If you have a start-up and are looking for funding I am sure your first stop is almost always the big names of the Silicon Valley And why not! most of them have set-up 1 man ‘offices’ in India, most probably headed by a ABCD (American Born Confused Desi). ABCD has become a polarizing factor in the South Asian diaspora in the US, with first-generation immigrant parents and young South Asians of second or latter generations. South Asian Americans use it to criticize the Americanization and lack of belonging to either South Asian or American culture they perceive in their second-generation peers or children
During your funding rounds… at first these American Accented ABCDs will impress the hell out of you.. talking about the Boards they are on… the multiple Phd.. degrees they have done and the amount of capital they raised or burnt during their time in the states. However they forget that they are looking at start-ups in India and with their impressions of India locked some 30 years back in time they find it very difficult to apply all their leanings in the present and future Indian context.
Now come-one how many times have you heard from these ABCDs ideas like making something around the Panchtantra and Mahabharata… or how about something always around local search just because they did not know where to find the local laundry shop (dhobi is still new concept). Also most of these ABCDs are constantly referring to deals done by their American counterparts and think it is safe to invest in ‘similar’ spaces. And yes you will very soon within their first year of operations see their investments in companies you would say ‘ouch’. Their favourite spaces hover around Travel, Social Networking, Mobile VAS, Gaming & Ad Networks. And just because they cannot justify spending their huge $ salaries on doing $100k deals they end up funding companies who require $100 with something like $2m in the first round..with the excuse that they have to Scale their plan…
Post that the story is familiar….some heavyweight CEO from a MNC or Existing player in the space is hired at triple his last salary… even before the founding team is settled down… new heavyweight (highly paid) players are introduced CTO, CFO, COO…stuff like politics, bitching and overspending in marketing creeps in. I would this this is still the honeymoon period, within a year… these ABCSs talk to their other VC ABCD friends who have just landed in India hunting for deals and make them Co-invest in a new round….. so this company now raised another $5m for a non existent business plan with no real strategy on how to use the money… what do they DO?? Television and print advertising now thats the easy way to make a plan where you can burn $200k a month in the name of brand building and long term strategy. Now that about 3 years have passed and most players of the founding team are gone, the original business plan and idea morphed into a new VC created beast and the honeymoon period over… the ABCSs on the VC who have invested are scared that their bosses in the States… A hunt for Strategic sale or merger is announced.. in a hush hush operation the company announces merger with some unknown company at a very high paper valuation !!
But the story still doesn’t end… as none of the investors have really made money.. the saddest part is what the ABCDs report back to HQ. India doesn’t really have a good start-up eco-system and most company are just a bunch of copycat start-ups, the founders are very immature and cant take positively to professional management and the internet as a business has not matured in India due to lack of infrastructure and small advertising market and high revenue shares taken by mobile operators. Final recommendation is the fund should invest in bigger deals with matured companies….. deal size $5m to $20m and that’s the only way the US VCs can make money in India.
So finally every so called silicon valley start-up VC in India in 3-4 years ends up in becoming a private equity investor in private and public companies…. The good news is that New ABCDs keep landing in india every 3-6 months and the cycle continues and we continue to see more investments in spaces which just do not make sense!
Hey! don’t get me wrong I know in a few cases these ABCDs have also got it right and have had excellent companies and exits.. however that the exception and not the rule!
Having said that if you are looking for some serious start-up capital i would recommend you prefer funds which are run and operated teams which have spent a large porting of their professional life doing business in India, who are entrepreneurs themselves and have at least invested a small portion their own money in the fund… a good example is Seedfund check their credentials! I am sure you can find quiet a few which can fit this criteria…..
As far as the ABCDs are concerned its best to leave them alone doing what hey want… its their way of giving it back to their motherland! My request to them is to keep away from Indian Start-ups…..and invest in listed companies we want the stock market to touch 25k soon….