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Dear Indian VCs: Your Groupthink Act is Killing Innovation

Source | LinkedIn : By Bharat Sethi

Here’s a bit of a dialog I recently had with a partner at a well known VC firm:

  • random VC1: “How many people do you expect to hire in this time frame?”
  • me: “Around 35”
  • random VC1: “Don’t you think that’s slow?”
  • me: “Well, we’d like to remain lean plus our business model allows us to be so. Have a look at my projections sheet”
  • random VC1: “Ah! Has random VC2 gotten back yet? We’d like to chip in if they commit”
  • me: “Not yet”

Since then randomVC1 has been MIA despite demonstrating solid interest in the business to start with. So much for respect of a founder’s time and effort! Imagine what if we do take funding from firms of these kind! Guess we’d be forced to become a churn-ware factory in no time.

I’ve raised capital from some of the most active and marquee angel investors over the last few years. But actively raising institutional money over the last couple of months has brought me closer to an odd gap in the investment marketplace. There are a very few investors actually vying to be first to discover hot new tech startups or create new markets. Instead, they’re always trying to find an American/Chinese replica or blindly follow investment decisions of other handful firms.

I find this abysmally ironic.

Most entrepreneurs want to start companies solving problems in a never-done-before way and go where others haven’t..but these venture money people are the exact opposite — Their mantra is “I’m going to do the same thing everybody else does, because they might be doing something right.” This herd mentality runs deep in the VC firms globally but in India, where venture capital is limited and hard to come by, its stifling innovation.

In fact, I’ve been told by an Analyst at one of these funds that they are specifically told not to meet with companies that are attempting something ‘absolutely new’. They go by a shopping checklist to satisfy their LPs and follow the few cool cliques; sentiments are created by this bunch, and the overall effect is a herd mentality. And not to forget, a lot of these partners are super fearful people. They just don’t want to be singled out for the blame if anything goes wrong. So much for supporting entrepreneurs who’re largely a fearless clan.

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