At a time when investors are constantly living under the fear of missing out and closing multi-million dollar deals at breakneck speed, Vani Kola, managing director of venture capital firm Kalaari Capital said that the fund would never invest in a startup in a rush adding that investments are long term decisions and should be done meticulously.
"It doesn't work that way. If any founder came and asked us can you fund and close in two weeks we would say no, because it actually doesn’t happen. It goes back to promising something that you don’t deliver. An investment decision is a very long term decision. Who you take money from ought to be a very long decision. I like to meet the founders five times to get to know them. I want them to get to know me. We are going to be together for seven years if not 10 years, some go on for 12 years. ," Kola said at an event responding to a query by Moneycontrol.
"You need your shareholder partnership to be very tight. A marriage doesn’t happen in two weeks. It shouldn't, right? This is as important a decision as it is, for both parties, for me and for the founder, especially for the founder actually because the shareholder will have significant rights. If you have shareholder dissonance any value you can create I can promise you, you can get severely under-optimised," she added.
Last week Moneycontrol reported how venture capital firms were closing deals faster as founders are flooded with competing funding offers. While the breakneck speed was making the deal-making riskier the fear of missing out or FOMO were driving these decisions.
Networking platform for business owners, Anar is clearly a brilliant example where the investors spoke to the founders over the weekend, carried out reference checks and issued a term sheet.
The company which earlier had investors ready to invest $600,000 in an ongoing funding round ended up pocketing $6 million seed funding -- 10 times what it had been offered less than 48 hours earlier – led by Accel and Elevation Capital. The deal is expected to close soon.
Talking about the euphoria the startups industry is witnessing right now, Kola said that it was "well deserved because we all want good news, we want to talk about the next unicorn." However, according to her, what needs to be seen is how many companies who get Series A end up raising Series B rounds.
"For every Zomato out there, how many companies have failed in between, which is natural law. Every company that gets funding does not become an IPO candidate and a billion dollar company let alone a $6-10 billion company," she said.
"We believe that honesty is the best respect we can offer to anyone who we are collaborating with. If any founder came and asked us can you fund and close in two weeks we would say no, because it actually doesn’t happen. It goes back to promising something that you don’t deliver," she added.Kalaari which has backed companies like Dream11, Snapdeal, Curefit, UrbanLadder and Myntra through its funds on July 28 also launched a dedicated $10 million fund to invest in startups that have women entrepreneurs and chief executives. This has been launched through its initiative CXXO with an aim to level the playing field for working women in India.