New Entrepreneurs should Bet on a Single Horse
Date: Monday , June 06, 2011
Where we invest
In India, the depth in each of the different segments in the industry is too narrow while the breadth is too broad and so it is better to look at things on a deal by deal basis. We are what we define as technology investors, technology that goes into the real world, it can be a semiconductor company, an embedded software company, a consumer internet vendor, software products and services company, a KPO, a mobile value added services or any other companies like that. While we are a technology only investor, we tend not to look at the industry in a sector wise basis, and we have no sector bias or no technology bias. We look at specific company and if we find it interesting then we invest in it.
What we look for
In the first meeting with company team, we will try to figure out if this is a bunch of folks will gel together, do they have the right sets of skills, and an apt market place. Then we look at what kind of traction are they getting in that market place, how differentiate they are - the team, the dynamics of the market place they are playing in, the competitive advantage they have over other players, and substitutes or alternatives in that market.
What excites us
A cloud company for the reason of being a cloud company might not excite us, how differentiated it is as an offering is what we are looking at. Cloud is not only helping companies that offer those services but also companies like Redbuzz which have moved to the cloud as it is more scalable. Another thing is mobile; apps from the mobile are going to be clearly the future. Some people are using the mobile platform for education, this intersection or vertical interaction is very interesting. This is a sector where we see a lot of potential for the future and we are very excited about the developments in this space.
When we look at trends, they are across the board. You see trends in the mobile front intersecting with education, there are very visible trends in the cleantech industry, the social media space, consumer internet, software products and services, mobile value added services, and so on, it is spread all over and we are quite excited by the kind of companies we are seeing on a regular basis.
Common mistakes by young entrepreneurs
There are three main mistakes that I see the young entrepreneurs make. Primarily many of them fail to see competition. They donít think about substitutes or alternatives that can service the same marketplace. It is practically impossible that you are dealing with something which is not being done by anybody else in the world. Secondarily there is a lack of decision maker in many of the new companies. For example; four peers come together and start a company and do not decide on who will be the final decision maker or the CEO. That is a mistake, there has to be a leader. A third thing is, and we use this as a criterion for judging the quality of the entrepreneur, how many horses is he trying to ride. Is he focused on one market, or is he trying to cover himself by finding two or three attractive horses. We believe that at an earlier stage it has to be a bet on a single horse.
My advice to the young entrepreneurs The key is to focus should be to set up a good business. Funding, in my opinion, is only a fairly insubstantial part of it. Many entrepreneurs prioritize VCs over their prospective customers, this is a big mistake. Try to do as much as possible with your own resources; it is not easy to rise funding in India. Focus more on your business and evolve your value proposition, what you start up with might not be what your customer wants. Iterate as much as you can, get feedbacks from the market place, and then when you feel it is necessary, go for funding.
The author is Director, Inventus Capital Partners