and HR technology have a lot of potential to get funds from investors.