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Indian Startups focused in Low Amount of Funding
By siliconindia
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Bangalore: Compared to the startups in the Silicon Valley, the Indian startups are more focused in bootstrapping their company rather than opting for angel and VC funding. "We can see that more of the Indian startups are going for significantly low amount of funding than the startups in the Valley, as they are keen to reduce the stake of outsiders. It is all about the ecosystem that prevails and influences such decision. MakeMyTrip being one of the best exits in the Indian market has opened a vast perspective for other investors to rely on the ideas and product/services of the startups," says M.R. Rangaswami, Chair, NASSCOM Product Conclave.
In India it is difficult for banks to lend startup loan. Moreover the angel investors and VCs fund only relying on the ground breaking idea. But, this is not the case in the Silicon Valley. The VCs and the angel investors out there are interested in funding the idea that have the intensity to churn out to big business even if they do not have proper infrastructure to scale at the beginning.
The U.S. market is matured enough and is filled of second, third and fourth generation entrepreneurs who have build their company with mentoring of the VCs. While in India, the VC industry is nearly a decade old and needs time to scale up. VCs are not interested to put their fund in such startups that are not self-sufficient to churn a specific amount of capital through running business. Also, before investing in such organizations, they search for an angel investment already raised by the firm and the portfolio that they serve to. It is a lack of faith that persists in the Indian VC ecosystem over the startup entrepreneurs and finds it difficult to pump in the fund relying only on their ideas. But in the U.S., the ecosystem is quite different. There VCs are ready to fund the startups based on the capability of the idea to scale in the near future even if the ideas are still under the research phase. So entrepreneurs out there do not have to scratch the last pie from their pocket to bootstrap.
While in India, bootstrapping is followed blindly. Several startups have encountered various bad experiences while raising fund from the angel investors and VCs. They find it better to bootstrap their company than going for funding where in they have to share their stake in the company. Some of the business owners complain that as soon as the company rolls the VC funding, it enters into a critical role in shifting the founder of the company building the functionality to produce reports that are related to sitting and writing memos. The VCs also becomes aggressive and start trying to call all the shorts of doing business along with enormous pressure to scale profit quickly leading the founders to make wrong decisions and even launch products too early or in the wrong market. All these drawbacks have led the startups to bootstrap rather than opting for VC funds.
Talking about the ecosystem in the Silicon Valley for the startups, Rangaswamy added, "In Silicon Valley, the entire startup ecosystem started a few decades back with them approaching the universities to provide proper education to entrepreneurs. After that, they approached the real estate for providing them infrastructure free or at a lesser price, as being a startup they lacked fund. Getting a space to startup in, the startups approached the mentors to guide them and appointed accountant to handle the financial jeopardize of the organization. After gathering the basic necessity to kick start their organization, they approached the angel investors and the venture capitalists to provide them with funding. And when all went fine, they took their company to NASDAQ. But, the ecosystem is not the same in India. Neither it can be. But it is necessary for the governments and the big corporate houses to take initiatives to leverage the current growth scenario."
