Why Senior-level Corporate Employees are Turning Investors for Start-ups?
The drive to learn is what's pushing senior corporate managment into investments
When a professional working in a corporate thinks of investments, one usually considers putting money in stock markets. But the scenario is changing, corporate employees are looking at investing in start-ups and building their own portfolio. As these investments are made on an individual capacity and employees often ensure that these investments do not clash with their company's interests, it keeps both parties happy.
Push and Pull Factor – Exploring Beyond the Obvious
There are various reasons why the mid-level management or senior management is spending in start-ups. Dr Amit Garg, medical head of emerging markets Dr Reddy's, said, "There are two facets to this, the push and pull. The push is where we need to understand what's pushing these corporate employees into turning investors. Extra time is one factor while the second one, exposure, is the bigger one. Exposure from the internet or community, friends who are opening up to the idea of investing in start-ups act as a great push. Horizontal innovations are explored then. Another fact is the risk taking capabilities of these senior employees. Years into the corporate world with a stable job, they are braced for a risk.It's a good break from the monotonous conventional business model."
Garg also talked about the pull factor, which rests in the hands of the start-up ecosystem. "The pull comes from incubators and start-up enthusiasts, who ensure that corporate employees meet start-ups. The start-ups can then learn from a corporate's stability. They want us to invest our time and money and be a part of their journey intellectually," he added.
Meanwhile, Ajay Jain, Founder of Xseed capital, who had started investing while he was a B-school professor, talked about how his "different" process paid off. "I came from a family of finance and always thought of investing in start-ups as a good opportunity. There's definite interest and I have seen many of my peers take the plunge. This has also led to the mushrooming of many angel networks and seed funds."
Investors and Teachers
Another reason why these corporate employees turn to investing is because they get a chance to be mentors. "It is intellectually stimulating. It's not just about the monetary benefits but also the scope to learn. Domain learning helps people give back to their companies. This makes way for a symbiotic relationship where they infuse energy back into the corporate," said Garg.
Talking about how these professionals believe they can help start-ups, Jain said, "They can add value to these start-ups with their expertise and that becomes a big reason for them to start investing."
Nowhere Else to Go
While the most popular investment schemes so far were in stock markets, Jain said, "The stock market is all over the place now, and gold and real estate are not that lucrative anymore. So, these people have money and a more sophisticated chanel to invest is in start-ups."
Jain also had a funny take on it. "It's because of Maslow's hierarchical needs," he said and added, "It's where people even after attaining seniority in a company, look for more appreciation."