Published on June 9th, 2013 | by Perzen Patel1
No Entrepreneurs or No Investors?
All to often entrepreneurs claim that few relevant investors exist – especially those prepared to invest in businesses where there are no other precedent business models, despite impact and profit potential. Contrastingly, investors focused on patient investing claim they are desperate to place funds, but are unable to identify sufficient investment-ready enterprises.
Unfortunately, this fragmentation between investors and entrepreneurs creates misaligned expectations. The result is that exciting innovations – such as solar energy lamps or low-cost hospital models – which could positively impact the lives of those living in low-income markets, are often stifled.
Recognizing this, Ennovent hosted a Thought Leader Session on May 24, bringing together leading entrepreneurs and investors to discuss this polarizing issue.
The discussion – which yielded surprising results – included entrepreneurs such as Rajnish Jain, Co-Founder of Avani Bio Energy and Vijay Pratap Singh, Founder of ekgaon as well as investors Priyanshu Gupta, Associate Vice-President, Lok Capital and Srikant Sastri, Angel Investor and Chairperson, Vivaki.
The unexpected outcome of this Thought Leader Session was that all the speakers and participants unanimously agreed that there were, in fact, enough of both entrepreneurs and investors in the marketplace.
Rajnish Jain, said, “As an entrepreneur I don’t feel that there is a lack of funding. Often entrepreneurs think, ‘It’s my idea and it’s great. Why are they asking about returns and questioning my model?’ Well, it is the investors’ money and they have the right to evaluate risks, ask questions. Entrepreneurs better need to understand this investor mindset rather than questioning it.”
The challenge for entrepreneurs it seems is not the quantity of investors, but in embracing the seemingly endless analysis and due diligence that comes with the investment process. But even before this process begins, it’s also difficult to recognize the right type of investor – resulting in an unexpected matchmaking process from both, the entrepreneur and investor.
“Anyone who can Google can find investors. It’s more difficult to recognize the kind of investor they are, their investment expectations and what stage of businesses they invest in mentioned Vijay Pratap Singh.
Furthermore, the entrepreneurs also added that, more than the idea, investors also look at the entrepreneur and their personal drive. “When you present, don’t do things as per the templates, do your own thing – what works best for you”, added Vijay Pratap Singh.
Before pitching to an investor, the entrepreneur should to invest in oneself as well as the idea. The entrepreneur must of course prepare an effective business model and establish proof of concept, but must also be able to creatively and clearly state what they need from the investor and why, highlighting the importance of strong communications skills and confidence.
From an investor perspective, it seemed that beyond the sufficient quantity of impact-oriented entrepreneurs, the challenge remains transforming innovative ideas into a viable business models focusing on both social and commercial aims.
Srikant Sastri from Vivaki commented, “A lot of good ideas exist but the structure around them does not. Investors don’t have the time to educate the entrepreneurs on the packaging of these ideas. For this to occur, more accelerators such as Ennovent Startup Services are required within the social space.”
While there has been a growth in the number of incubators in India in the last 18-24 months additional numbers are required to help create strong business models around entrepreneurial ideas and facilitate investor-investee matchmaking.
Talking about the challenges entrepreneurs face in identifying the right kind of investors for their enterprise Priyanshu Gupta, further added “While investors can easily be found through online sources, media and events, word of mouth references to appropriate investors remains key as investors expectations and their risk appetites differ at the various evolution stages of an enterprise”.
Interestingly, in taking an investor view the panelists unanimously agreed that the structure of the capital, be it debt, equity or grant is not as important as entrepreneurs often think. What arguably takes precedence is that the investor and the entrepreneur are in sync about the value proposition of the business and how the capital will be deployed.
Ennovent’s most recent Thought Leader Session reduced the thinking that there are no entrepreneurs and no investors to a myth. However what remains to be addressed to improve India’s landscape for innovations are the processes around matchmaking, business model development and pitching.
Ennovent Thought Leader Sessions provide a platform to inspire, discuss, network and connect with experienced practitioners to solve key challenges in taking ideas to low-income markets. Join the Ennovent Network now to stay updated on the next session scheduled to take place July 5th in Bangalore.