Indian banks shoo away product cos

By : |October 29, 2009 0

BANGALORE, INDIA: The terms Venture Capital and Venture Capitalist (VC) have been doing rounds in each IT discussion table that talks about productizing a new idea and taking that to market.

However, many times, due to many reasons, the entrepreneurs who approach VCs to give a pitch about their business, get outrightly rejected. So isn’t it high time that these budding entrepreneurs explored alternate ways of funding?

In India, product companies don’t get term loan from banks, said Srikant Rao, president and CEO, affordable business solutions while speaking at a panel discussion ‘VC funding Vs Bootstrapping’ at NASSCOM Product Conclave and Expo 2009 in Bangalore on Wednesday. “If you get a bank loan, go for that instead of looking for VC funding that you can raise at a later stage when you need a bigger kitty to take your business to a higher level,” he added.

                                 

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But sometimes banks don’t want to take a high risk of funding an idea whose proponents themselves are sometimes clueless about when the market is going to accept their idea, as panelists think.

But wait to jump to a conclusion that Indian VCs have a born aversion towards the product companies in the country. Ashish Gupta, managing partner, Helion Advisors while explaining on the VC’s side, said, “When you as an entrepreneur gets rejected by a VC, it is not that you are pursuing a bad idea but that the VC fails to understand your concept. It is not that you are getting rejected in your journey, but that the VC is not interested in joining you in that journey for time being. So keep trying and get a VC whom you will feel more comfortable in working with.”

The obvious message that transpired out of the panel was that you have to build a company brick by brick. Either you get funded or not, maintaining a discipline is more important than having a lot of money to get your concept materialized. “There is no confrontation between bootstrapping and funding. All companies have to bootstrap in the beginning as a humble start helps you observe the ecosystem and amass as much energy as that would be required when you shift the gear up for a massive rally. And in this later stage, you can try for getting an investor along with you.”

Supporting this view, Naeem Zafar from Haas Business School, who was the moderator of the panel, said that there was no ‘Bootstrapping Vs VC Funding’ scenario. “All firms need to bootstrap. The only question is when you need to go for funding. You also have to be very clear why you need money. After all, it is a race, you cannot afford being indisciplined or lazy. Availability of plenty of money should not make you think of going for a vacation.”

So the message was clear; be clear and passionate about your business idea. “Be passionate about your business but don’t get emotional about your idea. Because rejections and setbacks are bound to happen,” said Dhiraj Kacker, co-founder and CEO, Canavera.

At the end, there was a big warning from Gupta to services companies who move to product space. “It is very difficult and time taking process to establish yourself in a particular space. So in the case of services companies, since they have already established a base in service space, it is time taking and risky to get their head out of that domain and get established in a newer paster like product development. So far, very few of this kind are successful,” he said.

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