Share This Post

2 Comments

1. 

   Rishi March 15, 2014, 2:58 pm

   I’m guessing you’re not talking about restaurant or recruitment technology companies; there are plenty of VCs/Angels who do that. I don’t think VCs completely avoid Restaurant and/or Recruitment businesses.

   Let’s take the case of restaurant businesses. There are few examples from India that come to my mind immediately (Yo China – Matrix Partners, Mast Kalandar – Helion). Then there is a different type of specialized food businesses (such as Missisippy — Blume Ventures) that VCs have invested in. Although if you compare to other hot sectors like software, mobile, tech. etc., the numbers of investors focused on such businesses is very less.

   Here’s what I think:

   > The businesses you mentioned are traditionally classified as “services” and most VCs/Angels avoid services (unless they become huge and reach growth stage). The reason being services, while being relatively easy to turn profitable, is not easily scalable. They are in the business of (less probable) abnormal returns from risky bets; they don’t like average (more probable) returns from decent bets.

   > If you notice the restaurant/food businesses I mentioned have a different business model — they are either quick service (easily replicated and scalable) or have online channels/enabled by technology. So you need to figure out an angle from a business model standpoint that entices investors.

   > Not all VCs invest in all sectors. You need to do your research and find out who invests in such sectors. Best place to start is VC firm portfolio pages/AngelList.

   > For such businesses, if you don’t find a VC, find High Net Worth individuals who might be willing to invest. If you have enough scale, you can also approach Infrastructure funds/PE firms; but the bar for PE firms is very high.

   > If it’s a single restaurant model, bank loans/family and friends are your best bets.

   Hope this helps.

2. 

   Alok Rodinhood Kejriwal March 16, 2014, 5:53 am

   Not really, because these are services businesses that generate cash and are challenges to scale.

   A restaurant CHAIN may get funded but by PE and thats after a long history

   Also see:

    

    

   Products Vs. Services – The Smarties Guide from Alok Rodinhood Kejriwal

Comments are now closed for this post.