‘VCs should be nurturers, not controllers’

Venture capitalistsare called a lot of things, including ‘vulture’ capitalists; but a new book likens them to a woman. VCs are from Venus, Entrepreneurs are from Mars is authored by Shubhankar Bhattacharya, currently a VC investor at Kae Capital, an early-stage seed fund. He is also the co-founder of Yaqsh.com, an e-commerce store for diamond jewellery. In a interview with BusinessLine , Bhattacharya talks about how the Indian VC industry is evolving with the country’s start-up ecosystem. Excerpts:

The VC industry is much glorified and revered. Your book takes a bold look at the strange realities in this segment. What was your motivation to write?

As an entrepreneur, I found it really hard to decode a VC’s words and actions and wished to understand them better. I am quite sure that the vast majority of entrepreneurs are in a similar state of anguish and wish there was a way to make the relationship and courtship process easy and effortless.

When I switched sides to being a VC, a lot of the dots began to connect to create a coherent picture of how a VC thinks.

Where do you think the Indian start-up industry stands, with regard to emotional maturity for relationship?

We still have a long way to go since the Indian start-up industry is still relatively nascent when you compare it with markets elsewhere in the globe. However, recent trends are promising, with more and more entrepreneurs either turning angel investors or returning for another venture. Hard-earned lessons are now being passed on and incorporated in the system.

What are the few communication issues you have observed between founders and investors?

The most common complaint from entrepreneurs about VCs is that they either never reply or take too long for responses. Ironically, the exact opposite is the most common complaint from VCs about entrepreneurs: that they pursue and follow-up too much while not allowing the VC enough time for evaluation.

Is it true that way more ideas are rejected than accepted, by a wide margin. Why is it so low?

While data varies widely across sources, a reasonable benchmark is that about 1 per cent of all pitches result in a successful investment.

The incredibly low conversion is reflective of the low odds of success most entrepreneurs and early-stage companies have, and the need for VCs to be highly selective.

Why can’t a founder go for it alone? What are the advantages of going with an investor?

Founders can most certainly bootstrap their company to glory as firms as contrasting as Zoho and Patanjali have demonstrated brilliantly.

While Paytm today is celebrated as a VC-funded unicorn, we must not forget that from 1999 to 2007, Vijay Shekhar Sharma ran One97 (the parent company of Paytm) without VC funding.

However, these examples are extraordinarily rare. VC investment can potentially accelerate growth by multiple orders of magnitude.

What factors should start-ups consider to evaluate and pick a VC?

While there could be many things entrepreneurs should look for in a VC, I am of the opinion that the quality that matters above all is the VC’s ability and inclination to support and nurture the company when the going gets tough.

As a VC, what kind of problems or worries do you have?

Every VC investor has to deal with hundreds of investment requests. How do you filter out the best deal prospects (that are typically few in numbers) in a time-efficient way?

In trying to be time-efficient, did you just hurriedly reject a company that actually has blockbuster potential?

How do you always maintain professional integrity, even when it might put you in a vulnerable situation when it comes to making an investment decision?

Now, given that you have been on both sides, what changes do you think will help the industry?

VCs must treat every entrepreneur with dignity and respect; be open to evaluating fresh ideas that do not come with parallels from the US or China, but might still hold immense market potential in India; think of themselves as the Nurturer and not the Controller of the relationship.

You must choose to be an entrepreneur only because your vision and your business mean the world to you, not because it is “cool” or because VC funding is easily available; then, be prepared for failure and hardships. You can also support and help VCs in their evaluation and decision-making process.

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