Resist VC Money, Innovate in Business Model
Jun 15 2012, 21:07 | By Entrepreneur
It's 2012, and a challenging year ahead for entrepreneurs. But the general view among experts seems to be that money is there to back ventures if the business model is innovative. Too many me-too ventures are cluttering the market, with a focus on e-commerce, but the future will have to see start-ups innovating on both the business model and execution.
The general consensus at a discussion at the recently concluded Wharton India Economic Forum panel discussion on "Entrepreneurship in India" was that the next ten to twenty years will be very different for entrepreneurs in India than what was seen in the past, where 'irrational exuberance' ruled and consequently many ventures could not sustain themselves. But despite the current challenges, this is a great time for entrepreneurship in India.
The panel - comprising Manish Sabharwal, co-founder and CEO of Teamlease, Kunal Bahl, co-founder and CEO of Snapdeal.com, Sandeep Murthy, former CEO of Cleartrip.com and India Head of Kleiner Perkins, Gautam Gandhi, head of new business development, Google India and Sandeep Singhal, managing director, Nexus Venture Partners - discussed a wide range of issues from venture funding to social entrepreneurship to bootstrapping. Here are some of the thoughts they shared:
A lack of respect: Unlike the US, the Indian entrepreneurial journey does not command great respect. There are pressures from the family, it's hard to get capital, there is a lack of protection and it's a big black spot on the resume if a start-up fails. Indians are excessively focused on the end-result, not the journey.
Preparedness is critical: Entrepreneurs don't enter the fray well prepared, and there's little innovation taking place in the entrepreneurship space in India. Consequently, the e-commerce space is flooded by me-too products and services. But there are cases where such ventures have also succeeded, in spaces like job listings, travel sites etc. Utility-focused models are working these days.
Choose funding carefully: Raising money is a 'humiliating' process. And the colour of money is more important than the quantum of funds. Resist venture capital funding as much as possible, because VC funding 'changes everything'.
Bootstrapping vs external funding: Bootstrapping a business is generally a better option than seeking funding from external investors to begin with. Angel investors are also coming in large numbers. "If you have an idea, there is money to back it. And money can come in from anywhere."
Social enterprise: There are several ways of creating companies that do social good. India is at a juncture where firms can find themselves at the unique confluence of doing well and doing good. But it is important not to nuance the term social entrepreneurship too much. Firms are, in some way, social enterprises because they provide employment. There are ventures which can be fun, profitable, and yet good for India.
Be ready for the harsh realities: Don't ignore the smaller aspects. After getting funding, the biggest challenges are office space and infrastructure. Start-ups must focus on these relatively smaller aspects to get cracking.
Product, brand, people: It is critical to get the product right, invest in the brand and in people. It is critical to keep investing in people and scale up the venture. There are also some sectors where entrepreneurship opportunities are likely to be higher. The food and beverages industry is one of them.
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