By Sunil Goyal
For the start-up economy, venture capital funding is more than just the equivalent of fuel for a car. VCs also perform other critical roles that include advice on key business decisions, leveraging networks, hiring and mentoring. The technology industry has also benefited from their extensive industry experience and investment-related judgement as they navigated both success and failure.
Opening new doors: VCs who specialise in funding companies in a particular sector (AI, banking or retail) can help founders network with other technology entrepreneurs to assist in developing strategic roadmaps for long-term success and benefits including talent identification and global scalability.
Managing goals and performance: Venture capitalists, who invest their time and money in tech start-ups, often help a company’s management in taking big decisions. Along with moderating the company policies, VCs help in realigning organisational goals and management activities. The level of VC involvement in tech start-ups can depend on several factors such as their stake, the organisational life cycle, company performance, process-centricity, etc.
Building the human capital base: Hiring the right person for the job and building a strong employee base is among the major challenges faced by early-stage founders. Avoiding common mistakes: Founders can also learn from a VC’s own business mistakes or from the mistakes of their other investees that could include common lapses such as not seeking timely advice and the inability to adapt to changing market conditions. An experienced VC will coach entrepreneurs on how to avoid these mistakes, which can impact their teams and, eventually, the business itself.
Business scaling: For any entrepreneur, starting a company with a good business idea is easy, but the real challenge lies in scaling up. According to a 2013 venture capital report, companies backed by VCs benefit from:
– 2.5x sales growth
– 50% growth in employees
-3x investment in R&D
-15% higher survival rate after five years
Global perspective: VCs with a global perspective can help in enhancing exposure for tech firms who are looking at geographical expansion as one of their key business objectives. For this, access to the best business practices, strategic partnerships, and international vendors is a key plus in overcoming challenges.
Mentoring: Starting and running a new business enterprise can mean high-stress levels for young entrepreneurs who need to develop skills such as quick thinking and action, and objective decision making. An experienced VC can be an excellent mentor to a budding entrepreneur while providing useful success tips and suggestions.
Business ventures can benefit from VCs with mentoring abilities, as they tend to stay more committed to these ventures in the long run. Additionally, VC firms also offer mentorship programmes depending on the development stage of the start-ups. This, in fact, is the USP of YourNest where, apart from a certified coach, the core team invests time in grooming founders and their teams.
Credibility: Partnering with well-known VCs also provides start-ups with a high degree of industry credibility as they add a lot of value to a company’s development through team building, customer development, etc. Young companies can attract the right customers and employees based on the quality of the VC backing their ventures. Despite the high risk associated with new tech ventures, skilled engineers and business executives are willing to risk leaving their jobs and join start-ups funded by prominent venture capitalists.
The writer is managing director & fund manager, YourNest Venture Capital