Funding and corporate partnerships, two entrepreneurial dilemmas tackled at BengaluruITE.biz
Of the many problems that startup founders face, there are two that are more persistent and frustrating than the rest; the first is funding, and the second is how they can work with corporates. At the Startup Next event at BengaluruITE.biz, a technology summit organised by the Government of Karnataka, these questions were answered by a number of key stakeholders in the IT and startup space.
Rishad Premji, Chief Strategy Officer of Wipro Ltd, told young entrepreneurs that the IT giant would fund ideas that make sense for their business units. "Entrepreneurs should know what the corporate's business unit is doing, if they wish to partner with them," said Rishad.
He pointed to Wipro having two units looking at partnerships, and said that he believed that for entrepreneurs to be successful in building partnerships with established players, they have to have humility, relevant experience and create the right product fit for the corporate. "Build something great and you won’t have to go after money. Money will come after you," said Rishad.
According to EY, 50 percent of Indian corporates want to work with startups and will actively seek partnerships. "One of the reasons we feel that this is great is because innovation is not happening with speed in corporates; they need startups," Rishad added.
He also said that corporates should not destroy innovation in startups. "Our interests must be aligned. We in Wipro have invested in eight startups, all of which work with us internally," he said and explained that Wipro does not want to buy these companies because startups are nimble at innovating by themselves. So the opportunity to partner with corporates remains huge. He added:
I am interested in IoT, AI and machine learning. With these themes, I am interested in businesses that have a clear vision for profitability. For me, cash flows are important. I am a traditionalist, and the basics are very important to me.
Beyond buzz words
"This is a nuclear winter in funding, and there is a slowdown because of a herd mentality. But there are trends focused on solving problems for India," pointed out Sanjay Anandram, Venture Partner at Seed Fund.
According to data available with Your Story, investors poured a total of $9 billion into the Indian startup ecosystem in 2015. In comparison, for the six months ended June 2016, startups raised only $2.1 billion in funding.
There are trends around analytics, data, alternate credit scoring models in fintech, artificial intelligence in financial services, logistics-enabled by smartphones and healthcare.
G V Ravishankar, MD of Sequoia Capital, reiterated that companies are looking at unit economics and profitability. “We are seeing a focus on profitability, and, on our part, there is no slowdown in investments. We are investing an average of $150 million per year, and that’s how we have invested over the last five years,” he said. This year, Indian entrepreneurs have learnt quickly, adapting to the lack of investment. “I see companies cut the burn. For me, it is a great time to start a company and create great business models,” Ravishankar added.
They like people with a mission
Investors clearly love people with the objective of solving a problem. There are those who start companies out of college and build businesses based on small ideas (like connecting restaurants or launderettes); these businesses, quite frankly, are not going to change the world. “This year, it is all fintech, and last year was all about hyper-local. I want to know what the problem is that an entrepreneur is solving,” added Ravishankar.
He added that, in the end, those who do not give up are the ones that will survive. Good entrepreneurs are those that do not need money.
“In a slowing year, startups can go to their customers and bounce off ideas,” says Samir Kumar, MD of Inventus India. He adds that customers will give you more time than investors, and that they can help businesses in the building of solutions, given that they have firsthand experience with the problems.
But it can’t be disputed that the herd mentality of investors and their heavy investing in me-too startups is in large part the reason for the collapse.
“Yes, there was a herd mentality. Everyone who did not invest in Ali Baba three years ago realised that they had to invest big in India. But beyond the herd mentality, investing is like a marriage. It has to work for both parties” says Ravishankar.
So, before you attempt to raise money, figure out if the team and product that you have created is ready for growth. Present your vision with a purpose and make it insightful. Do not go after money till you are sure your product is ready to scale.
YourStory is a social media partner for BengaluruITE.biz.