You say lack of angel funding, I say lack of startups

“Lack of angel funding” is an issue brought up so many times while addressing entrepreneurship in India that I’ve seriously started getting nauseated at the very mention of it.

Its just become common place to cite lack of angel funding as one of the main reasons for lack of startups in India. To a certain extent, I agree – angel funding needs to be more easily accessible and there are a lot of genuine startups that could benefit from angel funding being more readily available.

However, an equal amount of blame also lies in the fact that most of the ‘so called’ startups are simply not fundable. We lack motivated, passionate entrepreneurs pursuing high quality ideas and startups. Hate me if you want, but someone had to say it and so I just did. Like it or not, but thats a fact. As someone who gets several pitches for reviews on a daily basis, I cant help but use one word to describe some of the startups – appalling. Day in – day out I witness how folks develop a new mashup or some inane idea, which at best could pass of as a hobby or a side project. Or even a college level project. But in no way, could they be called a startup.

Over time, the number of such ‘startups’ has increased. I cant help but wonder why / how people tend to get the distorted notion that their side projects could qualify as a startup ? Are we doing something fundamentally wrong from a perspective of fostering entrepreneurship that folks get the notion that their side project is a startup ?  Seriously, not everything goes. Having a lousy website with 10 users does not qualify as being an entrepreneur.

If I find some of these pitches not worthy of even giving a 2nd glance at, why – how do you expect angels / VC’s to fund these ideas with real money ?


Another point that I’d like to bring up is that  it seems like a lot of wannabe entreprenuers have the notion that getting funding is a prerequisite to becoming a successful entrepreneur. I have gotten a hajjar emails from folks who ‘have an idea in mind with millions in potential revenue. But need funding to get off the ground’. Good luck buddy – as if thats going to happen. If you are a first time entrepreneur and you cant bootstrap your way to the first working prototype, I would ask you to reconsider your idea, because getting funding for a first time entrepreneur in such a challenging market is going to be an insanely difficult task to accomplish.

I think fostering entrepreneurship is certainly a great thing and I think we need more of it, especially at the college level. However, at the same time we should also ensure that some basic tenets are made clear as well:

1) Entrepreneurship != Anything goes

2) Funding != Entrepreneurial Success

3) Entrepreneurhisp != Sexy / ‘in thing’

So the next time you pitch your idea – startup to someone – think about it for two minutes. Does my idea make sense ? Is this a viable business (going for the ad based monetization approach might not work well in India, given the tiny online ad market). What problem does it solve ?  Would it be something that I would use myself ? Am I doing it just because its cool ?  If I were to approach others for funding, would I fund such an idea myself with my own money ? Would this be something I see myself doing for the next 2-3 years ?

Answers to these basic questions should give you some fair idea of whether you should seriously pursue your idea / startup and whether it has any merit to it or not. And most importantly – whether your startup is fundable or not.

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39 comments

  1. Very well written … Having ambitions of being an entrepreneur isn’t wrong but what i find more often is that almost everybody who i meet has this idea which is going to be the next Gmail/Twitter/Facebook/. I specifically mention these ones because i see an upsurge in the whole “online business” idea thing. Everybody thinks it is easy to create a website, put it up and have users flock to their website.

    The need of the moment as pranav says is to have a better quality of startup ideas and again its going to work both ways. People need to come up with ideas that are more relevant to the Indian market in the next 5 years and they have to be innovative.

  2. Well written post!!

  3. This is exactly what I has said in few of previous comments on this blog, and I was perceived as a pessimist and people has literally given me a crash course in entrepreneurship using their theory skills.

    When it rains, everything looks green. The real test of greenery is now.

  4. Another point I would like to make is that there is just too much in terms of Startup Ecosystem in India. Most people have protos.ins, opencoffee clubs and what not to foster, mentor and networks like minded individuals.

    With all that euphoria nothing really comes out on the ground. People just get an high of meeting Biggies and think that they have a chance. Its like make believe.

  5. This article is partly truth, but mostly written against entrepreneurship. I am an entrepreneur myself, founded a startup, has gone through the VC funding pitches myself. Lack of angel funding is a major issue.

    In our startup, we had a business, which is making real sense, prototyped, proven to make money, well on the path to grow, still angel funders or VC funders refuse to watch at it. They are either burnt their hands in wrong investments and stay put, or too ambitious to agree on reality. They just want to invest on a dream land of making another Google out of India. Guys, wake up, we can make Indian startups first, at a smaller scale before making Google, of course we will make such companies after that. First, come down to reality. We have major problems with angel funders in India.

    • Muraleedhara,

      I dont dispute the fact that we do need more angel investors who are afraid of taking the risk.

      however, i dont blame the VC’s for being risk averse in the Indian market. There has hardly been any M&A activity, forget about IPOs. If the VC’s are not seeing any concrete return on investment, why would they invest ? After all, they have a business to run as well.

