Madhu has raised some interesting, and perhaps, furstrating, questions regarding what really VCs want. A fair description of the same has been outlined by Chris Wand.
Still being more of an entrepreneur than a VC, one learning I have is that VCs are not a homogeneous entity. Some key parameters as you look to choose a VC:
1. Stage — Angels, Series A VCs and Series B VCs are different breeds. While the first one will invest (maybe under a crore in India) for an innovative team and idea, the series A VC wants to see a more broad based team, lead paying customers and clear differentiation — this kind of VC funds the path to profitability. Gaps in team are acceptable but to be clearly recognized. Investment size will very with plan, but typically under $5m. Series B VC will typically take a profitable (or close to it) company, with the management pretty much in place, and basically fund expansion (depends on the business, but typically over $5m).
2. Expertise of the VC — Especially at early stage, it is hard to understand and fund businesses where none of the VC partners have expertise.
3. Portfolio — See if the firm you are looking at has made some prior investments which are synergistic.
Part of the frustration in India arises from the fact that some of the parts of the financing ecosystem are underdeveloped. But its getting there…
- Promoters or Entrepreneurs – A choice for Private Equity players - August 3, 2019
- Startup Marathon Mindset - March 25, 2019
- What’s your Customer Culture? - March 4, 2019
HI Alok,
I have met quite a few in 1998 and 2000 ( who included HITVEL of AP Govt, Credit Capital in ’95, ICF Ventures Vijay Angadi, Mahesh of Passion fund and the Liquid Capital pair)
The common trait I found in some( not all) is the more they use their lateral thinking hats( De bono) putting figures and numbers second in preference, the more successful they were.
Especially some of ICF Ventures investments are timed well – like investing in Gangagen, Sasken and in Oysterbay. They look for a lot of Intellectual property (which in other words is high entry barrier)
Sasken was a non-entity in 1998 and the dot com boom when went to a bust, was in dire straits but now its in a 100 crore IPO and the investment paid off.
Mahesh did well with his idea based company – Geodesic and reaped gains.
MOst of the VCs prefer the late stage ventures as the risk-to-returns game tilts in their favor.
The early stage ones are the ones most would shy off( Similar to IT companies prefering to pay more premium/salary for an experienced employee than to recruit a freshner)