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Startups today need a GLOCAL Perspective!

By SiliconIndia  |   Thursday, 03 November 2011, 21:43 Hrs
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Canaan Partners is a 24 year old global venture capital firm with offices in India, Silicon Valley, New York & Israel. We have raised 8 funds and have $3 billion under management today. Our international footprint helps us bring a 'glocal' perspective to our entrepreneurs -- global insights combined with a local, hands-on expertise. Our focus areas are IT and IT-enabled services, essentially any space where technology is playing a critical role in scaling up a business. This enables us to touch a wide variety of industries while still allowing us to add value -- more on this later! In terms of stage, we are early investors -- we prefer to be the first institutional capital in the firm. Typical investment size ranges from $1 million to $15 million, though we have invested both below and above this range previously. Our entire India team has an entrepreneurial background, and have co-founded or worked at startups before becoming investors.

Within the broader technology space, we are looking for disruptions -- opportunities to transform industries. Some of these opportunities are evident in customer pain points -- what issues are customers facing today and would they be willing to pay to resolve this pain? For example, think about the rapidly growing ecommerce space -- as consumers behavior changes to purchasing products online, it is creating a new set of ecosystem opportunities. If I live in a small town and am unsure of the 25000 cellphone I'm buying, is there a way for me to experience the phone so that I don't have to return it upon delivery? And if I just finished reading the latest Michael Lewis book and want to discuss it, how can I connect with another reader in a different part of the country. For the retailer, payments continue to be a challenge -- both collection of COD and the high costs of returns. And in the long-run, building brand image will be critical to survival -- how can I make sure that customers think of me when someone mentions 'shoes' just like they think of "BMW" when someone mentions 'luxury car'. These are new, exciting opportunities to innovate and build a credible business in the process.

It's a common saying that ideas are cheap, the devil is in the execution. Today if you look around, it is not hard to spot promising trends -- Internet penetration is growing rapidly, consumers are buying 'smarter'mobile phones, SME's are looking for better ways to manage their backend and retain customers, telcos are desperate for new sources of revenue and of course ecommerce has created new challenges. So the problems are evident, the solution more elusive. Therefore we look for someone who has peeled a few layers and tried to identify what is the real problem they are solving today, and what will they solve tomorrow. Why will your customer adopt your solution? Remember just having a new offering is not sufficient --in fact research has shown that your product needs to be 3 times better than existing solutions to get customers to switch. You can always bring the horse to the water, but you cannot make it drink!

Fundraising is just part of the journey and not an end in itself. Everyone loves valuations starting with a 'B' -- including us (especially at the time of exit!). Your investors win only when you win, so we'll be happy to value you at your true potential -- however your customers might be far less agreeable! So definitely celebrate your oversubscribed funding round, but never take your eyes off the ball. Also remember that fundraising is about much more than the money. What relationships do your investors bring to the table? Can they help you in recruiting the hot-shot CMO you need to scale your business? Can they introduce you to 5 potential enterprise customers to accelerate your pipeline? These are some questions you need to ask potential investors before accepting their check. Diligence your VC's just like they will diligence you!

The article is authored by Nishant Verman, Associate, Canaan Partners India.

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