Investment
is like soil which requires care and nutrients to help plants to grow.
Sometimes it acts as a soft bed and on other occasions it works as a catalyst.
In financial terms, investment means financial input along with other support
directly connected with the growth of a company. It is well said “demand and
supply determine the economic growth”. This fact exactly explains the flow of
investments in innovation industry. An innovation can be described as something
new which is majorly useful but did not exist till sometime back. An innovation
may happen in any sector or industry viz. IT, FMCG, Education, Automobiles,
Communication.
Investment
in an industry may depend upon different factors which can be grouped as:
PROSPECT OF
GROWTH: The probability of an
investment is directly proportional to the profitability of an innovation. An
innovation having an early success is always likely to attract huge
investments. In the recent past, we have seen that companies that have come up
with new and innovative concepts like Amazon, Flipkart, Snapdeal, Uber, OLX,
Quikr, Paytm, have attracted huge investments. Investors are always attracted
to invest in innovations where short term gains can be seen. Not only that, investments
can also be seen in industries such as fashion, IT and Real Estate. The concept of investment remains the same -
whosoever invests money, looks for growth. An investor takes a call on the
period of investment which in turn determines the expected returns. Largely,
one can say ‘Investments In Innovations’
go hand in hand but at the same time the investment are equally made in other running
industries. Investments were made in more than 662 start ups in the first nine
months of 2015 i.e. till September 2015 which means - 2.42 deals a day.
QUANTUM OF FUNDS: The requirement of fund determines the level of
investor willing to enter into an investment. It has been a common practice
that an investor makes an investment in different scales depending upon the
requirement of the start up. Sometimes a big investor invests in startups with
low investment and then takes up further investment to scale its growth. In countries
like India, startups have boomed and attracted huge investments. In the first
half of 2015, startups gained investments of more than $3.5 billon. As per the
number of investors in the total deals are concerned, nearly half of the deals
of startup investments were for less than $20,000. A big volume of private
equity has been invested in such deals. Apparently, startups looking for
smaller funds attract more investors rather than startups aiming for big funds.
LOCATION: The location of a startup plays a pivotal role in
attracting investments. This further determines the growth and the relationship
between the two. Remotely located startups grow only if they are attached to a
particular sector like agriculture, else they struggle hard to seek funds. The growth
of startups has apparently been more in metropolitan cities.
RISK: The fear of losing investment is balanced by the allurement
to multiply the investments. Investors look out for a balance between the two.
Investment is indirectly proportional to risk and directly proportional to
allurement. No one invests in projects where risk of losing investment is
higher. Therefore, investors prefer to draw a line where risk can be evaluated
for them to take decision about investment. The chances of investments being at
peril have risen due to the way startups are mushrooming. With such an increase
in the number of startups, an optimum level is likely to be reached. Investors
have to become more cautious.
ACCESSIBILITY: Startups have boomed in countries like India at
places like Indian Silicon Valley i.e. Bengaluru and at the best in big
metropolitan cities like Delhi, Mumbai. Investors are equally available in other
areas where the startup projects are coming up. In all events, the close
interaction between investors and startups is always preferred. The more accessible
a startup is to the investor, the more viability of investments and the higher
chances of growth.
FASCINATION: An unexpected increase is happening where every
entrepreneur is contemplating or has contemplated to get into startup venture. Similarly,
every investor is aiming at one or the other startup to multiply the investments.
The boom of new ventures with upcoming projects like e-commerce, health,
delivering consumer services/goods, has magnificently shown a rosy picture to
the investors which seems like a fascination. On the other end the
lackadaisical of investment opportunities in real estate, yellow
metal and share market has further widened the scope of investments in
startups.
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