Founder to Funder – Bridging The Gap

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Thanks to a growing young and educated population, strong government support, a large consumer base internet-connected and increasing presence of investors, India is today the third largest startup ecosystem in the world, behind United States and Israel. As Indian eco system strives relentlessly to plug the missing links of the great startup puzzle, there are varied strategies and tactics being explored by the community.

The Indian eco-system comprises primarily of first-time entrants, newbies, aspiring and serial entrepreneurs, all in search of the much-awaited formula for success in order to build fast-growing companies. No doubt that a good idea solving an existing real problem, fund raise, delivery and marketing efforts are all crucial to spell success for a startup. The problem with a startup is that you don’t have the resources of a big company to rely on. In a big company, you might be heavily constrained, but there would be number of people you may approach seeking guidance to deal with any number of problems. Hence, the role of mentorship plays a pivotal part in startups.

Y Combinator – A Classic Success Story

At this point, it is worth mentioning about the success story of Silicon Valley-based accelerator Y Combinator. What’s the secret formula behind Y Combinator’s spectacular success?

Though this question is open for debate, it is remarkable to observe that most of the founders of YC were entrepreneurs in the past. Has this in any way helped Paul Graham make excellent selection of founders, or his ability to coach founders, provide rare candid insights and develop a network of YC alumni to mentor, support and fund each other for success? There are many examples of how Paul convinced startups to alter their game plan significantly or even start a new company which eventually became successful. In turn, the ever-increasing community of startup founders function like a consortium of geeks, willing to give each other advice on any topic like hosting providers, technology, resources to complex issues like deal terms, legal counselling and much more.

Is there a correlation between entrepreneurs and investors?

It is not easy to dispute its value.

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Is the secret of best investors hidden in their pasts?

When Entrepreneurs turn Investors

In the global arena, it is interesting to observe the trend that many, if not most, of investors with entrepreneurial experience have led companies that became successful, typically exiting via a major acquisition or IPO. Jim Goetz, a partner at Sequoia Capital, invested close to $60 million in WhatsApp over several rounds starting in 2011. The value of this investment increased by approximately 50 times, when Goetz helped the company’s founders sell the firm to Facebook for $19 billion. Again, Jim was a founder in the past.

The future looks promising with the rising trend of successful entrepreneurs looking beyond angel investing, to actually becoming investment partners.

Can the entrepreneurial experience of investors provide attractive solutions to Indian startups as well?

Knowledge Coach

Investors who were successful entrepreneurs previously have valuable experience, domain knowledge, strategic inputs and detailed insights about what it takes to scale optimally and succeed, even take a company from startup stage to a successful exit. Founder investors can be good at helping fledgling startups as they were very close to the ground and can think from the perspective of an entrepreneur. A much required benefit to early stage startups as they need as much help as they can get from those who know the game and can help navigate obstacles and challenges in their journey. Early-stage requires a different set of operational skills and style of thinking.

Working with founder turned investors who have really been through the highs and the dark lows of entrepreneurship is highly beneficial.

They also can help startups make important M&A decisions, advise entrepreneurs about international expansion by forming foreign partnerships and working with local governments. It’s not all about exits!

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Access to Industry Network

Founder investors can give easier access to a strong industry network that a startup might not have otherwise, including potential customers and other investors/ partners and their networks. Investors can look to past employees at their former companies to help source investments and make useful connections for entrepreneurs in their portfolios. Word of mouth is really important. Strong endorsements early on can really boost the startup’s reach.

Comfort Factor

Finally, there can be an attraction factor at work, as well. Most likely, founders can get more comfortable with an investor who has been on a similar journey.

While it is evident that this subject is open to research, the rise of more of these uniquely experienced investors is one of the best ways to boost the Indian entrepreneurship ecosystem and ultimately help more entrepreneurs succeed in creating positive unit economics with a fundamentally sound business model, and the ability to generate consistent growth in revenue. Indeed, a valuable proposition for entrepreneurs.

Growth of high quality entrepreneurs in India!

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