Things missing in Indian early stage funds and things that need to be fixed?
My experience after meeting more than 200 entrepreneurs and investors in a year.
After shutting down my venture 2 years back, I had decided that I wanted to build global consumer products. It was a very sad decision for me to leave my own baby and start looking for another journey, where I could learn and create impact with my hustle and experience of failing at an early stage startup. I started working with startups and small funds in Bay Area and Singapore, where I interacted with a lot of entrepreneurs during which I always tried to help them in whatever way possible.
During these interactions I became used to a feeling of incompleteness, it sat on my shoulders like a ghost. I felt a vacuum, an urgent void. It became clear, that something crucial is missing here in India. Most of the time, these young entrepreneurs came to me with similar underlying problems like finding the right target audience for the product, product positioning, launching the products, etc. But, I used to worry that “Why were they coming to me when they had actual business people, the real investors working with them?”
Is money the only thing required to run a business? If that were so then rich people would never fail at startups. It seems that Investors are just writing the cheque and are not able to give any proper direction required for an early stage team.
I’m very fascinated by the way Chamath is building Social+Capital in the Valley and creating some incredible impact while backing companies like Front and Slack. They are not just writing the first cheque, but they have built a fantastic in-house team that works with these startups very carefully to scale faster. There are some others also like Binary Capital, Peach.vc, First Round Capital, a16z, KPCB which inspired me to dig out more about Indian early stage funds. What I discovered was very discomforting.
After researching more, I found out that most of the time startups get investors just for the sake of few thousand dollars, and there is no other tangible value. I have started talking to more people in my network about this problem and tried to understand, what are other funds doing in different countries?
I have found these are the necessary things needed for an early stage startup:
1.Early money: Some money which they could use in hiring the right talent required the most in their venture and proving product market fit for themselves. But, they shouldn’t take these funds as investor money, but they should take these funds as a liability so that they could understand the value of every penny spent. They should understand that this investment is the minimum amount of money their business is supposed to make now to succeed.
2. Right set of mentors: Startup Founders are mostly first-time entrepreneurs, and they’re building their ventures because of their passion for impact and change. But, they need people who can engage with them on a daily basis and advise them on the things they shouldn’t do. They need people who’ve experienced similar problems while building their businesses.
Right now, founders usually get some famous names to join on board just for the name’s sake. But, the value and impact are missing. No one is guiding or helping them hire the right team, deal with customer acquisition and overall, build a viral product. Founders are busy trying out everything available on this noisy internet, rather than act on available experience.
Founders’ top concerns are talent and customer acquisition.
In last two years report of First Round Capital, It has been clear that access to right talent and right ways of customer acquisition which retains for a long time are the biggest problems for an early stage startup.
Entrepreneurs have started focusing more on customer numbers and have forgotten the rule of super users which can let you scale business with hockey stick curve.
I had began dating Indian early stage funds to see if my experience with multiple early stage startups can add value to their portfolio companies. I have dated almost every stage funds here in India and came up with the conclusion that nobody can understand the things I wanted to tell them. These early stage funds are a critical part of the Indian startup ecosystem, and they are missing the key point of value creation, which is more important than just writing cheques.
Never reduce a target. Instead, increase actions. When you start rethinking your goals, making up excuses and letting yourself off the hook, you are giving up on your dreams! — Grant Cardone
Most are following the “how things have always been done” attitude. We have to find our true north and push past the default.
Our ecosystem needs to change in the way early stage funds have been working till now. We need to think more from value creation perspective. Otherwise, we won’t be able to get the best out of the potential our country has.
So, what are the possible changes that could be done?
1. Community Building: If you are an early stage fund, why don’t you build a community of founders in the house where everybody can help each other with their expertise and network rather than fighting with each other. Early stage startups can’t survive by just competing with each other; rather they have to help each other to grow. Right now, a16z and YC are killing it with their amazing community and network of founders.
2. In-House Talent Team: Experience and attitude towards learning always beat everything. Why don’t we put together some smart people in the house who are struggling to find their next series of their life? While they are fighting to find the next magical wave, they could add incredible value to your portfolio companies with their skill set. Since they are about to start the journey of starting up, they would do it passionately for learning and impact also. Design and growth are two skill sets which are hard to find, and it shouldn’t necessarily to any early stage team 24*7. So, an early stage fund could put together the talent pool of these skill sets in the house.
Grant Cardone has given an interesting 10X rule. The 10X rule is based on the idea that you should figure out what you want to do, goals you want to achieve, and multiply the effort and time you think it’ll take to do by 10.
Step that I took
What is the solution?
I started thinking as to how I can contribute in filling critical gap of this ecosystem and started my discussion with Amit Agrawal. We began meeting multiple startups to understand the things they are currently looking forward to. During this journey of meeting more than 200 entrepreneurs and investors in a year, we found out that significant value creation for an early stage startup is missing.
Most of the early stage startups have the common problem of not being able to figure out product positioning, the right product and how to monetize their traffic. And, these issues have become the reason of failures and shutdowns. I have always taken tangible Growth as not an option for an early stage startup
Either you scale, or you die.
So, in order to build a bridge for the gap we thought that WHY not combine our experiences of building products and grow it globally.
Finally, we have came up with idea under India Goes Global in June 2016 to help startups on this exciting journey to the path of 10x using our experience with growing different products from 0–100 M USD in revenue. Through this mission, we are trying to contribute to this startup ecosystem and help India create multiple profitable businesses.
I have been in a place where you have to pull the curtain on months of pain. Nobody should have to be in that position. Let’s put the effort, together as a fraternity, to make a great ecosystem of opportunity and learning.
Yours Truly
Misbah