  6. VCs and Angels in India lack the guts to invest in something new and ground breaking, they are happy investing in companies if some other VC or angel has invested in another company doing the same thing….
    that is the real reason behind lack of innovation.

    it is like develop what the VC wants, not what you think is a great idea….

  7. Hi Guys,
    Great topic. But believe me you are all talking about a very valid and potential business plan – Find Funding.

    Have done some digging around – Most of the Ideas at the concept level could be Ok. They are so because the knowledge is limited and so is the exposure.

    80% of the VC funding or Angel Investment gets into financial markets for spinn off -it is fast and the market is structured and organised.

    Other 20% is networking, for the few Select business class.

    India is still very much in infant stage in terms of VC and angel Investment – if entreprenuers werent there in India – we would be still a Backward country. Pls do keep in mind that 70% of the work is employed there – small or big they are still feeding our hugh population and are the backbone of Indian Economy.

    Good Minds can get this situation corrected but alas who has got the time.

    I never write in Blogs – well i have made this exception.

    Will i start the Change look out!!!!!!!

  8. In the field of software ‘execution’ is more important then idea’s i believe.
    There can still be a better search engine, or a better email system whatever.
    From your post its good to make out that more people are starting side projects, no matter if they fail, starting is more important.If you see the first version of flickr you will think of it as a dumbass product made by some student in 6th standard, but it is what it is today.
    VC donot fund in india because they want a safe bet, they lack the risk appetite of the western world.Its much easier to get funding if you start some manufacturing business then software business – Correct me if i am wrong on this.

  9. I agree with you partially. So many people want to keep a main job while doing their ‘idea’ as side projects. One reason may be that indians do not really risktakers — just like indian VCs.

    As Ranjeet said above, what is the risk taking potential of indian VCs? Are you ready to invest in a startup which doesn’t have a proper revenue model but will yield large user base? Are you ready to accept ‘number of active users = value’ kind of model? it is arguable, but how many indian VCs would have been interested in Twitter?

    It is catch-22 situation. Both sides are a little scared ab

    • One reason may be that indians do not really risktakers

      I dont quite agree with this. If that were true, how would you explain the very same set of folks arriving in the US and then becoming entrepreneurs ?

  10. It is a catch-22 situation. Both sides are a little scared about the outcome. I think this will change sooner or later. Till that time, just wait.

    -Arun (Anonymous Koward)

  11. Just a suggestion….

    To enhance the clarity of your msg for non-programmers/non-IT entrepreneurs pls write the three tenets in simpler language.

    “Entrepreneurship != Anything goes” can’t be read by many readers as you’d want them to!

  12. i agree with you i started a new project and looking for a investor but it is difficult to get one.

  13. Perhaps the VCs should consider how this situation has come about, and how ?

    Any wannabe entrepreneur does some research – What does he read – either funding in millions (late startup stage generally) or B-school competitions!

    The latter clearly is ‘paper plan’ funding, and that is what one mostly hears about – i am sure you all have also heard stuff like ‘I am interested in a startup, but not with my own money!!!

    i think the VC community (including TiE etc) have taken the wrong tack in becoming well known. They certainly are well known now, but within this surfeit of people/ orgs professing to encourage entrepreneurship, there is no real help available readily. There is either talk (TiE) or B-school competitions that gives people the wrong idea..

    Who is going to tell these wannabees what has finally been said in the above article – if you dont believe enough in your own idea, enough to risk something, then no one else will…

  14. What is your background in entrepreneurship Pranav? It is easy to say things from the sidelines…..

    Have you ever taken a plunge in startupdunia ??

  15. if you have the guts…. leave your job and come to the other side and then lets talk about lack of good startups….

    it easy to say things from the sidelines….. people who are managing their companies full time …. face the music everyday, unlike people like you who put their blogs/ comments in their free time….

  16. I need a consultant, of course paid one. It is very important to present the project in a right way, I failed previously because of poor preparation of the project. However there are super flop projects that got Huge VC’s, some how I knew those before they started, but what VC’s looked in to it was that (1) That the Guys are from big universities, or (2) were working in similar setups in US and UK.

    Yes there are kidos out there with super flop ideas with really huge dreams, like modeling websites, dating websites, online schools, Indian language translators to name a few, these kidos need guidance.
    If anyone knows any consultant to guide me thru how to present the idea, and from where do we get the statistics like consumer profiles industry size, Market survey data etc please let me know.

  17. Someone make a website about crooked indian politicians and lazy corrupt government clerks.

  18. Hi

    If I have an idea which isnt new. Not new in the sense that it already exists in foreign markets but not in India. Will such an idea receive attention for seed funding.

