 "Foreign venture capital funds get RBI booster")
Suharsh Dev Burman, co-founder of MerryMen Ventures India, is all set to hit the road to raise funds for his first venture --Dakaar!, a daily destination for short duration video content. Burman, in his mid-40s however, was taken by surprise when investors told him that he is a tad old for them to bet on.
"Only one of the fund advisers mentioned that our age will be a problem as we start looking to raise funds. However, I feel most investors are placing their bets on the ability of an entrepreneur and the product idea than just their age," says Burman.
But with the startup ecosystem fuelled by entrepreneurs in their 20s and 30s, investors are preferring to back the younger lot than those in their 40s.
Taveesh Pandey of Black Diamond PE Advisors believes that a founder's age matters for investors. According to him, venture capitalists (VCs) while looking for a good idea are also looking for high energy and a flexible entrepreneurial team. With a young team, they get access to multiple ideas and people who are not aware of the limits of a situation and hence attack a problem in multiple ways. On the other hand, with 'senior' entrepreneurs, one gets a solid idea with a clear execution plan, which very rarely has a 'what if' section if it does not pan out.
"Today, a 25-year-old can easily raise $5 million for a half thought-out business plan but a 45-year-old will struggle to raise even $500,000 for a well-conceived idea. Most startups took their first steps based on a very basic business model but have evolved and in some cases, metamorphosed into something else entirely. The belief in the ability of a young team to come up with multiple ideas on the fly is stronger than the belief in a person who has significant experience. This can be best summed up in the quote, 'If youth only knew: if age only could'. VCs bet more easily on the lack of knowledge and go slow on lack of energy," he adds.
There are several examples that elucidate what Pandey wants to say. For instance, inMobi, one of the most successful startups from India, initially started as mKhoj. The founders had to abandon their initial idea of solving the local information problem using SMS-based search.
Ajeet Khurana, angel investor and startup mentor, says three years ago, 25-35 was the sweet spot to be an entrepreneur but after 2013, 20-30 became the ideal age. Now 30s is considered the right time to be an entrepreneur-- with the right mix of experience, wisdom and risk taking ability while 40s is considered too late. "However, age is largely taken into consideration only by VCs. Angel investors are not worried about someone's age factor," adds Khurana.
But it is also a fact that with more experience and age on their side, entrepreneurs are very picky about what the investors want and who joins their board. Take the instance of Pune-based Sapience Analytics. Co-founded by Shirish Deodhar and three of his friends in 2009, the founders were between 40 years and 50 years of age at the time of company's inception.
"Investment is a two-way street. While the investors look to find the right set of people and idea, the founders too need to get an investor who is in sync with their idea and has a network that they can leverage. More than the investor, founders should be choosy about who represents the investor on their board. At Sapience, we never had to actively scout for investment. We were fortunate in being approached by investors at the right time and with who we built a rapport right away. Our investors (IAN, Seed and Orios) continue to be wonderful mentors and strong supporters on our journey," says Deodhar.
Entrepreneurs across the board feel that investors tend to move in herd when it comes to taking bets."It's like investors preferring to bet on people with IIT and IIM background because their success rate is high. Other than the herd mindset, it is also a fact that experienced and senior executives who start on their own are very adamant on how the product will develop or how they intend to go about their business, which then creates problem," says a fund adviser.
"Age for us is secondary. We have done deals with entrepreneurs in their 20s and 40s as well. It depends on the entrepreneur. Though data shows that from a median, 34-36 years of age group, were most successful entrepreneurs. People in their early 40s have made money and are ready to take risks. It is a damn good time to be an entrepreneur," says Sasha Mirchandani, founder and managing director, Kae Capital.
