Business is about managing people
Nov 25 2011 , Chennai
VCs look at passion of people before investing in a firm
Success is strictly restricted to how well they collaborate to achieve a common purpose. Choosing the right people and steering them in the right direction are considered the essential qualities of successful business managers. And that is where most startups falter.
Finding people is among the biggest challenges faced by rookie entrepreneurs. They are beginners treading a new path, unknown in the market and won’t be able to match salaries offered by established competitors. So, the most feasible option for entrepreneurs is to bring their friends and acquaintances, who are convinced of the new ideas, into the organisation.
“More often than not, you (startups) pick the first employee and the next one, followed by the others, ends up being his friends. The persons may not be the right choices in terms of talent or fit. You don’t start companies to make friends but to win in business. Starting a company is not all fun. It is a lot of hard work,” says Sanjay Swamy, partner of the angel investing firm AngelPrime.
Angel investors don the role of mentors to help startups take their baby steps. Ideally, their handholding continues to the point where the company’s operations have stabilised and are ready to scale. It takes at least the initial two years to be ready to find other investors including venture capitalists (VCs).
VCs bring more to the table than just money. An ideal VC partner would be the one that brings along market access, exposure, talent and financial discipline.
“VCs can help you to reach the right people at the right time. They have their own network of people and firms. Hence, look for the ones that will give you people access. Small entrepreneurs normally struggle to attract talent. A mightier VC can help to identify and retain critical talent,” says R Ramaraj, senior advisor at Sequoia Capital.
From a VC’s point of view, it not only invests in a firm but also in the people. One of the main criteria for funding a startup would be the capability and passion of its people. “We give 30 to 40 per cent emphasis on the team while evaluating a company for funding,” says Rahul Khanna, managing director of Canaan Partners India.
“We analyse the background of the people including who they are, what are their motivations and their aspirations. We typically look for past successes and failures of entrepreneurs. For us, failures are equally important as successes because they may not repeat the same mistakes in the successive ventures. Not all startups reach the finish line. However, we do look for the long-term goals of entrepreneurs,” he added.