Yesterday, The Economic Times concluded its The Power Of Ideas series of seminars with 'Capital Idea' - How entrepreneurs can access and bring their business ideas to life.
The Speakers on the panel were Jitender Balakrishnan, Deputy Managing Director, IDBI, Sandeep Singhal, Founder, Nexus Capital, Gautam Patel, Partner, Battery Ventures, Rahul Khanna, Clearstone Venture Advisors.
As reported by the Mumbai bureau
WHILE the slowdown has hit the mainstream corporate world, entrepreneurs with commercially viable business ideas will not find a dearth of venture capitalists (VCs) to fund them. Infact, at an ET roundtable ‘Capital Ideas,’ the VCs were ruing the fact that there was a dearth of ideas with sound business models and potential to scale.
“There are not enough quality ideas that we receive these days. There might be a few who satisfy some of our criteria, but there is still a lot that is left to be desired for,” said Gautam Patel MD Battery Venture. “While we have funds, there are not sufficient workable ideas for the funds,” added Jitender Balakrishnan deputy MD and head corporate banking IDBI. The roundtable was part of the ET’s “Power Of Ideas” campaign.
While there might be a large number of new entrepreneurial concepts floating around and lot many willing entrepreneurs, only a handful hold promise for VCs. “Between my partners and I, we receive at least five calls every day. But we would only invest in 6-8 companies this year,” said Nexus India Capital’s partner Sandeep Singhal. The VCs agree that the entrepreneurial activity has dipped in the last few months as the slowdown deepens.
Post the period of crazy valuations and unrealistic expectations, the VCs and entrepreneurs are a much more cautious and grounded lot now.
The consensus view was that the time of exuberance and out of whack valuations has gone for good.
“There was a rush to glory over the last 18-24 months, but this has changed now,” said Rahul Khanna of Clearstone Ventures. “Clearly, the valuations expectations have sobered down.” In the good old days, it was the money chasing the good deals, but now the scene is different. “Tables have turned as there are more quality deals chasing scarce capital,” said Singhal of Nexus.
The VCs were however all praise for the Indian entrepreneurs for their capital management skills. Though the entrepreneurs had issues with the level of stakes to be divested but that done the Indian entrepreneur were one of the most cash efficient. Infact, the VCs even went on to say the Indian entrepreneurs were the most cash efficient in the world and there were very few cases of fund being misused.
As the debate progressed, some members of the blogger community and some prospective entrepreneurs, who were also present at the ET roundtable, questioned the VCs on their indifference towards freshly minted entrepreneurs who were straight out of colleges.
“We are taking a more hard-nosed approach now as we have put in place stringent criteria’s for entrepreneurs to match if they want their projects to be funded,” explained Singhal.
The discussion then veered towards the lack of options for entrepreneurs for raising money, especially on the institutional side. The institutional investors have nearly exited this space and entrepreneurs are forced to go banks that have strict norms not compliant to entrepreneurs. “Ten years ago, it was easy for entrepreneurs to raise capital for their projects as there was a lot of help from institutional investors like IDBI, ICICI. Now the risk perception has increased and so it is difficult for them to find funding and also state-level institutions have moved out. They have to approach banks that have a 90-day norm in place making it unfavourable with these guys,” said Mr Balakrishnan of IDBI.
But, the entrepreneurs with sound business models need not worry, each of the three VCs told us that they have the cheque books ready: If the idea is worth it.
Read what bloggers had to say about the Seminar in Mumbai yesterday.
And from the Delhi seminar held earlier