Investing is an art and not everyone is an artist. Thousands of questions erupt in mind while investing such as where to invest, what stage should be invested, and more importantly either invest in equity or debt.
One thing on everyone's mind is that if one invests in equity, one will get likely 10 per cent to 15 per cent pre-tax returns and if one invests in debt, one will get between 8 per cent to 10 per cent maybe. So it's always challenging to decide until or unless there are some parameters.
Ratna Mehta, CEO and managing director of Fundalogical Ventures, easily explained the case. She said that it depends on the timing of investment in a company. “If one has to invest in pre-seed, one has to be very sure that he/she has a portfolio of assets. Because you want to know what is coming,” she added.
She emphasised, diversifying the investment for a better return because that may create a balance between differently performing companies. “ At the early stage, you generally have some companies that will perform okay. But you might have 2 to 5 times, 6, 7 times returns across the portfolio,” she stated.
Maneesh Shrivastava, co-founder of Alphavalue Consulting, talked about profitability in investing. A profitability, that has an impact to cover all your wealth. “If you invest in a company, whether it can bring the returns of that entire portfolio or not,” He added.
Maneesh explained his meaning of profitability. He added, “If I run a USD 100 million fund, which is an 820 crore fund. I have to invest 20, 30 crore in one company then I will look at that company that can return that entire 800 crore to me. That would be the probability factor.”
Futuristic Companies Welcome Investment
Experts also denied random investing techniques. They said that some people invest in 200 companies without looking at what the numbers are saying about the company. But experts are in opinion to view whether the company is futuristic or not. It's going to disrupt something in the market or not. That will create some sort of more factor that is there in the market.
Interestingly experts wanted certain barriers in companies to invest. One of the experts said, “If there are no barriers to entry in a company, we do not even touch it. There has to be significant barriers to entry.”
Don't Be Trapped In Marketing
Sometimes investors get stuck in the company's marketing techniques, especially retail investors. Many other companies in tier II and III cities have been working for a long time because they are so obsessed with the Jo Dikta Hai Wohi Dikta Wala concept. However, panelists stated one shouldn't focus on such startups whose marketing is very good. There are a lot of companies whose visibility is zero and performing well.
Apart from just looking at good businesses, there are other factors too that drives one to invest in a particular startup. And the important one is the potential and character of the founders. Mehta said, “I think if you back the right guy, whether the industry is going to its cycles, you will be able to make money, through the ups and downs.”
A panel of experts including Ratna Mehta, Maneesh Shrivastava, Khalid Wani, Aditya Arora, and Vishal Gandhi discussed all these permutations and combinations at the PHDCCI event.
