Early-Stage Tech Investing – Part 2
In India in the tech space, only a few companies end up getting funded. My guess is that out of every 100 companies that start off, less than 5 end up with adequate capital to build their business. So, what can be done to change this?
What many of these early-stage companies need is a combination of capital and management expertise. For this, they should be willing to give up a significant stake – provided they have not managed to raise capital for an extended period of time (say, a year). In this situation, the product/solution already exists. But it has not succeeded in the market for a number of reasons: the idea itself could be bad, the lack of money makes for decisions that are not optimal for the business, the company is not able to hire the people, or the business model itself needs some change.
In this scenario, what the company needs is a combination of cash and top-notch talent. Rather than go down the path of the “living dead”, the company should be open to bringing in an entity or a group of people which takes up 40-50% stake and can also help drive the company’s execution process. Money required will be about Rs 5-10 crore ($1-2 million). This will provide a lifeline for the company in the short-term, and an opportunity to succeed in the medium-term.
From what I know, there is no entity which can provide cash and management expertise for early-stage companies in India. Is this an opportunity worth looking at?