“Luck, first. Followed by more luck”, was Howard Anderson’s response to the question, “What makes a venture capitalist successful?” Howard is co-founder of Battery Ventures and YankeeTek Ventures. He elaborated that “Picking the right sector is key. If you have the right sector and pick absolutely the best or the second best company, you will make 20X your money; if you pick the right sector and just a good, not great company, you will make 10X your money. If you pick the wrong sector, even the greatest companies will only be worth 4X your money”
Venture capital money is pouring into India, with the result that there is a lot of venture capital chasing after few deals. In 1998, only eight domestic venture capital funds were registered with SEBI, today there are almost a hundred venture funds registered with the SEBI. Further, Table 1 depicts the rapid evolution of private equity financing in India. In the current optimistic landscape, valuations are high, and quality founding teams are hard to find. While luck is one factor that determines success, we talked to several venture capitalists to understand the approach that they have adopted to be successful in such a competitive environment. A few anecdotes exemplify the nature of the deal-making in the current Indian context.
“Once the sectors are selected, the next issue for the venture capitalist is getting deal flow, which is not an easy task. In developed countries like the U.S. there are certain clusters both in

geographical terms or institutional terms where such deal flow can be accessed. But, in an emerging market like India such scenarios are not prevalent. This leads the VC to walk more roads and engage in the ecosystem more intensely,” says Dr Chandrasekar, Executive Director of the Wadhwani Center for entrepreneurship development (WCED)at the ISB. In the absence of a well developed ecosystem that supports entrepreneurs, more than one venture firm has taken a non traditional route to deal sourcing. These firms felt that there were people with innovative, scalable ideas who do not know about how to secure venture funding. We have observed that some venture firms are actively trying to seek out these entrepreneurs. Such entrepreneurs may not have a robust business plan or a competent management team that can help them scale up their operations quickly. This hasn’t discouraged the venture firms, who have instead opted to take on the additional responsibility of handholding the entrepreneur and playing an active role in helping such companies move forward.
A completely different strategy is adopted by a leading venture capitalist as a means to minimise risk. He said that he almost never invests in an entrepreneur unless he or she has been referred by some one from the venture firm’s network such as a banker or another venture firm. When a banker can vouch for an entrepreneur based on his history of regular loan payments, half the