The last decade has seen a lot of VC investing activity in India. Calendar 2015 particularly stood out with frenzied VC deal making. It led to a very strong perception that VC funding was available for any "good" business idea, & the definition of "good" became very elastic. Students coming out of colleges started favoring venturing over employment. Taking up a job after graduation / post graduation seemed to be for 'dull' folks.
While the Indian entreprenerial spirit has gotten a boost, I get the feeling that it has also created 2 large silos of disgruntled entrepreneurs - those who tried and didn't get any VC funding, & those who got initial VC funding but failed or are failing in their efforts to raise the next round from a new fund investor. Let me elaborate a bit.
The entrepreneurs who ventured out, put in their savings [and their friends' and family's] and got some initial traction, always believed that VCs would be kicking their doors down to fund the next round basis the initial traction. This hope rested on what they saw happening around them. Nobody told them that VC funding can't be taken for granted. Nor that VC funds' investment preferences change as quickly as the weather in the Equatorial belt. Besides, in their wishful thinking, they would compare with one or more other ventures that had scooped VC funding with [in their wisdom] weaker business propositions or had lesser traction which in turn would strengthen their belief that VCs would queue up. When that didn't happen, it left them disgruntled... enough to question the wisdom of VCs. VCs started looking "unsmart".
On the other hand, there is a growing legion of entrepreneurs who raised the first VC round, sometimes from more than one VC fund. They put their backs behind the investment thesis that they had sold [and the VCs had bought], & scaled their business rapidly. However, many of them took their eyes off the ball wrt profitability and business model viability. Initial assumptions in respect of the market opportunity and its immediacy failed to play out. As a result, they needed additional funding to pivot or re-engineer their business, including scaling down operations and scaling back on the growth momentum. After all, there was no point in chasing users / customers and revenues which would add to your burgeoning losses. To their dismay, when they looked at their existing VC backers for additional funding for the transition, they found them uncertain. Often times, the VCs gave them the message that they would be willing to co-invest ONLY if the entrepreneurs could find a new investor. Other times, they blankly refused to support any further...where it seemed to them that it would be good money after bad. This has created the second set of disgruntled entrepreneurs.
My conjecture is that we will hear a lot of stories from such disgruntled entrepreneurs, adding to the pile which already exists and is easily found on the web and social media. 2017 might turn out to be a year when the benefits of VC participation in a venture's growth trajectory [capital + multiple other value adds] could get drowned out in the flood of sob stories from the 2 sets of disgruntled entrepreneurs. This might make many entrepreneurs pause and think, about whether or not they want to raise VC funding. Those who have their backs against the wall will swallow the lump and do the VC rounds. Those who can manage with existing internal accruals by stepping down a bit from the growth accelerator, will perhaps refrain from going out to VCs or will be really, really selective ... the best amongst these should be able to hang out a sign for the VCs saying "By Invite Only".