VCs—Very Cunning or Very Careful?
Venkatesh Krishnamoorthy’s pitch “for” VCs
In 2008, I attended the NASSCOM EMERGEOUT Conclave in Chennai in which I heard two seasoned entrepreneurs bashing VCs saying they wiped out their company. One entrepreneur had to sell all his stake and sell off his company eventually and the other was fired from his own company after the VCs found him unsuitable. These are extreme cases. So I naturally thought VCs are very cunning people.
I began to hear a lot about the ways in which VCs squeeze entrepreneurs to the extreme and give them sleepless nights. Another entrepreneur (we are not interested whom) said the VC made sure that he did not sleep peacefully and called him at odd hours to know what was happening. Yet another entrepreneur is a VC and investor basher. He narrated how a VC took three startup entrepreneurs to dinner and he had a special meal while the entrepreneurs got only an ordinary meal. Then he asked the entrepreneurs to pay! So cunning?
It is easy to form opinions based on what we hear. But in the last year, I have attended many meetings and conferences, courtesy YourStory, in my capacity as its chief evangelist. There is also a brighter side. When we met Raja Ganapathy, VC of Marketing at Sequoia, he said Sequoia is the only fund that has an exclusive marketing arm for their portfolio companies. They bat for their people, their investments, and take care of their investments so well. But many from Sequoia are reticent when it comes to media. They don’t talk much.
I have seen Alok Mittal, MD of Canaan Partners, in many meetings. Let us honestly ask ourselves have we not benefitted from his wisdom? Whether he invested in your company or not, did he not sit with you and talk to you and help you a bit. He is an avid networker and I have seen him with many entrepreneurs in many side meetings.
Kanwaljit Singh, MD of Helion Ventures, is a shy person. He is not forthcoming immediately. But once into a conversation, he frees himself into a great deal about what he expects. He says they raise money from partners and others before giving out to entrepreneurs. They are answerable to the funds they have raised. Would it not make sense if they invest in companies they think can give them, say, 5x or 10x returns? His colleague, Ashish Gupta, is down to earth and easily eases into a conversation. I have heard only good things about Ashish from many people.
Sandeep Farias, MD of Elevar Capital, talks passionately about why he invested in Madura Microfinance. If you listen carefully, he does not talk exorbitant returns or trashy stuff. What he says makes sense and he is an intelligent investor. He has ears to the ground and looks for depth in ventures perhaps.
Let us honestly ask ourselves. If we had a sum of Rs. 1 crore in our hands, would we invest in a mansion or would we blow it off at Las Vegas? Would we buy a Mercedes Benz or give it away for charity? Will you lend Rs. 20 lakhs to your friend in trouble? Be honest about it.
VCs are very careful people. They are the most intelligent of the lot I have seen. Whatever they talk makes sense. And they are not investing their own money to blow it away on a fancy business idea. They are investors looking for good returns. As simple as that. They are sensible people. Their investments also fail. Not that all their portfolio companies make profits or become a 100 million dollar company. They have their lives in stake. They are answerable to their partners.
So if you honestly feel your business idea is fanciful and would not make money and scale, be wise to do it on your own. VCs are also human beings. They can at times have a myopic vision or sight that we are all capable of having given our own assumptions and prejudices. Without them, we will never see a multimillion dollar company. We need their support to grow and grow big, bigger, biggest.
The next time you bash a VC, think twice.
Endnote: Brickbats or bouquets welcome!