Investing in a startup is usually a very risky business, but can also turn out to be very fruitful if and when the investment pays off. Startup financing can be rewarding, both economically and personally. But finding winners is not easy.
The Indian startups are presently on a high growth curve owing to an enormously supportive ecosystem, including a slew of government initiatives to nurture the startup culture in the country. No doubt, startups across the country have been growing at a rapid pace. Therefore, it isn’t a wrong time to invest in startups in India. Everyone, at some point or the other in their lives, needs a guardian angel to lend a helping hand that will see them through the pitfalls. Startups also need a guardian angel, in the early stages, to get off the ground. As an Investor, I have learned a few lessons that can help investors and entrepreneurs to grow together as a unit.
- It is the team one invests in, not the idea or business
It’s a familiar fact that if one invests in a talented team and gives them the liberty to create and produce, they will be able to work under pressure, and construct something fruitful. Most investors put their money on the team more than the idea. Even the finest of startup concepts undergo changes a few times before they are actually ready for the market. And, thus, a team needs to have that elasticity to change its tactic and strategies — and, in fact, this is exactly what an investor should be putting their money on.
- The real value one can add as an investor is not through money only, but through mentorship
In the words of Lourdes Martin Rosa, an American Express Open advisor and mentor, “Mentors can be one of the most powerful weapons for an entrepreneur, by providing guidance, wisdom and connections.” This has never been more relevant than in the current, flourishing entrepreneurial landscape. Seeking a suitable mentor should be as or more important for entrepreneurs than pitching for angel and VC funding.
Mentors should be invested not only in the startup but also in one’s professional growth. They should be sincerely interested in passing on their experience and also be brutally honest in their judgment. Their industry expertise and essential connections in the ecosystem can help in problem solving and seizing new opportunities.
- Chemistry between the investor and founders is vital to build a unicorn
The relationship between a startup and its investor requires a long-term commitment. A lot like marriage, it depends on reliance, trustworthiness and transparency. If any of these qualities is missing in the equation, the chances of forging long-term ties may dwindle. Understanding between two is a basic ingredient in any successful startup that has the potential of becoming a unicorn. But it is of higher significance in a startup-investor association because the two sides relentlessly need to work alongside each other through the startup’s journey to success, especially if one or both are willing to build a unicorn!
In conclusion, an investor can only reap his share of the benefits when the startup he invests in does well. So he/she should extend the necessary support and resources to reduce any hindrances along the way and make the ride smoother for the startup.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)