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he push for globalization is suddenly
getting a giant shove from the bottom up. As the Internet drives technology’s rapid
deployment around the world, Venture Capitalists (VCs) now see the virtues of
funding any type of organization, anywhere on the planet. That includes start-ups,
which are sprouting everywhere, in the most unlikely of places.
Confusion however persists in the minds of the start-ups over terms such as VCs,
Angel Investors and Seed Capital. It is important to define the differences between
each of these categories.
Venture Capitalists are investors who provide equity capital for high-risk business
opportunities in the expectation of high returns. At the conception stage, when all
the promoter has is an idea, the funding is generally provided by financiers who are
known as Angel Investors. In addition to the Angels, there are funds that finance
start-up ventures or “green field” projects. The financing provided is referred to as
“
seed capital.”
According to an estimate, in the year 2000 alone, around $32 billion of VC funds
will be raised across the globe. Of this, almost 60 percent is expected to be distributed
within the InfoTech and related sectors. India and India-centric start-ups are expected
to take at least 5-10 percent of this pie, which translates into a hefty Rs. 4,500
crore! Despite this deluge of VC funding, a common grouse of the start-ups is that
funding isn’t easily available. Many of these companies have great ideas, possibly
good revenue models, and the ability to create the relevant terms and implement
strategies. Where they are lacking is in their ability to impress VCs.
What these start-ups need are a few handy tips to guide them in their dealings with
the VCs. As they say, first impressions count.
TIP ONE:
Be prepared to answer questions. Like many media reporters, VCs ask a
lot of questions, and if a first-time CEO fails to respond to them, the turnoff for
the VC is instant.
TIP TWO:
Don’t be afraid to talk about yourself. It’s important. The old
adage that VCs read business plans from back to front is true. VCs spend an
The Times of India-Bombay Times May 17, 2000
Seven Tips To Get Money From VCs
