Raising funds tough ahead, says Sequoia MD Lakhani

Shailesh Lakhani believes raising money should be difficult, otherwise everyone would do it

Just because you are an entrepreneur with a degree from a premier institute, hyper app-download statistics and a team full of coders, you won’t get a cheque from Sequoia Capital.

Though it is sitting on a cash pile of more than of $900 million (nearly Rs 6,000 crore), it won’t fund you easily because scrutiny is on the rise and fair valuations are back.

Speaking at the Unpluggd start-up conference in Bengaluru on Friday, Shailesh Lakhani, managing director, Sequoia Capital, said raising capital isn’t going to be harder just in 2016, but will be the norm going forward.

“It’s going to be hard to raise funds as it should be. If raising funds was easy, everyone would do it,” he said.

This, however, doesn’t mean the investment market in India isn’t going to see stratospheric growth.

Though this year might see a lower amount being invested in start-ups and entrepreneurs; markets are expected to pick up later this year or early next year, while retaining good practices that investors are now exercising.

“I think most venture funds in India have raised capital in the past six to eight months, so they have a fair bit of dry powder. Everyone is still excited about India’s macro picture of mobile users, internet, e-commerce and the broad trends that we’ve all talked about in the past,” added Lakhani.

Indian start-ups raised over $5 billion last year and many firms used this money to splurge on buying customers without acquiring their loyalty. A few of them have shut shop, while others have shifted their business models.

While many have blamed founders for the lack of sight to think that investments were endless, Lakhani put some of the blame back on the investors. Apart from just blindly handing out cheques to entrepreneurs, growth was something investors valued a lot during 2015, fuelling founders to blow money on marketing.

“Last year you were rewarded for market share and you had to run that sprint. I don’t think any founders that did some crazy discounting were stupid people. They were doing exactly what they were being rewarded for. Different phases in the market mean you have to do different things,” said Lakhani.