Some Important Tips For Venture Capital Firms In India

India has a diverse economic structure and most of its people (93% to be precise) work in the unorganized sector. For this reason, there is a huge scope of moving the economy towards an organized sector. A lot has happened in this regard in the past there’s an even greater room is there for more. In the past couple of years, we have seen hundreds of startups coming up and transforming the sector whichever they belong to.

In the first quarter of 2016, we saw startup deals to the tune of 300 that were successful in raising a whopping $1.42 billion, which was an increase of 108% over the same period in the previous year. One of the prominent names, Mr. Achal Ghai at VCCircle Events will give some more insights on this. He is a Managing Director of many Venture capital firms, both in India and in UAE. There are some tips for VC firms in India that he shared with us that can make them at par with their international counterparts.

Despite the impressive figures, India has been lagging behind the US and China in investments to startups both in numbers and in deal values. The angel investors in India are nearly 400-500, whereas there are 3 lakh angel investors in the US and 16200 in China. Even after considering the fact that the US is far more developed and matured economy than India, there are some fundamental principles that work the same everywhere. And similarly, even the VC firms in India have many things to learn from their counterparts in the US. What should be the goal? Both, to boost Indian economy and at the same time maintain good profitability for the VC firms.

  1. Well, we need to develop a self-nourishing and sustainable ecosystem. It is not just the money that a startup needs, it is a combination of good mentoring, technical and professional training, providing the best of networking and logistics technologies that help a startup grow and be sustainable.There are many startups that have faced problems that could have been solved easily if these things were provided to them on time. There are several VC firms too that have invested and are not doing well. The loss of one is certainly and directly reflected on the other. The focus should not only be providing them the investment but also mentoring them and providing them the necessary experience that they lag.
  1. Another thing that India’s investor community should learn is developing a start-up ecosystem and culture that will help their second and third generation of startups facing the problems they have already faced. Once this cycle is developed, the sustainability is achieved. It is not like the Indian startups haven’t taken steps in this regard, but a lot has to be done.
  1. Indian investors need to be bold in investing and trying on new technologies. It often happens that Indian investors invest on a kind of startups that have performed well in the past. This is not a good or safe strategy, instead, they should invest in startups that are leveraging technology for something that was devoid of it.
  1. The most important thing that investors should know is valuation. They need to learn how to value and not just go by figures even if they are provided by good valuation firms. Over-valuation can cost you a lot as a startup can need various rounds of funds and investments should be made very wisely since the start.

We need to work hard to develop this kind of ecosystem. Although, these things take time but a good understanding of these basics will help both the startups and investments get good returns.

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