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The entrepreneur-investor relationship in India may be on rocks
India is currently having an extraordinarily high rate of entrepreneurship. Every day, at least two young entrepreneurs launch a new start-up. After all, the concept of turning your ideas into a successful business model that generates substantial revenue and allows expansion in both geophysical as well as consumer base terms.
However, things aren’t that easy as it seems. Beneath the booming start-up industry in India lie countless tales of entrepreneur-investor deals gone wrong. The meeting ground of this relationship is sinking at an alarming rate. It is not just the namecalling on social media or the tone and tenor of conversations involving the two parties that prompts this observation.
This year alone, investors have pumped more than Rs. 12,000 crores into the start-up industry – the most that has been ever recorded. For every successful Series A funding round, there are numerous that fall by the wayside. Often, each party blames the other for not keeping up to commitments.
The relationship between a start-up and its investor cannot be based solely on trust. Entrepreneurs with ideas need capital to create monetizing ventures while investors look for scalable models that can give them a healthy return. The existing round of sniping occurring in India has made many investors reluctant in funding in newly formed start-ups.
During the initial years of the start-up industry, it was the entrepreneur who had to agree on the terms issued by the investor. Founders heavily relied on investors to open new opportunities. Today, the rise of consumer internet ventures has changed this equation.
Companies in this category are changing the lifestyle of Indians by catering to needs like transportation, food, clothing, tickets, furniture etc. This has led to investors pouring even more money and this money is often decided on the terms of the entrepreneur(s).
A fruitful and growing start-up culture in India is greatly benefitting the economy and the private sector in India. Moreover, it also gives confidence to entrepreneurs with ideas that have plenty of potential as a business model. Entrepreneurs are turning into investors as well. However, tiny cracks have started to appear, which if not fixed, may lead to a bubble-burst moment.
(With inputs from The Economic Times)
