Bino is a friend and contemporary angel investor. One of the first things that strike you about Bino is that he is a doctor who gave up the world of medicine and moved to the investment arena. A healthcare industry analyst Bino advises clients on listed stock. Bino sits on the boards of several companies such as Carve Niche Technologies and PickMe eSolutions. I have worked closely with Bino in several of the sticky situations that angel investment often gets one into. At all such times, I have been amazed by his amazing analytical ability. Here are his thoughts about the startup space in India:
I Respect Entrepreneurs a Lot — I Want to Be One Too
Passion for entrepreneurship and respect for entrepreneurs have kept me glued on to the start-up eco system right from very early in my career. Early on it was very informal through friends, relatives and contacts that ventured into their own enterprises; later I decided to get more formal about it. That was when Mumbai Angels came up as a great option to get actively involved without committing my whole time to it. Through my earlier informal channels and later through Mumbai Angels, I have been an active investor in early stage startups and an active mentor to several of the invested ones. Jumping myself into the shoes of an entrepreneur is very much on my mind — the plunge could happen any day.
The Early Stage Is Where the Real Excitement Is
Earlier the start up, the more exciting the investment opportunity — in my opinion. However, the concept behind the business needs to be proven by the entrepreneurs before approaching strictly external investors (friends and relatives could be considered not strictly external). Ensuring that the market is accepting the product or customers are appreciating the service goes a long way in enhancing the confidence of the entrepreneur and the investor. The clarity of prospects that exists can lead to better negotiation and better goal setting at the time of fund raising.
Entrepreneurs: Do Not Dilute Yourself Too Much Too Soon
One basic fact: the original business plan almost never turns out to be the right one and to keep maximum value of the venture with oneself, one should go for external funding as later as possible.
To put to practice the above advice, one needs to be agile and accommodative and should be willing to bear the opportunity cost of entrepreneurship for an extended period of time. Also, one needs to be extremely cautious of cash burn in the business — that significantly increases the staying power and multiplies the chances of the venture emerging successful.
Thinking original is good, but not always necessary — a real entrepreneur makes money where there is an opportunity — if it is in copying something else so be it.
The Startup Space Does Seem Overheated, But This Is Not Cause for Concern
Nothing in the real world stops at where it is ideal to stop — look at stock markets, real estate prices, religious affiliations or whatever. Hence, I think the fact that there has been a heating up is a great thing to my mind. There could be pockets of excesses, or may be the whole space is overheated, but I would be only be cautious and not stay away from the space. From a macro perspective, I think the overheating is much needed for the space — it will establish angel funding as another mainstream investment avenue in India.
But one needs to be careful when looking at this from a personal investment / portfolio management perspective. Staying away is not wise; in fact, the best returns in the world are made in bubbles though one may lose part of it when it bursts. Of course, wise investment strategy is called for; else a burst will completely wipe out one’s portfolio.
Entrepreneurship Is About Having a Dream and Then Going Out and Making it True
I often think — those who understand their dreams become entrepreneurs and those who are lost in their dreams become angel investors. So when I understand my dream for sure, I’ll invest myself into it and not my money.
The most important quality of an entrepreneur is being down to earth and having clarity of thought. Startups that are based on superficial thought process and only macro level analyses and planning are destined to fail. A start up should have clear ideas about where the first revenue will come from and well defined plans to capture secure it. But every rule has exceptions — hence this one as well. If those who funded Google or Facebook played by this rule, those companies may not have seen daylight.
In a Sense, India As a Nation Is a Startup
India story is not different for start-ups and other assets — it is a big promising opportunity based on the purchasing power of a billion-plus population. However, this is not going to be a straightforward story, as we are realizing today.
India story is not a simple economic growth story — it is a story of social change; economic growth will be part of this social change. Social change is something that happens across generations — not necessarily years or decades. Better education, better healthcare, better infrastructure or simply better governance is something that is needed for the evolution to accelerate; and these things come only through evolution of the society. Thus the India story will unfold only over several decades and those who build their business patiently will reap the benefits. I would not base my investment on simply the India economic growth story.
Beware the Startup Bubble
There is a trend of acceleration in the India start up space — the trend is quantitative rather than qualitative. It is not in any specific area / style. This may, in some way be because of the over-heating of the start up ecosystem that we were talking about earlier. This is good from a macro perspective — lot of excesses will throw out something that is good. However, as an individual investor or entrepreneur, one needs to be careful about this — most of the excesses are bound to die down some day.