Broadly there are two kind of stock investors – those who know the companies they are investing in and those who don’t. The first ones use insider information or put their analytical skills at work to predict which company would/should/must do well. They take a calculated risk.
The second ones (like me) just buy stocks of “seemingly-upcoming” segments, and they place their bets on how fast they can guess a rise in stock value of a particular market segment. Like i never tried to find out why and where would Idea invest the IPO money.
Its the lower risk and reasonably_good_profits, that make the people the second kind. The dumb but dangerous kind.
The same hold good for VCs 🙂
I have seen many IIT/IIM people on board of VC firms, just putting the raised funds up to whats_been_good_and_selling market. If my statistics are right a call/support center, service based companies, webized google add_word optimized product will never face deficits of funds. Web is a killer technology and sales platform, but not all problems can be addressed that way. You can never sell dog food online 😉
A unique idea with good value to customers = Good business. Period.
And, when you create a substandard mock of a existing idea you create mediocrity.
And i strongly feel, this is *not* the right way. No one thought web-search in 1996, No one thought virtualization could be commoditized in 2001, No one thought mobile phones could fit in pockets in 1990. Indian VCs (I feel) still are not betting on black horses. They are not ready to invest in intellectually-property or product based companies. They still are looking for 20-30% growth plans.
We have a reasonably sound product[1, 2] in place, which has already happy faced beta-customers.
And this is what we hear from VCs ;-
1. 60% we don’t invest in this area. (hmm, but your website covers all googlable computer science area)
2. 10% we don’t understand your product/market. May not be able to help ( Perfectly OK )
3. 10% You don’t have a proven team (Milind has 15 patents, and i have never lost – be it AOE/interview or JEE 😉 . But yes we are first timers)
4. 10% Why don’t you sell over web. (Dude, its an enterprise problem. Customer need to be told how more than what)
5. 10% – These are the good ones. And i have my hopes alive 🙂
This is also a reason why there is a mushroom growth of “VC consultants”. Infact, when i asked one VC_consultant, if he trusts the product. He simply said, he would have to :), and VCs also need not fully understand it.
No one ever gets fired by buying IBM or Microsoft products, but thats not the reason why good startups are born. Its the confidence they endeavor bring in and the risk they encourage the user to take, makes them a winning startup.
Indian startups (includes us) needs angels and sensible VCs who can understand entrepreneurship and promote startups with solid base and good Intellectual Property.
- India’s Hottest Startups - September 7, 2008
- The case of SonimTech – And lessons we can learn - August 23, 2008
- The Druvaa Story – III - July 14, 2008
The world is changing so fast, how finance background VCs could understand then share entrepreneurs’ passion and vision.
Agree with you completely. The VCs in India ( maybe across the world) mostly ( i mean 80-85%) fund ideas / teams that they are comfortable with. You need to have a big name in your team / should have a running business generating revenues/ customers. I know cases where they have funded businesses without even a business plan( bcoz the founder was a serial enterpreneur – take this money and do a biz that is what they said).
It is a myth that they are risk takers , i mean they would nt generally look at an idea and be ready to work with young/inexperienced/ full-of-energy team even if the idea had lots of potential. I am not criticising anyone, but can anyone tell me that this is not true.
Mostly, first time enterpreneurs misread the VC situation ( lots of hype surrounds them) and jump into the sea thinking they would also reach the shore.
It happened to us, too. We realized this and are correcting it now.
I would say — try to get hold of some angel ( who would value you and your team as technologists, and your product ideas..) to invest. Or even try to get some customer to back you up. Then, once you are in some good shape running the biz, then go to VCs .
Wish you good luck.
I don’t quite know the financial metrics of you business model, but maybe your current predicament may be a blessing in disguise. I have written some stuff on my own blog triggered by your experience. It essentially talks about the positive side of not getting a VC. Maybe you and others would like to read it and tell me what you make of it. http://www.sumeetkapursblog.blogspot.com/