Sequoia India : Learn more about Top Investments in India
- 12 December 2020 | 789 Views | By Abhinav Mishra
The Indian startup ecosystem has completely changed in the last decade and thousands of startups have made space for themselves in various sectors. One of the reasons for this growth is the trust shown by the angel investors and venture capitalists in the Indian market. For example, 10 years back the number of angel investors in India was only 50 and in 2020 the number is over 2000.
A startup needs an investor to expand and get an edge over its competitors. There is a startup in Pune, Bhadepay which provides you furniture on rent. Do you know a couple of more startups who are in the furniture renting business? You know about others and not Bhadepay because others are funded and Bhadepay is still looking for funding and in the very initial stage. The founders have limited money to put from their pocket and hence an investor is a necessity for a startup at some point in time.
In this article, we will talk about investors and will discuss Sequoia India in detail to understand investors and their mindset.
How do I find investors?
Every startup founder has this same question – How do I find investors? Before you get to the answer to the question, you need to know that your startups should be investor ready. The initial focus should be on getting more customers, customer satisfaction, reviews, etc. If your startup is investor-ready, then you can try the below methods to find investors and investments.
Friends and Family – You need capital to run a business from day 1 but profit will take some time. The first place you should look for investment is family and friends since they are the people who trust you. They fund because they trust you, they have nothing to do with your business.
Events – Business success is about visibility and attending events is a great way to achieve it. You should look out for events in your cities and try to be part of those where investors are invited. Attend as many events as possible and interact with maximum possible investors.
Social Media – Another way to get visibility is through social media. Just like you are looking for investors, investors are looking for a good business to invest in. Post all good that is happening with your business on social media especially on LinkedIn and Twitter.
Crowdfunding – There are a lot of platforms specifically for this. You can share information about your startup on such platforms, and if someone finds it interesting, they put in their money.
Email – There are a lot of websites that share the contact information of investors. You can get the contact information and put the effort into creating a picture-perfect email with your pitch. The success rate is usually shallow with emails, but your job is to try every way to get the interest of investors.
What are the types of investors?
You don’t need an investor just to get the funds, it is much more than that. However, there will be certain investors who will only be interested in providing you funds in return for equity. As a founder, you need to know what your expectations from an investor are. Let us talk about the different types of investors you can approach depending on the stage your startup is in.
Personal investors – During the initial stage, you will depend on your close friends and family members for funding. These types of investors are called personal investors. Though you cannot and should not expect huge funding from personal investors. But the amount should be enough to keep you going.
Angel Investors – Ever wondered why the word angel? Angel investors will invest in the initial stage of your startup so that your business can grow. Their primary motive is not to get the profit and hence the name angel.
Venture Capitalists – These are investors who offer you capital for your startup if they believe the business has long term growth potential. Venture capitalists are normally well-off investors, investment banks, and any other financial institutions. In most cases, a VC would ask for equity in the company and get an overall say in the company’s decisions.
How to Convince an Investor to Invest in my Business?
If you are planning to start pitching investors for funding, below are some points that may help you in your journey.
The edge – When you pitch to an investor, the initial response could be completely different if the investor has already heard about your startup – maybe at some event or through social media. Marketing is very important before you start pitching.
Let numbers speak – Every founder has good things to say about his business. The investors are not looking for glorified and beautifully written pitch but are interested in the growth numbers and market research.
Keep things realistic – Keep your projections and growth number realistic and try to convince the investor that those are certainly achievable.
Show the feedback – Investors will only put money in your business for growth when they know the existing customers are fully satisfied. No matter how much money you put in the business, if the initial customers’ reviews are not good, the growth is difficult. Show them the customers’ testimonials and maybe talk about some specific scenarios where the team went out of the way for customer satisfaction.
Now that you know a bit about the investors let us talk about Sequoia and how they work in India.
How Does Sequoia Invest?
Sequoia Capital is an American venture capital firm that focuses on the technology industry. It has backed companies that now control $1.4 trillion of combined stock market value. At present they are pumping funds and their expertise into some of the strongest economies in the world. They encourage the international expansion of some of the brightest and best ideas from each corner of the globe.
Even in India, they are one of the biggest venture capital firms. We are going to talk about them in detail in this article.
Here are the things you need to know about Sequoia to understand how they invest:
Market, not people – If you study the companies they have invested in you can say they don’t aim to create new markets for a product but they like to exploit the existing market in the early stages. Their main focus is on the dynamics associated with an idea and the market size and not you, the founder.
Be different – You don’t need to have a better idea than some other company to get Sequoia’s attention. They prefer an unconventional idea that is innovative in solving the upcoming problems.
Funding as you go – Sequoia will not provide you with all the funding you are looking for in one go. They usually provide partial funding so they can monitor the founder and the business before giving you another partial cheque.
No Dragging – If you don’t perform and meet your milestones, Sequoia capital may withdraw their funds or stop funding to limit their damages. As per the founder of Sequoia, the company has closed one-fifth of the businesses in which it has invested across all markets.
What Sectors does Sequoia Invest In?
The five biggest markets in which Sequoia invests worldwide are software, enterprise software, internet, mobile, and IT. Sequoia India invests heavily in the healthcare and e-commerce sectors quite prolifically but with a striking slant toward tech applications in these areas.
|Software||BandProtocol||It is a stack of easy-to-use tools for developers to make token-powered communities.|
|Internet||Groww||An online investment platform.|
|Internet||Unacademy||An educational platform that is free for everyone, featuring the largest range of free educational resources in India.|
|Mobile||DailyNinja||A delivery service for milk and groceries, linking customers to local brick and mortar stores.|
|Healthcare||1mg||An online pharmacy network.|
|Ecommerce||Healthkart||A one-stop-shop for health, fitness, and beauty products.|
How much Sequoia India invests?
The firm invests somewhere between $100K and $1 million in seed companies, between $1 million and $10 million in early-stage startups, and between $10 million and $100 million at later stages.
Who is the Best Investor in India?
Sequoia is one of the best investors in India, if you are looking to add a few more names to the list, you can go through the below names:
People Group – People Group has backed up almost 50 startups in India including the very lucrative Ola Cabs. Domains they invest in are Technology, Consumer Internet, Mobile, Healthcare, and SaaS.
Manipal Global Education – is led by T.V. Mohandas Pai, former Infosys Director. The firm focuses mostly on early-stage investments in technology startups.
FreshWorks – If you have an idea that falls right in their niche (SAAS, customer support, Consumer Internet, Education, Enterprise Softwares, Content & Listing Platforms) and are looking for an angel investor, then you should keep FreshWorks on top of your list.
Which Investment Gives the Best Returns?
We just mentioned Sequoia is investing thousands and millions of dollars in startups. How about the return? Investment always comes with risk and companies like Sequoia are experts in managing risk. They invest in 10 companies (for example) and they know upfront that only one or two of them will give them extraordinary returns after 10 years.
To understand how much returns they make let say an investor invests Rs 10 lacs in 10 different startups with a 10% stake (valued at 1 crore) and makes no further investment in the next 10 years. After 10 years, one of them does exceptionally well and goes public and the worth of the money is Rs 100 crores. How much did the investor make? 10 crores. He invested 1 crore (10 companies) and got 10 crores that make it a return of 10X. The numbers taken are very moderate and when a company goes public investors can make up to 100X or even more.
Based on the numbers, you can say, the venture capitalists get the best returns on their investments. However, it is important to note they have expertise in such risky investments, they have a team that does a detailed analysis of business and market. Individual investors should look for different asset classes for investment for the best returns.
You can do so by going through the below.