If an Entrepreneur can rely on Friends or Family, why should he take money from an investor?

Short Description
In a candid chat with Franchise India, Hemendra Mathur, MD, SEAF Indian Investment Advisor, talks about the apprehensions that entrepreneurs have about Indian investors and the value-add that investors provide entrepreneurs when associated.
  • FIL
Restaurant India

Throw some light on the challenges Indian investors face.

I think the private equity space is changing in India, more and more entrepreneurs are asking the investors some tough questions. Good entrepreneur and good businesses, in particular, have multiple revenues to raise funds. So when investors approach them, they normally ask, “If I can rely on my friends or family or bank, why should I take money from you?” That mindset is the biggest challenge for us and we need to demonstrate that kind of value ad.

When you work with entrepreneurs, in how many ways do you add value to businesses?

We typically work with entrepreneurs to put the right organisational structure in place. The value ad comes in different forms.

  • The first and foremost role we play is in having financial control and cooperate governance since we invest in early stage companies or small scale entrepreneur-driven businesses. This is one area which is often overlooked. So, we set targets not only in terms of revenue but also in terms of profitability.
  • The second role we play in adding value is in providing decision making tools.
  • Last, but not the least, is looking for good talent since this is one area which any growing industry, like food services, requires. We support them to grow and help them identify people at various levels.

What all are the areas where can you not add value in a business?      

If are running a restaurant, I definitely can’t bring value-add in deciding whether you should go a high street or a mall; whether you should go on the lobby level or in the food court; the kind of decor you should have, and; the cuisine you should offer etc. That is the expertise of the entrepreneur. Since we are investing in good entrepreneurs and good business, we do expect them to be the master of thread that they are already doing.

Are you also looking at international linkages as well?

We provide international linkages, if it is relevant. As of now, I am not aware of any international investors in food services, but have worked with lots of investee companies to explore markets outside India and get them connected with the right people here.

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