Tag Archive for 'funding'

Is Micro-Funding a New Trend to Come?

Published by Vijay Anand on August 27, 2009 in Musings.
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A lot of folks seem to be very curious as to what I am working on, since my stepping back from Proto.in. Well, quite a bit actually and on some rather serious stuff. Serious as cash, infact. One of the major concerns that has been on my mind is the scarcity of capital in this market.

I am absolutely with the camp that believes that if there are quality companies, then capital will find its way. But we also know as part of most of our risk mitigation strategies, making a leap into a market with no safety net or partners makes it a really serious gamble - even for some of the most well-versed entrepreneur to tread in. I strongly believe that unless we enable some capital to flow, we are not going to see much of a difference in the number of quality startups that spring up, and inevitably the number of startups that get funded/get recognized, and the number that make an exit. This cycle, as you know is recursive.

So What have I been obcessing about? I’m focusin on three aspects and I think all three aspects are crucial.

  1. The mechanisms for loans from banks to become accessible for startups/SMEs
  2. An effort to bring together the Angel Investment Community, educate them and help them engage in an effective manner
  3. An effort to fix the “broken VC Model”

The First and Second are fairly straightforward and I promise to come back to you with some better news soon. But this is primarily about the third one.

I think the third one warrants a closer look for a simple reason. People have been claiming as long as for the better part of the decade that the VC model is broken and there seems to be no heed to that warning. Whats worse is that given that India couldnt be farther away from whats happening in the Silicon Valley in terms of similarities, the model is a force-fit one (There are some better models in Israel, Singapore etc). If you’d understand how a VC firm works, its primarily a specialized bank which runs on a management fee and bonus paid with the return on the investment. The overheads of running such a team is so high, that the only viable way for most firms to operate is to increase the fund size, which sets the ball rolling on them getting into a soup not able to invest in early stage no more, and the next thing you know they are either full-fledged in growth stage, or are in growth stage and are disillusioned about being an early stage investment firm. Suddenly working for a VC firm or being one doesnt seem so glamorous, does it? :)

What we need in India is essentially a firm which is capable of dispensing funds as low as 50 Lakhs to a crore (I am consciously keeping figures in INR to make it a point that we arent in dollar land and the rules and requirements are different here) - which can operate at lower costs, and can also manage a sizeable portfolio.
Continue reading ‘Is Micro-Funding a New Trend to Come?’

Judging a really early stage start-up

Published by Niraj on July 24, 2008 in Ecosystem.
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From REALLY early stage, I mean a bunch of guys 3 or 4 years out of college, having quit their highly paying techie jobs, wanting to build the next big thing and get rich soon. I can really relate to the picture, as an year back, I really did fit the description. You know these people when you meet them. They have hazy ideas in their heads which they think are profound, and are filled with enthusiasm and determination to fight it out and “make it work”.

While someone who is “seasoned” can bludgeon these guys’ theories to death in 10 minutes flat, we can see that traditionally in the west, its guys with these kind of profiles who have gone on to create the biggest tehnological successes. While some amount of bludgeoning is definitely justified, I have a feeling that the “seasoned” lot misses one point while dealing with these start-up guys: Judging by reason, start-ups hardly have a chance of succeeding. Start-ups have disbalanced teams, no money, no background in business, and still, some of them go on to become phenomenal successes.

Then how does one judge a startup? On what parameters? My take is, a start-up should really be judged on three parameters that I have written about below. I’d love to have a discussion about this here, and see if we can add to this list. Here’s my list of parameters (in no particular order):

1. The Market: Start-ups trying to solve a problem that does not exist are so common. There should be a clearly defined market/need/demand for whatever the start-up is trying to do, whether it is a consumer internet portal, or an enterprise service or electronic gadgets. The “seasoned” lot must first look at the existence of the market, and estimate the size of it.

2. The Techonology: Most techies will try to solve problems with extreme use of extreme technology, because thats what they are good at. Now that, in many cases, causes problems. For instance, it might increase costs so much that it might make the product or service prohibitive for the market. Its very critical to correctly judge the technology the start-up is using.

3. Enthusiasm/Guts/Desperation-To-Succeed/Human-Qualities: This is what separates the men from the boys (Sorry, I didn’t intend to be sexist here :). An assessment of this again comes from the gut, and you know these guys when you see them, and have talked to them for just five minutes. This is the magic sauce that makes a start-up succeed. It is very critical to correctly evaluate this.

Other than these, I know that an infinite number of holes can be punched into any start-up’s theories. Is doing that right? I would love to know what you think.

Sponsor a Business

Published by Ajay Sanghani on February 28, 2008 in General.
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Dear Friends,

This is one of the better ventures I have come across, leveraging the power of community to empower entrepreneurs.

Its a matchmaking project, connecting entrepreneurs who need loans with lenders who can offer loans.

If an entrepreneurs needs Rs. 50,000 as loan, he can receive it from multiple lenders , maybe in smaller chunks of Rs. 5000 each. Similarly a lender can spread his loan of Rs. 2 Lacs, across maybe 10 or 20 businesses.

Last week statistics revealed on the site are inspiring to know, the model seems to be clearly working.

Close to 4000 lenders have joined, 1400+ entrepreneurs have been funded collectively amounting to Rs. 2.5 crores.

This idea needs to spread fast, it is currently being positioned to help poor people with a zeal to do business, but who lack basic resources.

To ensure that the people do not misuse, the project works with local micro finance companies.

Surprisingly in India, there is only one field partner listed, it is Delhi based Somaiya Group.

Pls, Pls share and forward the details about the venture to lenders, micro finance agencies, as well as worthy entrepreneurs.

And yes, the link to the project is http://www.kiva.org

Regards,

Ajay Sanghani
Founder, ITVidya.com
Cell : 098200 20753

Early Stage Technology Entrepreneurship and Incubators in India

Published by Sramana on November 19, 2007 in General.
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My first experience of technology entrepreneurship in India was in 1994 while I was still a grad student at MIT. The most vivid memory I have of that experience is that it took me 6 months to get a phone line. It was before wireless. It was, most certainly, before venture capital in India.

Things have obviously come a long way. Last summer, I did a body of research on the Indian entrepreneurship scene, as I watched huge amounts of capital finding its way to India. Through that work, I also came to the conclusion that there is way too much money, and not enough fundable deals, and that India needs more incubator funds.

A year has gone by. Not a whole lot has changed.

So I chose to revisit the topic of Incubators in India in a series of posts, on which I would like to hear from entrepreneurs, investors, incubator managers, and whomever else in the ecosystem with meaningful input.

Here are the posts:

I look forward to your comments.