I kind of buy most of the points mentioned in the article. We have been a victim of this ourselves wherein the IDEA proposition or Vision has very little value. Little competition is seen as a deterrent to entry by VC’s instead of being seen a vision …..good points here

Sujai is 100% correct. Most of the VCs have no clue about what they talk. They say one thing on the dais of Tie summit, headstart etc and do exactly opposite once they are in office

Sujai’s observation about me-toos is 100% correct. They invest in a company because a competing VC has invested in that vertical

Indian VCs have a lower risk tolerance than grandmothers putting their money in a jar. They will not be able to find, fund, or help grow the next mega-tech company in India. They just don’t have the vision, exposure, training, or risk appetite.

It’s a shame that Indians like Ram Shriram and Vinod Khosla can’t set an example for these guys.

Hi Nikhil,

Interesting views.

We’ll definitely be watching this space.

It is intriguing how Sujai seems to have conveniently forgotten that he has pitched his company to a lot of non-Indian VCs too – for instance see this – http://www.rediff.com/money/2005/aug/23forbes.htm.
In fact, a few years back Sujai had engaged a boutique investment advisory firm and had gone on a roadshow to Silicon Valley to raise money from the Bay Area VCs and was not able to do so.
While Sujai seems to be a decent chap, his tirade against VCs is at best misguided and at worst malicious – he would probably do a lot better if he does some honest soul-searching to see how he can make his company fundable-worthy rather than blame the whole world and it’s father for his inability to articulate his company’s value proposition.
And as a final point, contrary to what Sujai says, VCs are not here to take risk – their main purpose is to make money by taking measured, informed risks…

you’ve got some very angry entrepreneurs here. btw, ram shriram has also funded me-toos in india — take a look at sherpalo’s portfolio companies. on another note, since vcs are not funding tech startups, hopefully they will fund more non-tech startups. a kirana can also innovate, even though it may not be able to do a ‘demo’ at a barcamp.

Snigdha – The specific example of the Kirana store is to demonstrate the “safety factor”. Investors who stay within models that are known to work like the Kirana store model. They have their own reasons for doing so.

I hope that VC Funds that have a clear internal mandate to make early stage investments separate from those that don’t. I’d really like to see Entrepreneurs do their bit by contributing to forums like TheFunded.com to help detail and record the personality and thinking process of each Investor. This will help equalize the balance of power in the eco-system.

- Santosh

The VC Panel is next :)

Most VC firms are run by the same guys who ran wall street and finance departments at companies (like satyam)…

They know how to make money for themselves and very little else unfortunately. I rarely come across VC guys who have done anything other than make deals with other people’s money…

Here’s to a new crop of VC types..hopefully!!

Getting VC funding is essentially a sale. And am not sure we have good enough technology entrepreneurs who can sell their dreams in convincing way to the VCs. We are seeing just 1st generation of technology entrepreneurs .. obviously the sale will become easier for later generations. No point cribbing about it and comparing your company with Google every time you are unable to make that sale. Just go back to drawing board or hire some one who can sell it to investors you are going to need it if you want to make it big.

Interesting discussion… here’s how I look at our business:

As in all businesses, VCs will look to find ways to mitigate the risks involved in generating returns… a starting point for this is a need to understand the market that the entrepreneur is addressing… in understanding this market there needs to be an alignment of vision between the entrepreneur and the VC that the market has a need, the opportunity exists to disrupt in that market and that the chosen path is the best manner in which to disrupt. This is a large part of what the VC / entrepreneur dance is all about.
I agree that Excel spreadsheets are not the metric for decision making. Excel spreadsheets provide insight into the entrepreneur’s underlying assumptions… what are the revenue drivers, what are the cost drivers, at what pace does the entrepreneur believe the market grow, what are the views on the long term margins in this business, if everything turns out as projected. This in turn gives insight into the factors that the entrepreneur believes are necessary for success. It is not an “end all be all” of understanding the opportunity, nor is it the sole means to learn about an industry; it is a tool that helps align views on what must happen in the world to make the business a success. In addition to the drivers of the Excel model, customer references and validation play an important role in providing comfort that there is market for the product and insight into the pain points… we spend a lot of time speaking to people in the industry in an effort to understand the market and the opportunity.

