As children we were always asked what we wished to become when we grow up. The usual answers were- a cowboy, a ring master in a circus and sometimes even a princess! But as we grew up, the answers gradually changed to more conventional options like a doctor or an engineer. Lately, these options have yet again been replaced by ‘Entrepreneurs’. The idea of running a business has always been considered a risky affair in India. But India is changing along with the desires of its 1.2 billion people. Today’s young gen has embraced the idea of ‘being one’s own boss’ quickly. Entrepreneurs are budding in every industry in the country. They are applying innovation and technology to transform healthcare, education, fashion, realty etc. Thus, making India one of the world’s fastest growing startup ecosystem and a hub for foreign investment.
Today India is filled with against-all-odds success stories of entrepreneurs. Be it Mr. Murthy of Infosys or the Bansal brothers of Flipkart, every successful company has excelled in these three aspects- Invention, Innovation and Investment. Although Indian entrepreneurs have long had ideas, there is a certain shortage of capital prevalent in the market. Funding is a big deal in the startup world and no debate is complete unless the issue of money has been pondered upon. Startups are also considered high-risk ventures that provide returns only when the idea takes off. Many people try and bootstrap their startups with their own money, but this is not possible in every case, thus creating a gap in the implementation of the project. Angel investors, Venture capitalists and Banks evolved as a response to this need for funds.
The question that arises here is why are Venture Capital firms or Angel investors choosing India as a destination for investment and what do they look for while investing in such companies?
Venture Capital funds provide capital to early investment operations. They generally invest in high-risk and high-return businesses. An article from the [1]Harvard Business Review describes the relationship between an entrepreneur and venture capitalist as- ‘…the entrepreneur is the modern-day cowboy; roaming new industrial frontiers much the same way that earlier Americans explored the West. At his side stands the venture capitalist, a trail-wise sidekick ready to help the hero through all the tight spots—in exchange, of course, for a piece of the action.’ Venture capital firms not only offer financial services, but also offer mentorship and guidance for the expansion and strategic development of the company. Such investors exist only when there is a [2]constant flow of opportunities that have great upside potential.
Venture capital firms look for three things while deciding whether to invest in a company or not- one being the future prospects for scalability of a product or service, second being the size of the market the product has been launched in and the third being finding the right partners to invest in. The blooming startup ecosystem in India provides a large market for most of the products.
The Indian startup industry thrives by the vigor, enterprise and innovation of the youth and has been on an upside in the current financial year with investments from several Venture capital and angel investors. [3]‘Quarter 1 and Quarter 2 of 2015 were fantastic for startups in India. But Quarter 3 was even better for those startups that were showered with funding. In the past nine months, angel investors and venture capitalists have been pouring more money into early stage Indian startups and late stage companies more than ever before. Between Jan-Sept, $7.3 billion has been invested across 639 deals.’ Foreign venture capital firms like Soft Bank (funded Snapdeal and Housing.com), Tiger Global (invested in CarTrade and Quikr), Google Capital are a few of the many that are currently investing in several domestic companies.
Further Prime Minister Narendra Modi’s ‘Startup India, Standup India’ initiative encourages entrepreneurs and startups to evolve rapidly. This initiative will provide new dimension to entrepreneurs and lead to employment generation. A report suggests that, ‘[4]the number of startups in India will increase —from 3,100 in 2014 to a projection of more than 11,500 by 2020; this is certainly not a passing trend. It’s a revolution. And it’s going to change the way the markets are working today in India’. Thus attracting a massive inflow of investments. The Indian market is getting additional startups day by day. The innovations that are being created are ground breaking and can possibly generate a lot of revenue for the investor.
This insurge of startups has changed the mindset of several young students in India; making them shift from the usual 9-5 jobs to the exciting and challenging world of the startups. Though there are many risks involved during investing in a startup or a new venture, the returns can also be equally satisfying once the idea has taken off.[5]‘India’s startup ecosystem ranks third globally with more than 4,200 new age companies’ along with suitable environment created and supported by the government making it one of the best destinations for Venture Capital firms to invest in a profitable venture.
[1] “How Venture Capital Works.” Harvard Business Review. 1 Nov. 1998. Web. 9 Dec. 2015.
[2] Gompers, Paul A., and Joshua Lerner. The Venture Capital Cycle. Cambridge, Mass.: MIT, 2002. Print.
[3] “$7.3 Billion Invested in Indian Startups in Three Quarters of 2015.” YourStorycom. 26 Oct. 2015. Web. 9 Dec. 2015.
[4] “India – the World’s Fastest Growing Startup Ecosystem.” TNW Network All Stories RSS. 5 July 2015. Web. 9 Dec. 2015.
[5] “Google’s Ram Shriram’s next Bet, an Indian Tech Startup.” The Hindu. 6 Dec. 2015. Web. 9 Dec. 2015
-Meesha Gandhi
the little door 