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Article by Mohan Babu

Title:   Entrepreneurs and venture capitalists

Most venture capitalists invest in ventures for which they have a gut feeling. They also expect the entrepreneurs to be fully vested in the venture before opening their purse strings, says MOHAN BABU

Most regular readers have probably observed that I love to make this column as interactive as possible, and lots of times, I share insights and inputs from readers, especially questions and comments that would be of interest to a wider audience. I recently initiated one such chain of mails that I exchanged with a wannabe entrepreneur that I will share here. The identity of person mailing me is masked per his request.

Dear Mohan

I am a regular reader of you column in Express Computer. Many times I was thinking of writing a mail to you, but couldn’t. Today the time has come to do it. I work at a MNC specialising in software services in India. I currently concentrate in the area of image processing focusing on security system, industrial automation, etc.

I have been toying with the idea of starting a software company focusing on product development for a while. I thought of healthcare and security area and in my area (image processing). Request your help in getting any information in this regard. Please do not mention my name if you are publishing it your column.

Thanks in advance,

Dr No

Though I regularly receive mails from individuals claiming to possess an idea for the ‘next killer app,’ asking me for investments, I was intrigued by the note from Dr. No and I responded with the following mail.

Hi Dr No,

Thanks for your mail and kind words about my write-ups.

Your idea really sounds intriguing. I am assuming that you are already working in the field on you want to start the product development company.

Before you can get any external inputs, you will have to begin to address some of the common questions that a VC (Venture Capitalist) or investor is going to ask you:

  • Why invest in you?
  • What do you bring to the table?
  • What is going to be the ROI (Return on Investment)
  • Of course, people are also going to ask you about your business plan. Do you have one? If so, has it been reviewed by others in the industry?

All the best,


After exchanging this note, Dr No responded back saying that the questions I had asked were exactly the kind being asked by the VCs that they had approached. He went on to add that the venture was being planned very carefully. With over a decade in the industry, he had gained a gut-feel for the market and wished to explore developing a product in an area which he understood. Being a bit risk averse, he along with his friends were moonlighting on the project during their spare time, they had also invested their own resources to employ a few engineers to develop the product. After they got sufficient traction, they were planning to approach prospective investors.

From this exchange, I began to realise that Dr No and his friends had the right perspective on entrepreneurship and new ventures. Though they were on track towards attracting the interest of a VC, they still had a few miles to travel.

Most venture capitalists rarely invest in any venture that they don’t have a gut-feel for. They also expect the entrepreneurs to be fully vested in the venture before opening their purse strings. What it means is that the entrepreneurs should be able to demonstrate their complete commitment to the project either in terms of having a workable solution or product that the VC’s fund will help market, or be involved fully in the project, with everything to loose if the venture failed.

What it basically means is that part-timers with little to lose if the venture failed have lesser chances of attracting a serious (unless the product is already finished, in which case the VC’s funds will just help outsource the manufacturing or operations).

Though this article does not even attempt to give a big-picture overview of what it takes to attract venture funding, with the few exchange of notes with a prospective entrepreneur, I hoped to demonstrate one small facet of the processes involved. As always, readers are welcome to add their thoughts or to refute.





About the Author

  • A Bio and profile of the author, Mohan Babu, can be found at his homepage
  • Mohan has authored a book on Offshoring and Outsourcing (Publisher McGraw Hill, India), a link to which can be found here
  • Mohan has also authored an Online book on "Life in the US," available for free download.
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    ©Mohan Babu: All Rights Reserved 2005

    Mohan Babu is an international consultant trying to find the ‘sweet spot’ where IT meets business. E-mail: mohan He is also the author of a recent book on "Offshoring IT Services"

    All rights are reserved. Mohan Babu ("Author") hereby grants permission to use, copy and distribute this document for any NON-PROFIT purpose, provided that the article is used in its complete, UNMODIFIED form including both the above Copyright notice and this permission notice. Reproducing this article by any means, including (but not limited to) printing, copying existing prints, or publishing by electronic or other means, implies full agreement to the above non-profit-use clause. Exceptions to the above, such as including the article in a compendium to be sold for profit, are permitted only by EXPLICIT PRIOR WRITTEN CONSENT of Mohan Babu. 

    Disclaimer: This document represents the personal opinions of the Author, and does not necessarily represent the opinion of the Author's employer, nor anyone other than the Author. This Article was originally published in Express Computers


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