Strong tailwinds are blowing that is shaping the startup ecosystem in the country in general and in the North Eastern Region (NER) in particular. Riding on the government fillips, PE/VC deals in India have touched a record high and the ecosystem players are responding to the shifting gears of entrepreneurial action. As the country witnesses mushrooming of new and innovative ventures, the NER that has hitherto been lagging in the startup movement is slowly but surely showing signs of adaptive evolution.

NEVF leads the way

The North East Venture Fund (NEVF) set up as a dedicated Venture Fund for the NER with a corpus of Rs 100 crore has so far closed investments into thirty plus ventures across sectors like healthcare, artificial intelligence, adventure tourism, handicrafts, processing of exotic foods and aggregation of services that make up an already diversified portfolio of the fund. Within a short span of time, the NEVF has been able to generate significant enthusiasm among the entrepreneurs from the region.

Navigating the ‘Baader–Meinhof phenomenon’ in Guwahati

Being active in the venture investing in the NER and being based out of Guwahati, Assam, India’s gateway to the ASEAN, gives the frequency illusion of proliferation of funds, startups and incubators. But then slowly one begins to realize that this is the reality. This is a new phenomenon for the region and a welcome change. Navigating this feeling of apparent cognitive bias of the startup ecosystem is indeed feel-good but needs to be handled with caution.

As the investment funds, startups, incubators and accelerators proliferate in the NER, a cross network collaborative effort will provide clear pathways to scale. There has to be increased sharing of investment deals and ideas and co-investing and co-accelerating if the need be.

Venture capital is about delicately balancing growth aspirations with realism

Venture capital for startups in emerging markets act like a catalyst. However, most early-stage investors routinely spray small amounts of money – usually just a couple hundred thousand dollars at a time – into the market and pray that one of their investments will someday remunerate their entire fund. But there has to be more to building a thriving startup-investor ecosystem than merely spraying capital and praying for explosive growth from newbie founders.

Instead venture funding is:

1. More about guiding startups through the Valley of Death

Raising funds is just the first hurdle. In fact, in many ways it is not even a hurdle. The struggle then is to help startups that have raised their first round of capital make it through the Valley of Death. The challenge is to provide strategic support and help them keep pace with their growth targets and navigate through the growth challenges.

At NEVF we have been interacting with many aspiring and some established serial entrepreneurs. While apparently access to funds appears to be a challenge, most actually seek the mentoring and strategic support, access to markets and networks etc.

2. Much beyond chasing the J-Curve

According to CB Insights, 70% of tech startups fail within 20 months of their first funding round. In fact, if we take all startups, less than a third survive beyond 5 years. First-time founders are not prepared for the reality that they will need more money to actually reach the growth targets demanded by investors. Startups fall victim to chasing the J-Curve and most of which comes from the aggressive alpha-seeking by the venture capital funds.

It is indeed heartening to see the flurry of transactions in the startup space in NER. At NEVF we are committed to provide patient capital and look to create entrepreneurial success stories and examples from this region.  Let this mark the beginning of venture investing in the NER.