Venture Capitalist Acting As a Catalyst For Startup Ecosystem

Global FundraisingBy Profit Board Last updated on Dec 9, 2020

World’s third-largest startup ecosystem, India has become a magnet for global venture capitalists (VCs). The country’s startup ecosystem has been the centre of attraction for global as well as homegrown VCs.

In the pre-COVID 19 era, projections indicated that by 2025, India may have 100,000-plus startups, employ more than 3.25 million, and produce 100-plus unicorns, with a total market value north of $500 billion. In 2019, investments went at a very high stake. It was a milestone year for the Indian VC industry with $10 billion in capital deployed, the highest ever and about 55 per cent higher than 2018. India also witnessed a 30 per cent increase in deal volume over 2018 as well as larger average deal sizes across all stages.

Then came the Black Swan, COVID-19. The world is still reeling from the after effects of the pandemic. Startups are facing a situation that they have not seen in a long time. Sources of capital have desiccated, supply chains broken, liquidity crunch is widespread. While this might seem gloomy, this also presents an opportunity global VCs to make a difference.

The VC investments have started picking up. In India, VC investments grew to $3.6 billion in July-September from $1.5 billion in the June quarter, powered by mega deals that included the $1.3 billion raised by online retailer Flipkart. Large tech investors focused on India during this time.

Apart from providing startups with much-needed funding, they also provide them with guidance and mentorship at various stages of their growth journey to unlock their potential. VCs play a major role in influencing the strategic direction of the firms in which they invest.

Helping operations, business development and sustainability

Operations: A big part of early-stage startups have outstanding products but they do not have the right strategy/plan of action to execute the same. Many VCs, with their specialized team and experience help the startups to build and nurture their products.

Tracking of OKRs, mapping of KRAs, creating a roadmap, setting benchmarks are some of the areas where many VCs generally collaborate with startups.

This is also where the special focus has to be given, especially in the new normal.

Relationships: Because of their ownership relationship, VCs have a strong incentive to share their knowledge with the new ventures in which they invest. VCs tend to play an active role in the new ventures that they invest in and have even been considered to be part of a venture’s human resources (Florin, Lubatkin, & Schulze, 2003). This is largely because of the high level of risk associated with VC financing and that VCs want to not only protect their investment but do whatever it takes to ensure a high return.


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