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Investor Talks, “I invest for more reasons than simply for the financial ROI”, Dr. Srinivasan .R Iyengar

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If there is someone who plays a vital role in the growth of a startup, it is the investor. Investors not only contribute their financial abilities but also their expertise to help startups move in the right direction. Startups can get in touch with investors and mentors through incubation platforms. These platforms are a great way to connect and startups also gain insight into what can they do better for their idea.

In Sociobits’ Investor Series, our team got in touch with Dr. Srinivasan .R Iyengar. Director and Professor at Jamnalal Bajaj Institute of Management Studies (JBIMS), Mumbai University. Dr. Srinivasan .R Iyengar is also a visiting professor at IIM Indore and Sambalpur. He also has rich experience in teaching, research, and strategic consultancy. Dr. Srinivasan .R Iyengar also supports budding entrepreneurs and new businesses to grow by providing accelerator/ incubation platforms.

Dr. Srinivasan .R Iyengar, Director of JBIMS shares what is important for startups as well as investors when it comes to fundraising.

What do you think is the future of the startup culture globally?

According to a survey, India has become the third-largest start-up ecosystem in the world after the US and China. 44 Indian start-ups achieved unicorn status in 2021, taking the overall tally of start-up unicorns in India to 83, with most in the services sector.

The creation of a new venture plays a significant role in the growth and stability of a country and it addresses the gap in the national economic system among countries. Entrepreneurship is widely recognized as the engine of economic growth and social development throughout the world. The new forces for economic growth worldwide are technological innovation in entrepreneurship.

Why should we give a boost to the startup ecosystem?

According to the Government of India’s “Make in India” website, India is recognized as the second-largest startup hub in the world.  The last decades have seen a rise in start-ups within the “new economy.” They are in an early stage of development and highly innovative (for instance, a new business model, product, service, technology), and demonstrate scalable growth rates in turnover and workforce.

Entrepreneurial ecosystems consist of a combination of social, political, economic, and cultural elements at the local, regional, and national levels alongside complementary organizations such as research/science parks, accelerators, and technology transfer centers. These start-up ecosystems not only offer specific services and support for entrepreneurs, but they also confront them with specific expectations, for example, investors looking for early-stage investments, or consultants and experts diffusing specific models and knowledge.

“Give a man a fish, feed him for a day; Teach a man to fish, feed him for a lifetime” could easily be adopted as the motto of mentoring.”

– Dr. Srinivasan .R Iyengar, Director of JBIMS

How important is the role of mentors when it comes to guiding budding entrepreneurs?

Business mentoring fosters independence. “Give a man a fish, feed him for a day; Teach a man to fish, feed him for a lifetime” could easily be adopted as the motto of mentoring. Mentorship has been a long-honored profession since the days of ancient Greece. This advanced civilization understood that unlocking one’s full potential required the individualized attention of someone who understood the process of achieving success. Entrepreneurs hire business coaches for good reasons that combine self-reflection, goal-setting, positive thinking, commitment, accountability, reinforcement, and continuous improvement.

If you would like to give one piece of advice to all the budding entrepreneurs who are looking to raise funds, what would that be?

Entrepreneurs have traditionally financed their new ventures with personal savings, investments From Friends and Family (FFF), and seeking support from angel investors before turning to Venture Capital (VC), banks, or equity markets.

Recently, entrepreneurs have also begun to use Equity Crowd Funding (ECF), an innovation utilizing the power of social media to provide a new channel linking public investors with entrepreneurs. Non-family investor consists of angel investor, incubator/accelerator, Venture Capital (VCs), or corporate venture capital, and crowdfunding or blockchain-based crowdfunding will be good for scaling up the businesses.

Dr. Srinivasan .R Iyengar

What have you learnt in your journey as an investor?

The performance of several startup entrepreneurs in India has been quite encouraging. A “start-up” is a new business venture started on a small scale with novel economically feasible products, the required expertise, both marketing and technology, and a vision for growth and expansion.

I have invested more knowledge with budding entrepreneurs for business growth strategies. I have also been closely associated with various state government entrepreneurship projects as a mentor.

What is your investment philosophy?

Rule 1: Never lose money. Rule 2: Never forget Rule 1. I invest for more reasons than simply for the financial return on investment and we’re helping entrepreneurs grow their businesses. 

I know that any investment I make is going to be spectacular – it’s going to be a spectacular success, or more likely, it’s going to be a spectacular failure. How do I determine which it will be? Gut feel. I rely on my gut feeling. Investing in technology start-ups has better ROI.

“Investing in startups is a very risky business, but it can be very rewarding if and when the investments do pay off and may produce very high returns on investment.”

– Dr. Srinivasan .R Iyengar, Director of JBIMS

What are the easiest and toughest things about being an investor?

Investing in startups is a very risky business, but it can be very rewarding if and when the investments do pay off and may produce very high returns on investment. Founders, friends, and family (FF&F) money can easily be lost with little to show for it. Investing in venture capital funds diversifies some of the risks but also forces investors to face the harsh reality that 90% of companies funded will not make it to the initial public offering (IPO). For those that do go public, the returns can be in the thousands of percent, making early investors very wealthy indeed.

What is the common mistake that businesses make while pitching to investors?

Pitching has long been understood as an important means of gaining business investment to support early growth. Fundraising is a business and costs money. The detailed business plan must be outstanding if it is to win investment funds. Entrepreneurs don’t do enough work on their financials and rely on figures that are so skimpy or over-optimistic.

How do you spot a good founder?

Successful businesses begin with simple ideas. Do you believe that the man who concocted the first batch of Coca-Cola syrup believed that his recipe would be the basis for a $28 billion company? Inspiration, i.e. Passion:  is the most important trait of a successful entrepreneur. A good entrepreneur has the characteristics of a person, values, skills, and attitudes that provisions own business-building intentions.

What are some of the red flags that you have faced in your investing journey?

Entrepreneurs know they are going to invest a lot of time and energy in their business.  But many have no financial skin in the game. It’s not really about the amount, it’s about an equal amount of risk-sharing. Asking for too much can be a red flag that founders may not really know what they are up against. Blind optimism is not going to sell to investors and not going to make for sustainable development.  

Dr. Srinivasan .R Iyengar has given some very important factual data along with tips and tricks for investors as well as startups that show us a clear picture of the future of the startup ecosystem.

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