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Advice From Cocoon Ventures, The Newest Dubai VC In India

Cocoon Venture’s managing director and cofounder is Nebu K Abraham. Their corpus size is 15-20 million dollars until 2018 and is actively looking to utilize it. The VC is excited about India’s potential as a big and certainly more approachable ecosystem compared to fund-drenched Silicon Valley. From Cocoon’s first exhibition in India attracting startups, here’s its advice to the entrepreneurs of India.

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What’s the next big trend you think will hit the Indian startup ecosystem?

I believe we can expect a lot of B2B startups in the Indian startup ecosystem in the near future. The B2C segment is already saturated with a number of young and old business competing for market share and the same market space. Moreover, there is no FDI restrictions in the B2B segment which makes it all the more attractive for startups to enter.

Edtech is another area of possible startup interest. There is quite a need of really good use of technology in education sector. A good example for this is the Byju’s, the learning application.

What one big thing must Indian startups do to become sustainable?

The best thing a startup can do to have a sustainable business running is to stay competitive and keep innovating.

By this I mean for startups to constantly keep improving and evolving so the business itself has so much to offer. I believe India is a land of raw talent, which is also very evident in the kind of startups that make an entry every year. So there is no lack of good talent. However to make the best of it is what matters. The same applies in case of other resources.

The best way to exit a startup is:

a. To be acquired (M&A)
b. IPO
c. Prefer to maintain shares in startup if it becomes successful enough to reach IPO status

It is wise to have an exit advisor to counsel you. There are numerous ways in which a startup can exit, however some of the methods depend on how the business itself doing and also the legacy you wish to leave behind. M&A’s is a good way to combine resources to make bigger and more efficient companies.

What’s the one big thing an entrepreneur can do to convince you to invest in their startup?

The most important thing an entrepreneur can do is to present a convincing case. When I say a convincing case, I mean a well thought out plan with the product or service in question. It must have a documented need or demand in the market that it will be addressing.

Before selling your idea be confident in your own solution and let that conviction transpire through your pitch.

Let your startup up pitch lack no statistical information or market knowledge. To have someone put their money onto your business, you need to show enough facts as to why your model will succeed. A prototype or rendering of the product will be great. Another important factor that will be considered is the team. Your team will be one of your greatest assets; a strong managerial team will go a long way.

Is it a waste of time and money for novice entrepreneurs to pay to attend networking events and startup conferences?

Businesses are built and advanced through partnerships. It will be a loss for young entrepreneurs to miss out on getting to know more people in the industry and similar other young entrepreneurs. There is a lot one can learn from such events, there is a tremendous transfer of knowledge and exchange of information, a lot of learning takes place. Moreover, for young startups and entrepreneurs exploring new opportunities, such events are a great place to start. You are not just talking to a lot people, you could possibly be meeting your future business partners.

Cocoon prefers to invest in sustainable business models selling a product with proven demand (like clothes and food for instance) or innovative, slightly wild ideas with a bit more unproven risk?

Cocoon Ventures loves novel ideas and disruptive business models. Although we do invest in areas such as clothes or food for that matter, we love to explore ideas that are fresh and game changers. The Indian startup ecosystem is one that is so rich with ideas and innovative solutions that have real demand in the market even if it is on the wild side. Cocoon Ventures embraces opportunities and hence we do not hesitate to take the less travelled road. The same applies to the kind of investments we make.

How does Cocoon deal with write offs and losing money?

In any business there is risk. Bigger the business, bigger the risk that follows.
We strongly understand failures are always a part of any growing companies. Until one fails, you never know how to stand up and try even harder. We at Cocoon Ventures always try to join with ideas/startups with a solid product and plan. That ensures great opportunity for scalability at an international level and not just a domestic market.

Our team does due diligence and in-depth market research before we make any commitments to make sure the startup is never feeling the stress and that we run together to reduce the risk of failure. So far we have not come across a scenario of a write off but should such a situation arise, we believe in providing more support to the ill-performing startup to do better. Alternately if it has to result in a write-off it we will decide to focus more on the startups showing more promise.

We don’t want to be known as an investor that would squeeze you out because of a loss in our account books, rather as the investor who will accept risk together with the startup.

One piece of advice to novice investors

For investors who are newer in the scene knowing the basics will always make a world of difference. For example, a thorough research of the investee and understanding the market scenario of your industry will help with more accurate product and business analysis.

Consider maintaining a diversified portfolio not just in terms of numbers bust also in terms of the operating industry. Know your level for risk tolerance because more often than not, many overestimate their risk tolerance only to find themselves in an unpleasant situation later on.

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