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.
