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Zeroing in on the right venture capitalist

Zeroing in on the right venture capitalist
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First Published: Tue, Sep 04 2007. 12 56 AM IST

Updated: Tue, Sep 04 2007. 12 56 AM IST
Mumbai: A few weeks ago, we put together a checklist for start-ups on ‘How to Get the Venture Capitalist to Say Yes’, issue dated 24 July. It was compiled using inputs from several venture capitalists (VC) currently investing in the country. The article elicited some interesting responses from entrepreneurs.
We decided, thus, to go back to the field and this time, talk to a few entrepreneurs to get their side of the story. We came back with some interesting insights. To begin with, most entrepreneurs don’t even know where to start looking for VCs, leave alone targeting the right one to back them. We’ve put together a second checklist to help entrepreneurs in their quest for funding.
Go VC hunting, actively
Unfortunately, not a lot of VCs hang out at start-up gigs such as BarCamps and Mobile Monday Meets. You have to launch a proactive search for them. Enlist with The Indus Entrepreneurs (www.tie.org) and get them to introduce you to their VC members. Start-ups in Bangalore; the Silicon Valley Bank’s (www.svb.com) office is another place to meet VCs. Next, zero in on VCs who invest in your sector and who are actually making investments at the time you’re looking for money.
Network, network
VCs like to work through networking. Cold calls rarely work. Revive that college alumni network, someone will know a VC. Get a reference and you’ve won half the battle. Serial entrepreneurs, who have been funded by VCs before, are often quite open to doing the first introduction. Attend start-up workshops, mentoring programmes and so on. Social networking, the offline kind, works wonders. Find out where VCs socialize and who socializes with them and get yourself invited to those places—sometimes you might need help from daddy or uncle, but all is fair in entrepreneurship.
An equal marriage
Firm track records and networks are important but ultimately you have to deal with the individual who sits on your board. So, before you close the deal, the following questions should have positive answers: Does the VC have time? Does he have operations experience? Experience in your industry? What do other portfolio companies say about him? And, most important, do you like the guy? Bottom line: The VC will be like a co-founder. Is this the business partner you want?
Can they walk their talk?
Every VC will tell you that he brings additional value to the table in terms of industry and market relationships. Do proper due diligence on this promise. Find out if the firm has a diverse network (each VC has contacts in a different sector). And ensure someone has a relevant network from operations, as that is most helpful for recruiting.
Will they stay with you?
Investigate their portfolio companies to see how long they stayed, and how they exited. Make sure their time frame matches your own. If they are in the later stages of their fund, they may have a shorter time frame.
Footnote: This checklist was compiled after speaking with Gaurav Mishra of Guruji.com, Mohit Dubey of Automotive Exchange Pvt. Ltd (CareWale.com), Ganesh Natarajan of Mindcrest (India) Pvt. Ltd, Kiran Konduri of Four Interactive and Naveen Tewari of mKhoj Solutions Pvt. Ltd.
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First Published: Tue, Sep 04 2007. 12 56 AM IST