Why investors are more in favour of experienced corporates turned entrepreneur?

investors showing more interest in experienced foundersWith around 100 Indian startups founded in the 1st quarter of 2017, the total number of startups is expected to reach around 400 by the year end. According to data from leading data analytics firm on startups Tracxn, this will be 10% of the total number of startups founded in 2016 and only 4% of the total in 2015. Does that mean that the startups in India are not doing that great? Or are the Indian youths not motivated to move along the glorious path of an entrepreneur?

Many investors recall that back in the year 2015, they used to have calls with around 20 entrepreneurs daily where they listened to their business pitch. These entrepreneurs mostly were fresh college graduates without much industry experience. But technology backed startups were on the boom. Hence, back then investors stepped on the bandwagon with expectation of making big profits. Some of them recall that young entrepreneurs demanded a response from the investors by a given deadline since there was a long list of other investors that were eager to join hands with them.

Things have changed now. Investors are trying to backup those startups with a sound business idea rather than just by looking at the sector which the startup is catering to. They are putting more confidence on startups founded by folks with good experience in the industry before taking the entrepreneurship path. After all, not many bright business ideas spawn up over a glass of beer but it has been through a methodical research and proper analysis of the market.

If I ask you to tell me the name of three startups that come to your mind now, what would you say? I am quite certain that all the names that you would have taken have been founded by folks with good experience in the industry.

Startup accelerators tell that the earlier pitches used to be more arrogant and sounded more like high school or college projects. Other accelerators believe that it’s more due to the increase in the level of patience for the investors. Today, investors are willing to wait more to identify those startups with a solid business plan. In the earlier days, any startup trying to make a dent in the consumer (B2C) business caught interest. This was also due to the huge boom in the Indian e-Commerce sector.

Despite the investors tightening the funding to the startups, experts are having a positive outlook on the Indian startup sector for this year. This is majorly contributed by the fact that investors are performing deeper analysis before funding any startups. With that, the chances that any startup will thrive in it’s business increases and hence the success ratio for startups is bound to increase.

 

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