“An investor’s worst enemy is not the stock market, but his own emotions”
Getting 100s of emails every day and that too at odd hours, isn’t it frustrating? It’s depressing, at times, and it actually sucks. But investors, referred to as ‘sharks’ of the entrepreneurial ecosystem, do this all day.
Running a business requires money, serious money. And in the startup world, investors are the ones who infuse their money, backing the ideas of young entrepreneurs to make their billion dollar dreams come true.
Whether entrepreneurs are seeking just a few lakhs or a relatively huge amount, they need to enter the shark tank to convince these investors to believe in their idea.
Some startup founders have a few misconceptions about the person on the other end of the pitching deck. They believe being an investor is the most lavish job. One needs to just sit and listen to the entrepreneur’s idea and say ‘yes’ or ‘no,’ crushing their dreams before it takes wing. But it is not all elementary, my dear Watson. To figure out what investors actually go through, one needs to sit at the other side of the table, right next to them.
And that is exactly what we have done. We, at Inc42, bring home the other side of the story which will, hopefully, make hungry entrepreneurs realise that being an investor is not everyone’s cup of tea! It’s not at all fancy to carry the badge of an investor. And here’s why:
A Lonely Job
Venture capitalists or angel investors are their own boss as they need to manage multiple things by themselves. Right from reading scores of mails from entrepreneurs every day, evaluating multiple proposals, to researching some of them and doing due diligence, they have to do it all by themselves.
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“This really needs you to put in a lot of effort and time because when you are investing your own money (or a fund) you can’t afford to make mistakes. This also means saying NO to a lot of people. It’s not an easy job,” said Shailesh Kantak, founder and CEO of Flexi Ventures Private Limited, a startup that aims to help businesses reach their full potential by connecting them with trusted and verified partners.
“For A Venture Capitalist, There Is No Immediate Or Short-Term Gratification”
For VCs and angel investors, financial rewards are medium- term at best and are dependent on the portfolio company’s performance.
“Although founders of a VC firm are in essence founders – they are advisors, guides, mentors to the startups – the gratification of being the captain of a team/startup is something many VCs yearn for,” said Sahil Baweja, Director, Now Capital. Now Capital is a Delhi-based firm, which provides a unique combination of capital, strategy and operational consulting.
Risk Mitigation Isn’t An Easy Task
Every investor builds a portfolio of investments just to be able to mitigate risks. But at a very early stage, the risk in every single company is high as there are hardly any trends or strong indicators that help in decision making. So, most often, an angel investor is taking a calculated punt on the team to deliver. Angel investing is far riskier than investing at a later stage – say after the company has turned profitable, or established PMF.
Lack Of Control
Once a VC or an angel investor has invested in a startup, they are still not the ones in the driver’s seat. They are, at best, periodically reviewing the progress.
“Information doesn’t come to you in real time. You could be mentoring or advising the founders but if you have that urge to control, and you can’t, it could lead to serious stress and strife,” said Shailesh.
Difficult To Find The Right Investment
It is easier to spend money than earn it. There are lot of ideas, people, and businesses that seem attractive and compelling to investment your hard-earned money. It is always tempting to invest in companies or business ideas which fascinates us. But do these companies really have a chance of success or are they overpriced? An investor needs to be very sure about the company in which he is going to pump in his money, so that he can get the desired return on his investment.
The fact can’t be denied that VCs and angels take a lot of risk investing in new ideas and new technologies, every day and form a pivotal part of the startup ecosystem. As a founder, you are often just days away from total failure. This basically never happens for VCs, and even when it does, it happens over a decade.
In spite of the downsides VCs or angels work with dedication and passion to make an idea a successful one. It’s not only the money which they put in, they also put in their belief in a complete stranger’s vision. This takes a lot of courage and investors do this with a smile on their face.
So people pitching on the other side of table – remember no job is as easy as it seems to be. It carries its own pros and cons, and the weight of the crown!