Startups / Raising funds / Seed / Angel / Series-A / Series-B and so on have become buzzwords in India in recent times. There is lot of action, excitement, passion and hope around Indian Entrepreneurs. Over last few years, the investment industry has matured and has become more organized; but at the same time, it has also mimicked a few fundamental flaws that are all too visible in the Silicon Valley.
Today, venture capital and the investing ecosystem treats startups as a “Passing the parcel” game. As we, all know, in traditional passing the parcel game; one has to pass on the ball to immediate neighbor as soon as one gets it. Person holding the ball when the music stops is out of the game and/or is punished.
Do you think, this describes the startup ecosystem in India today? Investors keep investing and pass the parcel around, until the ‘biggest fool’ is left holding it when the music stops. That is when the unsustainable business model probably sinks the company.
However, this game has quite a few very interesting variations.
- The first variation – In this game, people who participate do not actually pass on the ball as soon as they get it. The game is about holding it as long as you can, but getting rid of it JUST before the music stops.
- The second variation – You can continue pumping air in the ball while you hold it. Thus, the longer you hold the ball, the bigger it gets
- The third variation – You can choose anyone to pass the ball to (You do not have to pass it to your neighbor).
- The forth variation – Person who receives the ball gives you a gift that is proportional to the size of the ball he’s getting.
In most cases, investors (and entrepreneurs alike) just pump money into a startup until it becomes big enough to pass it on to someone else. The cycle essentially repeats multiple times for a startup (if it is successful).
This however is very different from how it all started. Originally, the intent was to provide help and nurturing to the innovator / entrepreneur and grow a company together.
That is where the “Tree sapling” metaphor comes into picture.
At “Investor India Alliance”, we are looking to go back to this core philosophy of investing in startups. Here, we are not pumping air into a startup to increase the valuation and then hand it over to a “bigger fool”.
Here, at IIA, most startups that we choose to work with are in very early stage of growth. We believe that is when they need our help the most. We work closely with the entrepreneur and investor to nurture a startup. It is exactly like taking care of a young tree sapling. We need to shield it from harsh sun, strong winds or torrential rains. We give it good soil and fertilizer (Investment); we also give it good nutrients (Mentoring) and make sure we protect it from being eaten up by birds/animals (Strategic Direction)
Once we have nurtured the sapling, it is ready to be grow into a bigger tree. In other words, our focus is to nurture the startup in its early stage and make it flight-ready. At that point, our work is complete. If the investors want to continue their journey with the start-up they helped nurture, they are welcome to stay invested. However, it is a joint decision between the founder and investors.