Startup Ecosystem: The New Age Doctrine for Investor-Investee Relationships
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The Indian startup ecosystem is bustling with innovation, with homegrown startups scaling like never before. Investors have played a key role here, providing the necessary financial as well as strategic assistance to entrepreneurs to take their businesses to the next level. Today’s investor- investee relationships seek to go beyond term sheet, bringing in elements of learning, growth, cross-collaboration and a shared vision to disrupt markets. This plays a key role in the way the startup unfolds. There are some amazing examples worlds over on how investors have enabled founders scale, innovate and change the entire landscape of markets.
Here’s a brief overview of how an early-stage startup and investor manage and leverage their relationship:
Common goals and shared vision While it may take time to align across different parameters, having common goals and a shared vision is crucial. This impacts the overall growth of the company, both investors & founders need to work together towards one direction for maximum scalable results. Parity in vision often results in fragmented results despite both investors and founders putting in effort. For example, If the company is very interested in setting up a private line when the investor is interested in a marketplace, there can be arguments about where to allocate resources etc. To enable a smooth journey for both parties, it is imperative to make sure your future plans for the company are aligned.
2. Network and grow together
The biggest mutual benefit in an investor-investee relationship is knowledge sharing and network. However, the onus is more on investors, since they have a large network of peers who could be critical for subsequent rounds of funding. Their network could also help in connecting the business with other companies, vendors, trainers, and many other stakeholders who could play a key role in business growth in the long haul. They could invite their portfolio companies to investors’ meetups, enroll them for webinars or learning sessions, or invite them for a casual round of conversation with a potential partner. All of this counts when the business owners are keen to learn and experiment.
3. Be Transparent: No amount of emphasis on transparency is ever enough. Both parties need to meet frequently to discuss business plans, progress, and projections. If you are not transparent about your needs and requirements, you won’t get the help you need. Communicating transparently and frequently ensures alignment in goals.
4. Trust is non-negotiable: Startups often operate in a highly dynamic space where the landscape and the way the company operates shifts quite often. Trust is an important factor that helps both the investor & the startup navigate through the many shifts. Candid discussions about future plans, the current state of things and the speed of execution are the key to zoom past such times. The experience of an investor could help here to anticipate problems and the business machinery can get onto the task in time.
5. Do not over commit: It’s important to set realistic and mutual expectations from day 1. While every founder is striving for excellence, it's important to be committed to practical results as well. Committing to results without in-depth knowledge or lack of viable data can often result in unrealistic goals. It’s key to have a solid if possible data-driven approach to committing and successfully achieving goals.By Mr. Yuki Kawamura, Partner, AET Fund Japan & Ms. Sanna Vohra, CEO & Founder, The Wedding Brigade