There's some traction (in exits') for Indian VCs & that ain't bad!

Expectedly, there was some excitement & some skepticism over the recent acquisition of redBus by Ibibo. My comment on one such recent article "Is the redBus exit really good for the VC ecosystem inIndia?" on StartupCentral is as follows;

My comment:

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What you have said above sounds (to me) like;

If only the ‘sheer-return achieved on one exit’ by the VC is looked at in the broader context of ‘performance of the fund’ as such (disbursed funds?) rather than merely as a nX return on investment made into that particular company, only then will the overall picture emerge.

Now, just because you mentioned 200mio USD fund in your article, I wish to know if I can assume that one of the three VCs (or all three as an average) who disbursed funds of ~200Mio USD across past 7 years among multiple portfolio companies has hitherto managed only one attractive return of ~15-20X? (of RedBus) & this sheer return still doesn’t amount to being anything substantial to the LPs from whom the 200mio fund was raised?

If the answer is yes, I agree with you that for the Indian VC universe ‘Dilli abhi dhoor hain..’ (loosely translates as ~miles to go before resting on ones' laurels...)

Of course I’d also be cautiously optimistic when I say that if only the VCs that invested into RedBus used a similar good-sense & judgement while identifying, nurturing the other portfolio companies within this 200mio fund, then it is likely they’d still see some more good exists, including some from an IPO even.

Overall I guess there’s some traction & that aint bad. 

Dear HBR, defend your research!

In the May 2013 issue of HBR that has a ‘spotlight on entrepreneurship’, Adi Ignatius observes in the very first paragraph of his editorial that the “IPO market has been soft for years” & on a closing note hoped for ‘a steadier flow of IPOs’ as the economy is on the path to recovery.

This angst I thought pretty much reinforces the dominant LP complaint of an ‘absent IPO market in venture backed firms’ these days. Given this, I expected the articles to focus on elucidating about scalability of an early enterprise to the entrepreneurs – which I realized wasn’t the case after reading through the same.

Each of the four articles & the one interview instead seemed standalone in content & interestingly anti-VC in tone & tenor – not sure why. Since an elaborate hypothesis on these already elaborate academic articles didn’t appeal to me, I felt capturing the essence of each article in a single line would make it crisper - but given the duality of the message in the articles/ interview, I decided that the take-away messages should be in two sets, one for the entrepreneur & one for VC.

Here goes;

FOR THE ENTREPRENEUR

Go the Lean-way or Fade away¹

Seek out the client, not just an investor²
To err is VC – YOU, be the driver³
Marry the VC if you must, just make sure the pre-nup is not one-sided!⁴
If you are good, a Top VC will find you / If a Top VC funds you, you must be good!⁵

FOR THE VC

Lean is in – Junk the flab (read: 5yr business plan et al.)¹
Failing early is a virtue, at times, most times²
Focus on great returns, not on large fees – Stay relevant³
VCs are good but dated – Brace up for the Gen-Y entrepreneur⁴
If you aren’t a top-quartile VC, tough luck!, great deals don’t happen to you⁵

Article reference:

Click link to access the article, (I pay for my Kindle edition tho’..)

1.        Article “Why the Lean Start-Up Changes Everything” by Steve Blank

2.        Article “What Entrepreneurs Get Wrong” by Vincent Onyemah, Martha Rivera Pesquera, and Abdul Ali

3.        Article “Six Myths About Venture Capitalists” by Diane Mulcahy

4.        Article “How to Negotiate with VCs” by Deepak Malhotra

5.        “In Search of the Next Big Thing, Interview of Marc Andreessen

Most of the above messages have been around for some time now, only this comes across as a tacit academic endorsement of the market grapevine - If I forget scalability for a moment, my summarized takeaway from the above is;

Whether or not there’s something basically and drastically wrong with the current VC model, the emerging new trends in the start-up strategies make it pertinent that the early investors, in particular the VCs, should evolve in tandem – This is important not only for sustaining the radically different new-gen start-ups but also for the sustenance of the VC domain itself.

I always liked the way the professors are called out to defend their research in “Idea Watch” section of HBR, So do I now say; 

Dear HBR, defend your research? 

Game on…


After thought:

Ponder the following exchange between Adi Ignatius (Editor HBR) and Mark Andreessen (Venture Capitalist) - ref: “In Search of the Next Big Thing

Adi:    You’ve developed a strong philanthropic focus. Is the next generation of investors thinking about social investment?

Marc:   No. [Laughs.]

Adi:    So much for my hopes for the next generation.

Marc:   Many younger entrepreneurs have a social mission or a philanthropic agenda. They start early. Investors, not so much.

Considering this is towards the end of the conversation, I thought Marc was pretty dismissive about another aspect that investors both big and small HAVE to eventually look at "Corporate Social responsibility" of financial organizations. I pondered on this in my earlier article titled "IRR v/s Social Impact: Do financial institutions necessarily go through this dilemma?" - No answers tho'.