Do early stage startups face the risk of getting duped by Investors? Read what experts say..

Indian startup ecosystem are growing at a fast pace as youths are aspiring to do something of their own. But it has its own risk of getting duped by investors. The article is a must read for early stage start-ups in order to make them alert about the issues that might plague them..

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Startup ecosystem growing at a fast pace

Indian Startup ecosystem is growing at a very fast pace and is now on 23rd rank in top hundred countries.As per the report of startup India, everyday 2 to 3 startups are born. With this is also born a few dreams every day.And due to the growth and development of this, overall system is growing at the rate of 15% Y-O-Y and so the mentors and accelerators are growing at the rate of 11%.

Big Equity game

So, when we look around, we will find that things are developing. But the harsh truth is that this sudden boom in the startup ecosystem is also increasing the number of frauds and cheatings with such innocent startups and hence this plays a significant role in the failure of the startups.
Its generally decided that most of the so called investors, and especially if the investment is at the first stage, then they try to take as much equity as they can from the startups which can range from 20 % to maybe 90% as well, and yes trust me this happens.
So the basic theory of such people is that they will either take the maximum shareholding benefit by asking such a type of equity percentage that for the next round of investment, no new investor shows interest for further funding the startup.
(Saransh Kumar)

Startups getting duped

The latest trending cheating and mis-commitment that is happening with the startups is that the investors will do a big amount of deal, then will get the term sheet signed and then if the commitment is of 100%, they will just pay maybe 10% and the rest will never be paid! Yes, trust me this happens.
Also, I have seen that there are many investors who issues cheques to startups and such cheques bounce and then the investors either do not receive call or ignore the startups.

Pressure falls on startups

So this is something that we should think about seriously because due to funding and mis-commitment problem, every headache and market pressure comes to the head of the startup founder and not the investor. All the planning that the startup does is based on the amount that has been discussed in the term sheet.
So you can easily imagine that how much it would hurt and how much depression would come to startups who fail, who are cheated or betrayed.
So to tackle this problem, there is no such particular body or no such organization that stands with such startups, listens to them or helps them to fight against such greedy investors.

Young Atmanirbhar Foundation helping startups

This is where Young Atmanirbhar Foundation steps in. Although the foundation is basically working towards education and health development but is also taking up the issue of cheating that happens with startups similarly.
Even Young Atmanirbhar Foundation is in talks with a legal agency who will henceforth deal will all the legal issues that the startups have to face and will help them to give a strong punishment to such investors or mentors and publicly reveal their face in the social media.
Also, Young Atmanirbhar Foundation is an affiliate member of Indian Chamber of Commerce and will definitely go ahead and fight for the young and innocent startups and their rights and will stand with them during their tough times and give them mental and moral support.

Saransh Kumar is startup enthusiast, an IIM Kozhikode student who has been into this startups since almost 9 years and has seen multiple ups and downs, success and failures during this journey. He has an experience of raising two rounds of funding for his startups and seen very closely that how investors play with the emotions of the startups and then leave their hands in the mid way.

Views expressed by the author are personal

Keywords: start-ups, chalgenius, investors, investments, startup ecosystem
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