Importance of a Micro-VC firm to kickstart a start-up’s journey

A Holding Hand

Entrepreneurship is a natural step forward for an individual with passion in his/her heart and a vision in their mind to affect a change in the world. The first few steps can often be, simultaneously, thrilling and terrifying: as starting and running a business is akin to raising a child – or just like learning to take the first few steps as a baby, both of which require strong backing and willpower. In the world of entrepreneurship, that strong backing often comes in the form of the venture capitalist who has the resources and know-how to fuel and guide an entrepreneur’s start-up journey. Sourcing the right kind of backing can make or break a company’s growth as they try to steer the stormy seas of business and operational challenges that are bound to occur as a company develops from early-stage to full-growth stage. In a country like India, a micro VC firm does exactly that by providing the financial backing and business advice that an entrepreneur requires.

Micro venture capitalism includes small seed investments provided to early-stage companies that are yet to gain traction. This could range from $25K to $500K which is a crucial risk capital that businesses need to achieve scalability and build a stable business model. Most active micro-VCs are started by experienced founders who are able to offer support, guide and extend business solutions though their own professional networks to these budding entrepreneurs. A micro VC is uniquely equipped to see this model of high risk and high return investment through by also offering help in terms of managing consumer outreach, drawing in bigger players for later stages of funding and helping build the team from ground-up. Beyond capital, a micro-VC firm with entrepreneurial experience has the experience of hiring the right talent, focussing on business execution, identifying and prioritizing work-flow and resources and the overall bandwidth of the founders.

Indian Start-ups Require Micro-VCs

Micro VC’s alone have contributed approximately $341 million towards the Indian start-up ecosystem in the last 3 years, according to reports. This growth can be attributed towards the fast turnaround time, support and guidance offered by a micro VC in comparison with a large VC or an institutional investor. In India particularly, larger VC funds or institutional funds do not come very aggressively in the first round of funding and early stage investment is largely driven through micro investment firms. Conversely, in a country like US, the pool of investors is massive and even larger VCs enter the stage during the first round of funding or during the early stage, which is not the case in India yet and a micro-VC firm has the capacity to fill in that gap.

Many start-ups fall prey to ill-advised pursuance of large VCs in the first attempt, which can often be a harrowing task and lead to the dissipation of brilliant business ideas as they are not offered the right kind of attention and support. A start-up in its initial stages must look more for investors with operating experience and business intelligence beyond just funding. Currently, there is still a knowledge gap about the investment landscape and start-up founders do not have exposure to the different kinds of funding options available to them. Before seeking funding, they must understand the kind of players that are present in the market, conduct proper analysis, understand which kind of investor could really put them on track with their business goals and guide them on their journey. The start-up and investor partnership must be guided by certain values that will guarantee mutual benefit and business growth. A micro VC firm actively plays a role in creating value, and through their portfolio companies gives entrepreneurs the liberty to use their funding to establish a strong base rather than relying purely focus on capital gains.

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