Entrepreneurs committed to taking novel ideas to low-income markets often face complex challenges resulting in high risks and uncertainty. One of the key challenges, if not the most important for early-stage enterprises is funding.
But, we all already know that.
As the social enterprise ecosystem matures in India, what’s emerging as a bigger challenge, is the disconnect in expectations between entrepreneurs and investors. One often finds entrepreneurs claiming that there are few relevant investors – especially those that are prepared to invest in businesses where there are no other precedent business models to be used for comparison. On the flip side, investors focused on patient investing claim that they are desperate to invest but find insufficient investment-ready enterprises.
This fragmentation creates misaligned expectations and at times even stifles exciting innovations. It is for this reason that Ennovent hosted a Thought Leader Session on this topic last week, bringing together leading entrepreneurs and investors to debate on this issue.
What emerged was a revelation – all the speakers unanimously agreed that there were in fact enough of both entrepreneurs and investors.
Rajnish Jain, Co-Founder of Avani Bio Energy said, “Even as an entrepreneur, I don’t feel that there is a lack of funding. Often entrepreneurs think, ‘It’s my idea and it’s great. Why are they asking about returns and questioning my model?’ Well, it is the investors’ money and they have the right to evaluate risks, ask questions. Entrepreneurs better need to understand this investor mindset rather than questioning it.”
The challenge lies in meeting each other. And, even more in meeting the right kind of investor for your enterprise. “Anyone who can Google can find investors. It’s more difficult though to recognize the kind of investor they are, investment expectations and what stage of businesses they invest in as it is rarely clearly stated”, mentioned Vijay Pratap Singh, Founder and Managing Director of ekgaon. Priyanshu Gupta, Associate Vice-President at Lok Capital further added “while investors can easily be found through online sources, media and events, references remains key as investors expectations and their risk appetites differ at the various evolution stages of an enterprise”.
From an investor perspective, the other challenge identified was also that while there were sufficient ideas, transforming these ideas into a business model that is relevant is something that entrepreneurs are currently underprepared to do.
Srikant Sastri, Chairperson of Vivaki and an angel investor commented, “A lot of good ideas exist but the structure around them doesn’t. Investors don’t have the time to educate the entrepreneurs on the packaging of these ideas. For this to occur, a lot more accelerators such as Ennovent Startup Services are required within the social space.” Interestingly, the entrepreneurs felt that while there has been a growth in the number of incubators within this space in the last 18 – 24 months, it is in the interest of the investor that more accelerators are developed to facilitate easier investor – investee matchmaking.
Furthermore, the entrepreneurs in the room also added that more than the idea; investors also look at the entrepreneur and their personal drive. It is therefore important to convince the investor that you know what you want and how you plan on getting there. “When you present, don’t do things as per the templates, do your own thing – what works best for you”, added Vijay.
Inspirational as the session was, the insights that came out of it were key – investors invest in the entrepreneur and not the idea. Moreover, it’s not important where the capital comes from be it debt, equity or grant, what’s important is that the investor and the entrepreneur share a common world view and are in sync on how the capital will be deployed.
Ennovent Thought Leader Sessions provide a platform to inspire, discuss, network and connect with experienced practitioners to solve key challenges in taking ideas to low-income markets.
Join the Ennovent Network now to stay updated on the next session scheduled to take place July 5th in Bangalore.