Stories of startups getting billion-dollar valuation have fuelled dreams of scores of entrepreneurs to pitch the ‘next big idea’. While in India the startup hub is mostly centred in metros like Bengaluru, Mumbai etc., tier-2 cities are slowly emerging as incubation centres for some unique business ideas. In an interview to TOI, Deepak Menaria, founder of Lemon School of Entrepreneurship, says startups are growing in Nagpur at a rapid pace but the base of investors to support the initial funding needs to expand.
Excerpts…
Q. How fast is the startup culture growing in Nagpur?
A. About seven or eight years ago, there were probably 40-odd startups in Nagpur region or let’s say Vidarbha. Now we have around 450-500. So, the startup story is growing at a rapid pace in our Nagpur region. I have seen this journey very closely in the last eight years wherein more of the innovations are coming from smaller towns. They are doing good because they have undergone those problems and are best for finding solutions related to it. In 2013, we had our first startup contest and only six entries came from Vidarbha, while now almost 70 entries come from here. This growth of 10 times tells us that we are living in some very exciting times.
Q. Are these ideas coming mostly from youths?
A. While there’s no age group for entrepreneurship, people as young as 17 to those in their sixties are coming up with ideas. That’s probably the best thing about entrepreneurship because it has no age barrier, no academic barrier. But to answer your question, yes, we are seeing that majority of the people coming to us with ideas are in the 22-28 age group.
Q. What is the biggest challenge for people with bright ideas, pitching it properly to investors or getting the actual funds?
A. There is a lot of media hype about unicorn (a startup which reached a billion-dollar valuation) stories and it’s good too. But the problem it creates is that every youth now wants a million dollars in funding. I tell everyone that getting funding is just one of the milestones, but not the only one for you. The main goal for you should be to have a plan for becoming sustainable, profitable and making an impact on the world. There are lot of things that need to happen between getting an idea and seeking funds from investors. You need to test the idea, spend time in solving the problem and validate the idea. The approach to validation is very important because it involves spending time with potential customers who will agree that yes, we need a solution to a particular problem. If you are able to do this, then getting funding won’t be a problem.
Q. It seems that getting funding is not the problem.
A. Absolutely. There are enough investors in the world who are looking to put their money into the right kind of business. The problem is more of finding good ideas to put their money in.
Q. Are business ideas now focused only on technology products/services?
A. Most of them yes, but we do get a lot of people who want to expand and innovate with traditional businesses too. I always tell people that they should always leave one seat on the board for Mr. Technology. It will help you scale up and make a wider impact.
Q. While the startup culture is growing in Nagpur, what’s the investor scenario like?
A. This is one area where we can improve more. What we need is a local base of investors who have the vision and risk appetite for early rounds of funding. The risk is inversely proportionate to the stage of business. In the early phase, investment in business is very risky but potential returns are very high. And if you invest at a later stage then the risk is low, but so would be the returns. I believe that having a group of angel investors from the local community is crucial because it creates the right kind of an ecosystem in which startups can flourish.
Q. What advice would you give to those looking to pitch their ideas?
A. The most important one is not to rush into it. There is an appropriate time for pitching and that happens after you have done a lot of research, both on the ground and off it. Investors are looking not just for an idea, but a proper plan on how that idea will be turned into a successful business. Entrepreneurs must remember that if someone is investing money, s/he is not doing it for charity but for returns. So the investor is thinking in terms of an exit strategy and returns. All these things need to be clearly identified by those pitching ideas.
Excerpts…
Q. How fast is the startup culture growing in Nagpur?
A. About seven or eight years ago, there were probably 40-odd startups in Nagpur region or let’s say Vidarbha. Now we have around 450-500. So, the startup story is growing at a rapid pace in our Nagpur region. I have seen this journey very closely in the last eight years wherein more of the innovations are coming from smaller towns. They are doing good because they have undergone those problems and are best for finding solutions related to it. In 2013, we had our first startup contest and only six entries came from Vidarbha, while now almost 70 entries come from here. This growth of 10 times tells us that we are living in some very exciting times.
Q. Are these ideas coming mostly from youths?
A. While there’s no age group for entrepreneurship, people as young as 17 to those in their sixties are coming up with ideas. That’s probably the best thing about entrepreneurship because it has no age barrier, no academic barrier. But to answer your question, yes, we are seeing that majority of the people coming to us with ideas are in the 22-28 age group.
Q. What is the biggest challenge for people with bright ideas, pitching it properly to investors or getting the actual funds?
A. There is a lot of media hype about unicorn (a startup which reached a billion-dollar valuation) stories and it’s good too. But the problem it creates is that every youth now wants a million dollars in funding. I tell everyone that getting funding is just one of the milestones, but not the only one for you. The main goal for you should be to have a plan for becoming sustainable, profitable and making an impact on the world. There are lot of things that need to happen between getting an idea and seeking funds from investors. You need to test the idea, spend time in solving the problem and validate the idea. The approach to validation is very important because it involves spending time with potential customers who will agree that yes, we need a solution to a particular problem. If you are able to do this, then getting funding won’t be a problem.
Q. It seems that getting funding is not the problem.
A. Absolutely. There are enough investors in the world who are looking to put their money into the right kind of business. The problem is more of finding good ideas to put their money in.
Q. Are business ideas now focused only on technology products/services?
A. Most of them yes, but we do get a lot of people who want to expand and innovate with traditional businesses too. I always tell people that they should always leave one seat on the board for Mr. Technology. It will help you scale up and make a wider impact.
Q. While the startup culture is growing in Nagpur, what’s the investor scenario like?
A. This is one area where we can improve more. What we need is a local base of investors who have the vision and risk appetite for early rounds of funding. The risk is inversely proportionate to the stage of business. In the early phase, investment in business is very risky but potential returns are very high. And if you invest at a later stage then the risk is low, but so would be the returns. I believe that having a group of angel investors from the local community is crucial because it creates the right kind of an ecosystem in which startups can flourish.
Q. What advice would you give to those looking to pitch their ideas?
A. The most important one is not to rush into it. There is an appropriate time for pitching and that happens after you have done a lot of research, both on the ground and off it. Investors are looking not just for an idea, but a proper plan on how that idea will be turned into a successful business. Entrepreneurs must remember that if someone is investing money, s/he is not doing it for charity but for returns. So the investor is thinking in terms of an exit strategy and returns. All these things need to be clearly identified by those pitching ideas.
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