  19. From an IT services startup perpective ,I still think getting seed funding is very difficult.

    Maybe because the idea of scalability in IT Software development is primarily either
    a) Increase the number of employees
    b) Increase the number of domains
    c) Get your presence in the primary software markets – UK and EU

    My experience in funding negotiations is bizzare –
    “Prove your worth for 5 years with a 100% growth and then I will fund you” There itself I think there needs to be some education to be done for the funders as to what seed capital is , what working capital is and blah blah blah.

    But they got the money and they are always right by that virtue.

    My suggestions to the wannabe startups is to work on a startup full time rather than part time and stick to it through the ups and downs. Staying afloat will ensure you get opportunities now and then which you need to grab and see if it takes you through ..

  20. ameeruddin hudda

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  22. what would a girl ask for if not for a diamond necklace, diamond necklaces would always impress a girl”,;

  23. well, i was enrolled at an online school and the curriculum is quite great”"

  24. I am Major Arun Kumar Jha, a 39 yr old serving officer of the Indian Army. Certain fully researched plans have evolved thru me by the grace of HH Sri Sri Ravi Shankar (founder of the ‘Art of Living’ Foundation) over more than EIGHT years after doing it’s Basic Course.

    The plans envisage raising the domestic agricultural production of India thru the fertile plains of North Bihar (spanning more than 50,000 SQ Km). The plans envision a Private Project of a Legally registered Trust in Bihar; which would be funded – on the strength of its genuine activity and visible benefits – by High Net Worth individuals (Indian, NRI and across the world); Multinational corporations (Indian, NRI and across the world); Trusts and Foundations in India and across the world; International development agencies and all other possible sources of the funds.

    The plans require minimum USD 10 Million (INR 450 Million) to be started. I am looking for funding (preferably Donation/grants) or even Angel or VC Funding to materialise these plans.

    These plans can be pursued with full force after 13 May 2011.

    I request all people reading this mail to give me suggestions or advice at jdfparunjhaatgmail.com at their earliest, but before that date.

  25. i wish to have some diamond necklace but they are quite expensive -~-

  26. yaa i really appreciate the views of author but indian mentallity is to study well to get good marks and get good job, marry a lovely girl have a child , house, car broughtup your child retire from the job go tovarnasi or badrinath and wait for dead.

  27. I agree in parts with Pranav. VC’s are not short of funds and they are looking for solid well thought out startups to invest funds into.
    However, personally I feel India still is lagging behind in several areas that are conducive to an IT start-up. There are exceptions such as travel booking online which has done pretty well as it definitely addresses a major pain for customers who wanted an easier way to book tickets rather than just going every time to their agent. It also saves a lot of money.

    Other than that, India is not very big on shopping online, or for that matter spending money at all online.

    To compund the problem, cyber laws are weak, patent laws, copyright protection and such things are non existent. The challenges are huge and the bottom line is revenues.

    For a successful start up the major problem is to address revenues and cash generation. Good paperwork, fancy ideas and graphs will not get you the money.

    Solution : bootstrap, generate revenues and build brand presence if you want the big bucks.

  28. What you are trying to convey becomes simply obvious once someone has spread even a year and just exploring the idea.
    I am in my final year and got attracted to entrepreneurship and initiated to entrepreneurial related activities in my first year. After being bitten by the bug and spending 4 years, doing exploration, listening to lectures, discussing ideas with friends, organizing b-plan competition, VC pitches, etc etc and after doing my intern at CIIE, helping an NGO to come up with a business model and all these years dreaming(fantasizing) about being an entrepreneur .. I have decided not to be one .. Simple reason I dont want to waste my energy building the next big thing online but want to do something more meaningful which I find myself not prepared to …

  29. to all entrepreneurs – just follow your heart and keep working

    VC are not always angels

    if you have the fire in your heart you will succeed.

    as for those who are just for fun, well you will soon learn and back down.

  30. Found you blog by using digg I have to admit I m amazed with all your articles!

  31. I am Major Arun Kumar Jha, a 39 yr old serving officer of the Indian Army. Certain fully researched plans have evolved thru me by the grace of HH Sri Sri Ravi Shankar (founder of the ‘Art of Living’ Foundation) over more than EIGHT years after doing it’s Basic Course.

    The plans envisage raising the domestic agricultural production of India thru the fertile plains of North Bihar (spanning more than 50,000 SQ Km). The plans envision a Private Project of a Legally registered Trust in Bihar; which would be funded – on the strength of its genuine activity and visible benefits – by High Net Worth individuals (Indian, NRI and across the world); Multinational corporations (Indian, NRI and across the world); Trusts and Foundations in India and across the world; International development agencies and all other possible sources of the funds.

    The plans require minimum USD 10 Million (INR 450 Million) to be started. I am looking for funding (preferably Donation/grants) or even Angel or VC Funding to materialise these plans.

    These plans can be pursued with full force after 13 May 2011.

    I request all people reading this mail to give me suggestions or advice at jdfparunjhaatgmail.com at their earliest, but before that date.

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