What investors look for in startups? Answer by Praveen Sinha, Founder of Jabong

Despite the surge in coronavirus cases, the Indian startup ecosystem has witnessed a surge in investments across the past year. It continues to grow at a fostered pace with every passing moment. Praveen Sinha, while sharing what he looks for in startups before making investments, also advises entrepreneurs for establishing a viable and profitable business. 

Co-Founder and ex-MD of Jabong, Praveen Sinha, has said that it is the team and the idea behind the startups that impresses investors the most. He also said that along with unprecedented challenges, the pandemic is offering immense opportunities for startups to flourish across various sectors. In the end, he identified some of the areas where Sinha is looking for making investments aggressively. 

We know that you have always been active in nourishing budding start-ups; what do you essentially look for in the pitch to get you interested in nurturing any new venture?

The foremost thing which I look for is the founding team, especially the experience and the passion required for the execution of their unique business idea, how deeply they are involved in that idea. If the team is good, then the idea grows through lots of slugs. They may have textured with a specific solution, but if the solution or the approach requires changes, it can certainly be achieved through teamwork. Another thing is to look at the opportunity they are trying to create. Market size and acquisition of clients are also essential, how easy or difficult it will be.

How easy it will be for a new entrant to be copied and replicate the idea. No idea can be fully protected until it is super deep in terms of patent etc. Hence, it is just in terms of USP through the founding team or the execution but not very easy to replicate the concept. If competitors come, the team is competent enough to handle it and ensure that they are not killed in the process.

Earlier I used to have a more extended gestation period of three-four years when ventures could raise multiple rounds of funds. But currently, viability and profitability are the following requirements. Many startups have scaled on massive capital funding. However, they will justify the valuation in the long term, which has now become 10-15 years. You will see many startups with a billion-dollar evaluation, but the bottom line matrix is still not stable.

I don’t have a view, or I don’t suggest they will not become viable or will not justify the valuation, but currently, at the time frame of 10-15 years, it does not look feasible. Now my focus is on an idea that might not become a unicorn in valuation, but in terms of bottom-line profitability and self-sustainability, it can find its path.

What Are Some Essential Tips You Would Want To Give To Young Entrepreneurs To Keep Sailing?

For entrepreneurs at an early stage, multiple aspects need to be taken care of. First is the customers and the environment, second is the product and the solution it is catering to and what customisations and tweaking are required. The third is, if it is still not profitable, either you start raising funds and, in parallel finding ways to reduce costs, move it to a flexible model, given the uncertain time where lockdowns and curfews keep happening. The model needs to be dynamic, and you cannot have fixed costs. And then the fourth is a team, and if there are no sufficient funds, then the team also needs to move on.

At an early stage, it is more towards product and customer, and the mid-stage is about your growth, the customers’ satisfaction, and building the momentum on what you have already achieved. The next is while raising funds, making it more profitable by reducing the costs while ensuring the building up of processes so that scaling up is stable and not unreliable in terms of performance and delivery.

Would you like to share some of the challenges you overcame to reach a successful stage in your life, having invested in many companies and running profitable businesses of your own?

Being a successful angel investor and serial entrepreneur, Sinha shares, “On investments, other than several other dynamics, “I have found that if the founding team has that persistence and passion, then I generally found a decent growth, or if a closure – then also a proper closure. However, many times entrepreneurs don’t listen to advice, and they go with their beliefs, which I think is good but considering the advice and not diluting other’s opinions will fetch better results.

On the startup side, finding the right set of the team is a challenge and then bringing the first customer as there is no history is yet another challenge, followed by registering early growth than raising funds, making it profitable; these are multiple challenges at different stages. It requires persistence and perseverance to make your venture a success.  

As Per The Current Market Where Covid Has Taken A Toll On Many Sectors, Mainly Hospitality And Tourism, What Space Do You See The Potential In Now For Young Entrepreneurs?

The hospitality sector has been impacted seriously. Food, travel & tourism lots of segments have been impacted. But the pandemic has also created several opportunities as well such as the HealthTech, delivery, and diagnostic in healthcare. The second is work from home, so how can you make it more convenient and easy. For example, a small product is a UPS for WiFi, but it is not a full-fledged UPS. Still, it is a perfect solution for the people working remotely where electricity is disrupted frequently, and there is a generator power backup, which ensures continuity. Still, there is a break when the power goes, and there is a sudden discontinuity with the shutting on and off of the WiFi. So many such opportunities are emerging for the companies to experiment, which was earlier not possible.  

Similarly, people have started to work around ideas around sanitation and hygiene. Then in healthcare, from drug discovery to launch, experimentation. Certain startups have compressed that cycle which traditionally takes several years to complete. Developing such capacities is helping the companies to produce life-saving drugs in a rapid space, unburdening them at the time of spikes. With the restriction on movements and remote working, several opportunities have emerged in the tech and e-commerce sphere. 

What Are The New Few Avenues You Are Looking To Invest In?

Currently, I am more interested in the FinTech space. Finance is still unserved to many of the population, and alternative data can provide such a solution. We have not yet figured out or found a startup that has cracked or found a vast space. I think this area will emerge and evolve. The second is HealthTech and wellness. Agriculture is yet another space I am interested in. 

With over two decades of experience in the startup sector, Praveen Sinha is a well-known face in the business world. Besides running multiple successful ventures, it is also helping several startups towards success as an angel investor.

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