2. Contd…
Venture capital (VC) firms are used to thinking they're smart, brilliant and
desirable because entrepreneurs tell them that, because they just want the
money, says Naval Ravikant, one of the foremost influencers of Silicon Valley
and founder of AngelList. In an interview with ET's Krithika Krishnamurthy,
Ravikant talks about the changing startup scene in the Valley and how Indian
players will do well to learn from their global peers. Excerpts:
What do you think of Indian VCs?
Indian VCs are like VCs in the US 10-20 years ago. They're not used to
building peer relationships. What will happen is someone will come along
and disrupt them. VC firms that don't have a brand are going to struggle.
Because there is a lot of money out there, you need to have a point of view,
a brand, to really add value. You can't just talk about it, and say well, we are
smart people.
3. Contd…
So, what is happening in the US?
Right now, VCs are used to thinking they are smart, brilliant, desirable and funny, because
the entrepreneurs tell them that, because they just want the money. But eventually,
somebody will separate the control, the advice and the money because VC is a bundle of
all three and entrepreneurs really want to unbundle: they want money from the cheapest
source, advice from the best source, and they don't want to give away the control. So, that
is starting to happen in the US, and the trend is well underway. I think it will happen in
India also, because the market has to mature.
Are startup success rates going up?
Success rates are definitely coming down but that is because the cost of running a startup
experiment is coming down...so more experiments are being run. In the old days, we
would have one company spend a million dollars to figure out if it has a market. Today,
maybe that same company could do it under $1-2 million. The capital, as a whole, may
make the same or better returns, but yeah, if the failures don't cost a half of what they
used to, you are actually saving money, it is a more efficient market.
4. Contd…
What do you think of competitors such as LetsVenture?
I have seen them from afar. Obviously they are trying to copy what we are doing. I say,
good luck. It is a very difficult business, it is more of a passion project than a business.
They're better off starting a company with a much larger market. The problem is, syndicate
is a very small market, venture is not a big industry. For us, just serving the market in the
US and the UK, we can barely make the math work on an interesting business. My sense is
that our clones and copycats are very manual. If they make it work, then congratulations to
them!
Is startup-VC dynamic changing?
When the venture industry started, it was enough to just have money and then it was
enough to sort of have this big fuzzy brand. But now startups are getting a lot smarter. We
are seeing a lot of cases where the startups are writing the term sheet, dictating the terms,
selling common stock instead of preferred stock, where they don't give the investor veto
rights or board seat or privileges, and they are really asking the investor -why should I take
your money when there is other money available.
5. Contd…
Of course this is only the top-tier startups, but a big chunk of the top
tier accounts for a lot of the returns. Look at listing non-tech startups?
Probably not. It is hard enough to do tech startups. It is very specific. It
is hard to imagine our infra being adapted to non-tech startups. For
better or for worse, we probably will just stick on to just one thing. Our
syndicate leads may need to non-tech. Right now, vast majority will
always be tech.
6. For details and bookings contact:-
Parveen Kumar Chadha… THINK TANK
(Founder and C.E.O of Saxbee Consultants & Other-Mother
marketingandcommunicationconsultants.com)
Email :-saxbeeconsultants@gmail.com
Mobile No. +91-9818308353
Address:-First Floor G-20(A), Kirti Nagar, New Delhi India Postal Code-110015