The reason “Me-Toos” are attractive is that the market is understood, the execution challenges are clear, so with tweaks (sometimes minor, sometimes major) there is a belief that the risks in these businesses are manageable.

One way to make the dance between VCs and entrepreneurs easier is to engage with VCs that understand your space… find people that know the industry you operate in (i.e. if you are building a telecom solution, see if you can find the firm, or even better, the partner at the firm who knows about the telecom vertical)… if you find the right person that understands the industry, you will no longer have to worry about helping them mitigate the general industry risk and perhaps they have enough understanding to dig into the core of the product differentiation and have the requisite contacts to be able to get the market validation.

On the topic of Entrepreneurs as VCs; I agree that more entrepreneurs should go and start businesses rather than become VCs, but the reason many entrepreneurs find themselves valued in the venture community is that they provide comfort that post investing in the business the VC can help beyond just the money… here again this is about risk mitigation… knowing that you can be a part of helping with the end outcome gives some comfort while investing in new areas.

This is a great discussion and I applaud Sujai for taking the time to voice his opinions and frustrations… hopefully through ongoing dialogue we can find a way to make the process of matching money with innovative ideas as frictionless as possible.

Get your English right. Please stop posting with your pathetic English grammar and spellings. gee – use a spell checker at least. “”publically”"???

Sujai is a smart guy and some of the points he raised are valid. When Sequoia goes on a forum and says that they won’t take concept risk but only execution risk, they are obviously inviting ridicule from the entrepreneurs.

That said, Sujai is sorely missing the point about his company. He made few cardinal sins with his company:
1. He built his product on the wrong version of wimax – 802.16d. The whole world has moved to 802.16e and he still doesn’t have a product to show in the “e” standard. The space is pretty crowded with base station providers and when you are stuck with a wrong technology, it doesn’t help your cause.

2. He had a window of opportunity with an area called femto cells about couple of years ago. His architecture might have been suitable for the market but he didn’t move aggressively there. It may be easy to argue that he would have done if he had the money – but running a startup is also about prioritizing correctly and have the discipline to ditch an effort that is failing to bear fruit.

3. While he has built an architecture that helps with making low cost base stations, competitors have reached there in a different way. They are riding the wireless chipset economies of scale to reach low cost – or they have reached within a reasonable range where cost has become less relevant. Anybody who is in the electronics field knows that you cannot build a sustainable story primarily on low-cost. Big guys will come and undercut your cost. When you are around for 4 years selling low-cost, the rest of the electronics industry has caught up with your cost basis just riding the technological advances.

Business world, unfortunately is not that forgiving; it is pretty brutal and you can not afford to make many mistakes. It may be hard for Sujai to reconcile with this truth but he needs to do so soon. The venture eco system is pretty small and he doesn’t need to burn all his bridges this early in his career.

[...] Murthy of KPCB & Sherpalo Ventures, in response to Sloka Telecom CEO Sujai Karampuri’s comments on the apathy of Venture Capitalists towards technology [...]

err… mobyte, what exactly would be a new crop of vcs? i am rather intrigued by this statement: “I rarely come across VC guys who have done anything other than make deals with other people’s money…” — whose money do you think a vc is supposed to do deals with?

Well, if the entreprenuer needs to bring the idea, the sweat and invest cash in phase 1, I believe that every VC person should be asked to do the same…

All VC players (Partners, Directors, Principals etc.. all those who make an investment decision) should be asked to bring their own personal cash to the table (through the fund maybe) if they want to play the game.. else they seem to be only ones with no real stakes except their carries on risk..

Else we will continue to have situations like the last 12 months where every VC has lost money and now talks about strategic investments etc.

Singdha: Your comments clearly tell how half information is dangerous. You require full PPT of Sujai’s presentation….

Others: I had met Mr.Kanwal Reiki at recent TiE event(TES). According to him there is no single VC in INDIA capable of investing in Tech Product company. I don’t think so you require any one else to endorse Sujai. Kanwal said the same thing in public…

I think VC culture in India is a lot about friend endorse friend, a lot about funding ‘safe’ options (previous success etc.) & a lot to do with things within their own safety zone. ‘Gut’ has gone missing someplace….
Also there are no guarantees in life so if an entrepreneur turned VC can insure you in one way or another from risk etc. is an open debate ….experience today is such a relative word..