About two weeks ago, I got a call from Sam, a Bangalore based entrepreneur who runs a software startup. We had met a year ago and I was glad to meet him and hear the progress of his business. From the elusive conversation I had with Sam, I witnessed an entrepreneur breaking down, as he has pumped in his personal assets to scale up his company due to lack of funds or support from Angels or Venture Capitalists. In India it’s not just Sam who is in troubled waters, its millions of entrepreneurs across the country.
The majority of the new businesses fail within the first five years and it’s mostly witnessed in India and other developing countries. Here mostly insufficient funds or execution plays the baddie. The key reason is today we are not witnessing a proportional growth or support from Angels or Venture Capitals along with the growth of entrepreneurial tribe in India. Angel funds in India are still in its infancy and it started only in 2006. Moreover there is a huge disparity between Angel funds and VC funds in India.
During 2011 alone, angels pumped in over $20 billion funds in U.S. However, when compared to VCs, Indian angel’s are still not very active and getting convinced by many of the ideas of entrepreneurs is not easy. Today even though India has her credits to the top billionaires, around 90 percent of the early stage venture funds in India come from offshore sources rather than from domestic investors. As per the estimates the investments could increase to around $3 billion annually in the next 10 years. This reflects the potential of the growing Indian entrepreneurial community.
Even in the midst of the blame games between investors, entrepreneurs and policy makers, we should have a pause and look back. We do not even have one Google’s or Facebook’s of the world from India. When we have people like Ram Shriram, Managing Partner at Sherpalo Ventures who is one of the first people to write a check to Google co-founders, to guide the Indian entrepreneurs, there need to be some flexible amendments in the policies so that it can further foster the Indian investor community and entrepreneurship ecosystem. Moreover, the Venture Capitalists and Indian entrepreneurs from the West should join hands in this mission as it will help foster India’s prosperity.