By D. Murali and C. Ramesh

Chennai, May 14: Billions of dollars are pouring into India via the venture capital (VC) route as more and more US-based players set up shop in the country to ride the next big growth wave.

However, the increasing interest in investing in India has not translated into easier access to capital for entrepreneurs at the angel and truly early stage levels, says Ms Anjana Vivek, co-founder and CEO of VentureBean Consulting, a Bangalore-based firm that works with early stage ventures and companies in transition, including those looking at funding options.

Speaking to Business Line, she says that startups needing less than $1 million still find it difficult to raise funds.

“While many noises are being made, we do not see funding to the extent it is required in this space. This is a bit of a worry for the industry as a whole. While everyone seems to agree that this requirement is to be met, there are very few risk takers for this space.”

She goes on to ask: “If we do not have seed stage and very early stage funding, where will we get enough numbers of companies eligible for VC funding?”

According to her, it’s a lot like the link between the number of college-going students and students who have gone through primary, middle and secondary school; you don’t have many of the former if there aren’t enough of the latter.

“Similarly, most companies need the funding at the idea, seed and early stages to take them to the level of VC funding. These are typically companies for whom loans are not advisable.”

She adds that many potentially good companies fall by the wayside because of the lack of this initial-stage, high-risk funding.

Ms Vivek believes that India needs funding models that will work and leverage on Indian strengths, “rather than the US models which are resized and cut to a different size!”

She thinks the time is probably ripe for more Indians to get into the act and fund startups that are able to understand the uniqueness of the Indian environment.

“India should be the starting point, not the ending point. When I say starting point, this could be business environment, customers, employees, etc.”

Too much money is chasing too few startup deals in India, while at the same time established players are often getting a lot of money from VCs. Ms Vivek attributes this to the limited bandwidth that VCs are constrained by.

“Existing and new funds are raising larger sums of money. Typically, VC fund managers have limited bandwidth and therefore limit the number of companies they invest in. Thus, as the fund sizes increase, the average investment per company also increases.”

VentureBean’s main focus is on mentoring, training and linking entrepreneurs to resources.

“For entrepreneurs, we provide a sounding board. Often they don’t have or make time to think about the long-term impact of current actions, bogged down as they are by routines and operational challenges. We provide the external yet involved perspective. We work with companies from idea to scale-up stage and beyond.”

For VCs, the company provides a means to leverage their existing bandwidth. “We can be their outsourcing partners and help in building their portfolio companies through a combination of mentoring and training services.”

Besides, VentureBean introduces select VCs and angel investors to client companies.

Like all VCs, Ms Vivek thinks that the team behind a startup is critical to its success.

“What sets successful entrepreneurs apart is their staying power, i.e., the ability to stick through the bad times.”

She believes that in addition to basic capabilities and domain knowledge, the key team members should have the drive to succeed.

“There are many challenges and ups and downs in business, particularly in startups and companies in high-growth stages. The business may flounder in between and may not look so great, but they team should never give up.”

Ms Vivek is active as Venture Advisor and Guest Faculty of IIM-Bangalore.

Prior to her current role, she was a full-time faculty member in the Finance and Control Area at the institute.

Previously, she has been COO of the NS Raghavan Centre for Entrepreneurial Learning at IIM-B and Vice-President (Corporate Advisory Services) of Ernst & Young, where she headed the due diligence practices in South India.

She has also been associated with Centre for Technology Development project of the US Agency for International Development (USAID) and Vice-President of NVCF Finance.