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In the booming age of startups becoming unicorns and not remaining so, it is crucial to evaluate your investments correctly. India is claiming exception to the impending recession with the reduced Wholesale Price Index (“WPI”).

This could mean that the market conditions for startups in India may not be as challenging as, North America.

Although, there are factors that may lead to a decline in your investment value. This blog, has the support initiatives from GoI but are these sufficient to beat the uncertainties?

In G.S.R. notification 127 (E), GoI has notified entities which can be regarded as a startup. The eligibility criteria include –

If you are evaluating the investment options, one rule ingrained in the investor’s mind is “Higher the risks, better the rewards.” But is that really true with startup investments?

With this, the top 5 risks identified for startup investment are hereunder –

And as bad as it may sound, some founders do face what is popularly coined as “Founder’s syndrome,” which hampers growth as the founder struggles or refuses to change gear and adopt a new mindset, approach, or skill set for the organizational growth and as the strategic context changes.

So, why invest in a startup?

With the mandatory risk disclaimer being given at the time of inviting investments, it is crucial to consider and evaluate the following while deciding on the opportunity –

  1. Is the market ready or is seeking the product/service?
  2. Is the company scalable?
  3. What are the entry barriers including well-established competitors and their goodwill?
  4. What is the company’s project financial growth over the next 5 years?
  5. Are the management and team qualified to run the business effectively?
  6. Does the investment fit personal preference?

Answering the above questions positively will help mitigate some eminent risks but it may not fully cover for all. 

This is only for informational purposes. Nothing contained herein is, purports to be, or is intended as legal advice and you should seek legal advice before you act on any information or view expressed herein. Endeavoured to accurately reflect the subject matter of this alert, without any representation or warranty, express or implied, in any manner whatsoever in connection with the contents of this. This isn’t an attempt to solicit business in any manner.



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