Two Venture Capitalists Speak Out On the Slowdown And Its Impact On India
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We had ealier spoken to Tim Draper of DFJ on his thoughts about the slowdown. We felt that we also needed to take a closer to home point of view of Venture Capitalists who have been working with entrepreneurs and business models in India for sometime now.
We caught up with Sateesh Andra of Draper Fisher Juvertson and Alok Mittal of Canaan Partners to know their take on the Economic slowdown, Sequoia capital’s now popular presentation and impact on VC investments.
Impact On India
According to Alok Mital of Canaan Partners the Impact is already there. He felt it will beharder for companies to access cash be it venture funds or clients who will themselves tighten their belts. According to him the least impacted would be the companies relying on local demand.
VC’s advice to companies
Alok points out the companies would need to watch out for the business risk. He felt that it would be tougher to raise money if there is no progress and cash flow positivity as its not the ideal fund raising environment and it will worsen. According to Sateesh Andra of DFJ. Companies need to conserve cash based on which phase they are in i.e. concept validation, business scaling or business model finetuning and accordingly take a decision on their cashflows.
Impact on Funding
Alok felt that with regarding to investing more money in the same companies or new companies Canaan would be careful of not undervapitalizing a company. He said that either Canaan will put in enough
money to see a company through to the level or they wont put money.
Sateesh on the other hand felt that only top notch deals will get funded which means that some who might have just got funded earlier wont get funded now.
How long will this slow down last?
Alok felt that Its going to be long slowdown this time around and the fundamental reason is the housing
market as a housing market depression takes a longer time to correct. He felt 2 years or so it would be the timeline for a recovery.
Sateesh felt it could be as long as 3-4 years as well but 2 years would be the minimum time it would take for the valuations, cashflows and energy level to back to yesterday’s levels.
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Well, companies should actually avoid going for funding if they can’t afford one, rightly pointed by Tim in his WatBlog interview.
At initial stages, funding rather acts as more of an innovation killer than anything else. The reason being simple. “ROI”, “Release Cycles” and many other factors coming into picture!
If only, the enterpreneur has a very clear picture and focus, he could survive the “funding wrath” and utilize the funding in the right manner to take his company to a greater height.
cheers
Well the slowdown is not because of innovation but because of tight financial conditions in the global markets:( so the growth in the Indian online industry I believe is here to stay i mean there are various start-ups that are formed recently are facing tough for no fault of theirs which I believe is injustice done on their part
VC’s are you listening:) Innovation breeds growth and we have a lot of innovation in India:)
Innovation in India means Naukri.com , Shaadi.com
The best funding you can get is from your customers.
Hold your horses, and try to ride them without a saddle if need be !