Comments on: VC 101: The Process of VC due diligence and what it means for startups [Must Read]

By: tech space

tech space — Thu, 26 Nov 2009 04:02:57 +0000

Some times startups really waste trying to understand Vc mentality In iNdia,most of the times what they preach is not what they practice.There is a typical trend in all the VC investment India.95% they invest in companies which are started by Reputed B SCHOOLS nd iiT ALUMNI.That is also the reason for 95% failure rate in their investment.
they do not backup an idea and its implementation plan unlike slilicon vally vc’s.
What they do not understand is most successful enterprenuers in iNdia are not from such Institution.These guys make some really good employess and not enterprenuers.

By: abhin

abhin — Wed, 25 Nov 2009 17:05:45 +0000

That was quite theoretical..its like saying ‘dude! I know what you should do’, and hide behind the curtains of anonymity.

Maybe that’s the real picture of Indian startup ecosystem – throw gyaan & bring others down..

By: Start up Guy

Start up Guy — Wed, 25 Nov 2009 15:49:53 +0000

Yes I admit my statements are generic. So too is the article. A lot of it sounds like a cut and paste from some “IC template” doc.

I guess I should expand on VCs investing with their gut – this is usually triggered by (1) their understanding a space or interest in it (2) herd mentality – ie what others are investing in (3) probably most significant – the team. VCs bet on people more so than ideas at the early stage. They know that good people will create and execute on plan A, B, etc as and when needed which is typical for any start-up. Looking at the people makes sense in my opinion. Early stage investing should be like a hiring decision. The money invested is usually small and will cover salaries for a few core people for about a year. Hence investors are essentially hiring good people for a year to work in a space that shows promise and that interests them.

By: stinger

stinger — Wed, 25 Nov 2009 11:10:58 +0000

i agree rajesh
there is not yet any amzazingly successful stories in India,well as far as redbus is concerned,i dont thing it is such a success as it is still doing only a fraction of business what other companies in the similar space are doing.

most importantly redbus may even be in trouble as most good travel houses like sharma transport are getting their own ticketing systems.

By: rajesh

rajesh — Wed, 25 Nov 2009 10:47:50 +0000

Pt is that there aren’t amazingly successful stories from India..so your qn is just not valid..(if it is, then answer my qn first)

By: rajesh

rajesh — Wed, 25 Nov 2009 10:46:55 +0000

You are living by your name..and am fnding your comments quite funny.
Take a step back and name an India startup which has been phenomenally successful?

To ans your qn – there are enough companies which have are doing good business (e.g. redbus) and “HAVE” raised funds from VCs as well.

By: stinger

stinger — Wed, 25 Nov 2009 10:39:06 +0000

can any one name one single startup which has succeeded after raising money from VC’s in india.Pls do not confuse ur self with raising more money in later round means more success for the startup.
Here is a real advice,if you believe in your company do not approach any Vc in India.Because most Vc’s InIDA HAVE earlier LEAD THE MOST DISATOROUS COMPANIES in The history of startups.

By: krish

krish — Wed, 25 Nov 2009 07:49:08 +0000

Great Gyan and good stuff to be taught in Management Schools…so that when students come out of these colleges, they can create such collaterals on behalf of VC firm’s partner and these partners can show this to their LPs.

In reality, the way it works is One VC firm invests and than there is a “chul” in all others to follow suit…Look at the no of investments in Online Travel, Online Gifting, Tutoring / Coaching Institutes….

But there is nothing wrong with it…what option LP has…if all VC firm invest in same kind of companies…they most likely will give same kind of returns…so every one is safe!!

Krish

By: Ashish

Ashish — Wed, 25 Nov 2009 07:21:24 +0000

You have made very generic statements..
These are stuff that startups need to know (and not need to follow).

By: Start up Guy

Start up Guy — Wed, 25 Nov 2009 07:09:08 +0000

Good VCs go with their gut. They take chances. All the mumbo jumbo in this article is CYA (cover your ass) stuff for LPs. Early stage investing is about taking chances. Most of what is stated here is not known. Many VCs hide behind the statistics of start-ups. Most start-ups are likely to fail by VC exit multiple requirements. So if VCs say NO as a default they are more likely to be right than wrong.

By: Rohit

Rohit — Tue, 24 Nov 2009 15:55:46 +0000

A+ article – keep it up, very useful information.

By: Pratyush

Pratyush — Tue, 24 Nov 2009 07:37:58 +0000

Very well written article Pavan. Gives a good insight into how the process takes place inside a particular VC and what expectations should startups have.

I think it will also help new startups tailor their “business cases” better to get faster results from the process listed above.

I do however share some sentiments with the (badly written) comment above. I think sometimes the VCs do throw off the baby with the dishwater and justify seemingly brain dead investments. I really hope many more of them read (and hopefully understand) a book titled “The Black Swan”.

By: rakshit

rakshit — Tue, 24 Nov 2009 06:44:56 +0000

Agreeable, and therefore the suffrage is also theirs. They lose money quicker in the process. Who cares?

By: stinger

stinger — Tue, 24 Nov 2009 06:20:58 +0000

All well said,with all the smart VC’s around in India ,there is not a single successful Vc funded company in India(exception naukari),
the Vc’s WITH all the due deligence invest in wrong companies for the wrong reasons ,interfear too much in their day to day operations and ultimately spoil the eco system in the companies they invest.And they say even if one succeds out of their 10 investments they are safe.I think they deliberately ensure success of only one company out out 10 they invest just for the heck of it.They do not have a clue about waht they are investing after all the due deligence,they just go by market trends(heard mentality).