The former Director General of Bombay Chamber of Commerce and Industry, and CAN angel investor, helps us understand the art and science of investing in the right startup. By Shweta Gandhi
A senior professional with 41 years of experience, Vikas Gadre is the former Director General of the premier Bombay Chamber of Commerce and Industry. He was responsible for bringing the corporate culture in the Chamber, improving its brand image, and implementing initiatives that helped the member companies, improved governance, systems and processes. He has also worked as the VP and CIO at Tata Chemicals. Currently an independent consultant and director, Vikas has headed production, procurement finance, information technology, international projects and corporate planning functions. He is one of the original investors who joined CIO Angel Network (CAN).
So far, Vikas has invested in two startups, the Android app Paytunes being one of them. Here, he provides insightful details about the entrepreneurship industry and stresses on the necessity of mentorship in today’s startup culture. “We need more initiatives like CAN,” he says. “And investors are also open to mentoring. I would be very keen in helping or mentoring entrepreneurs, and if required even accompany them to banks if they want.”
- Ability to evaluate
“Startups should be able to convey clarity on the size of the market during the pitch. Being unaware causes misunderstandings, failed expectations and evaluations are kept abnormally high. Not everything is always up to the mark. When we are evaluating their presentation, it is expected that some startups will wash out, while the strong ones will remain.
“When a startup is looking for investment, they should have a prototype ready—it shouldn’t be at the germination stage—and their passion must get converted into basic action. They can’t be waiting for investment.”
2. Proactive communication with investors
“The startup needs to remember that the team of angel investors at CAN take a lot of time and do sincere hard work in understanding its potential. Initially, we thought we’d be able to add value in terms of marketing or mentoring. Having invested in Paytunes, I’ve observed that though the startup is making serious efforts to advertise, it’s not reaching out to give us information about their plans on a routine basis. The link between the investor and entrepreneur is not well established. We expect startups to inform us of their updates—it could be done through their HR practices.”
3. Engagement with the right technology
“The whole idea is to engage. If a group of investors is helping entrepreneurs in technology, it will help the entire eco-system grow. Before investing, I always look at the startup’s tech team—not accountancy or HR—because that is the prime mover things. As long as they keep artificial intelligence, big data and Internet of Things (IoT), they have the qualities to expand.
“Also, if a startup is run by one founder, he will be out on a self-fulfilling prophecy. Meanwhile, if two-three founders brainstorm, constructive arguments can happen and hypothesises can be questioned, leading to the rise of more creative ideas revolving around tech.”
4. Passion and potential to grow
“Startups must have a passion to grow. If they are cornered, will they fight back or give up? Is their market big enough to grow? There has to be potential. Sometimes startups are family-managed businesses and scalability is an issue. So is that a problem they’re trying to fix?
“Startups always have to plan in advance and understand management even when they become large enough. The ground reality is that if a startup is dealing with less than 10 customers, people would not like to invest in it. Volumes must be stretched and revenue generation must be high.
“Also, majority of the startups are from Mumbai and Pune. B and C category cities like Aurangabad, Kolapur and Nashik see tremendous ideas formulating in engineering colleges, but they don’t have a platform. I suggest a one-day seminar in cities like these where we make a case for startups to educational institutions that will provide impetus to the young minds.”
5. Ability to address a real issue
“The one question I ask is: What kind of business or social problem will the startup solve? India and China have huge populations, and in the next 10 years, the number will only grow. So it is vital startups address a social issue keeping the masses in mind, and create an app that is people related. I envisage that there will emerge startups that will be dealing with issues related to energy, solar power, irrigation and agriculture, and I expect a lot of IoT to continue to happen.”