Startup Investing - Baby steps for a newbie investor - IV

May 27, 2022

In this note, lets peep into - What makes the companies to grow or the other way round ? We have come across companies who inspire / despite raising a sizeable sum of money , fail to grow and throw despair to the investors .

This is the last  part of the series on Start -up Investing - a multi-part series on how a newbie investor can be a part of the Start-up Investing ecosystem 

Do find the Ist part of the series here ,  the IInd part here & the IIIrd part here .

In this note, let's peep into - What makes the companies grow or the other way round?

We have come across companies who inspire / despite raising a sizable sum of money, fail to grow and throw despair to the investors.

When the company is set up, it’s the vision of the founders and the founding team. As the founders pitch the idea and the idea turns into a viable product market fit (PMF), the fund raise happens. 

VC / PE’s are willing to invest in the dreams of the founder, which is looked at monetising fast.

And growth is one lever. The Topline - the most commonly used KPI. This is looked at silos?  Since the fundraise has happened, this is the metric which drives. Hiring larger teams, higher salary, more offices … every resource being used.

Now, if you sit back and ask yourself - were great companies built overnight, with money being deployed all across functions?

But then how can this happen today?

So one  needs more money to sustain this. Valuation is thy name… the roulette goes on …

And by this time , the large stakeholders typically drive business???

The founder's early vision and drive gets compromised, unless he / she is strong.

As an investor, getting a profitable exit is the end result. But are you giving time for the company to grow or only seeking multiple x’s. 

Ask this before investing. 

The ecosystem can change, which can  make the original idea untenable. 

Pagers as a product had a very short life in India, ( less than a year), as mobiles took over the space. 

Also, can cartels come together and deny capital to a new company in the space. Well, everything is possible.

As you invest in the startup ecosystem, it's important for you to ask the right questions. Spray and pray is not the only approach.

At Auxano capital, we believe - the India story is yet to begin. Being in the journey for the long run is the key.

Author(s) :
Brijesh Damodaran