India is a country where people do not actually understand the meaning of the technical terms but gets highly infatuated by the globally glamorised terms like investor, entrepreneurs, ceo etc and start calling themself with the same name to get some pseudo publicity.
One such term is Venture Capitalist or Angel Investor or Just an Investor. if today you check linkedin every other profile will come across with the title as Angel Investor or Venture Capitalist or Just investor, people who are too young to even understand the meaning of entrepreneurship with some failed ventures in past start changing the title of the profile to angel investors in order to impress connections on their profiles.
Now let us understand who is a investor or venture capitalist.
“A VC is a venture capitalist. In the simplest terms they’re investors. They invest in ventures, i.e startups and other new businesses. It’s different to angel investing in that this type of funding comes from firms and funds – not individuals. Because they’re bigger, you can potentially get a much larger investment from a VC firm than from an angel.”
Who does a VC invest in?
“Venture capital firms will generally have an interest in a specific industry, and it will normally be one that’s currently growing. This means you should approach VCs who specialise in the industry your startup works in. This is because they’ll not only provide funding – a good VC will also provide business guidance and expertise to help your startup grow.”
Now in India any tom dick & harry who owns some funds say somewhere around 5-10 lacs acquired by selling some land or property in India tends to become Angel Investor or VC who do not even understand the ABC of Entrepreneurship or Venture Funding.
They are just looking for some place to invest money and only want to stay away from standard routes of investments like mutual funds, life insurance, fix deposits, gold, property and want to take a route which gives them better, faster and more glamorized returns which fetch them good ROI on their money as well as give them a publicity in the market and business world.
But such investors are really harmful for the startups.
Lets first Understand, how a VC earn money by Investments.
” Venture capital firms typically invest in upcoming industries, like tech. In return they get equity or shares in the company. The ultimate goal for VCs is that a startup will grow to the point that they get a high ROI (return on investment). They’ll help the business scale to a point where they can make a profitable exit. For instance, if the business goes public, the VCs will probably cash out their shares during the IPO. Obviously, in an ideal situation, they’ll end up getting a lot more money back than they originally put in.”
So in short they invest in a idea or venture where they also share equal risk of loosing money if the idea or venture fails but in India Angel Investors or VC feels that if they have invested in some idea or venture they will sure shot earn well.
They are unable to take risk and always want a excellent ROI beyond expectations, as long as they keep getting good returns against their investments in the company they are happy but once the idea or venture reaches certain saturation point, the real scenario starts and they start threatening the entrepreneurs to either sell of the business.
Advice to Entrepreneurs: Always select a Angel Investor or VC very carefully, a VC does not only bring his investment in the venture but also brings his network, experience, mentor-ship and will help you to grow your venture, mere money wont land you anywhere.
Advice to Wana Be VC or Investor: A Venture is a dream of entrepreneur, it is his hardwork or efforts in which he/she has invested some sleepless nights and hard working days, So respect it.
You are not investing in a money multiplying scheme or a insurance policy to make your money double. Entrepreneurship is a big risk and you could end up loosing your entire investment so understand entrepreneurship first and invest only and only if you are ready and able to take risk.
After all you also expected to earn multiple folds if venture succeeded so be ready to share the losses also. Everything has equal pros and cons in this world.