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March 12, 2005

"Early stage investments still make sense"

Ravi Chiruvolu, a general partner at Charter Ventures, provides a reminder of why early stage companies, while currently out of fashion, are an attractive investment opportunity in his column for Venture Capital Journal:
Not only are valuations more attractive, not only is deal flow more robust, not only is there less competition for entrepreneurs to accept term sheets, but investing earlier cuts to the very notion of why most VCs do what they do. To create and add value within organizations where bandwidth and talent is sorely needed. To take risk in the hope of creating sustainable businesses where quality output, increased hiring, and contributing to the overall health of the economy all go hand in hand. To prime and polish even more companies in order to create an ever better and more efficient channel of mid-to-late-stage startups for further follow-on investing by larger funds.

Thus, to add talent, resources and capital at the earliest stages of company formation essentially adds all of that, and more, to the entire food chain of startups within our industry. For these reasons we should start filling the gaps at the earliest stages of venture capital, helping seed-stage companies keep pace with the money being raised by mid-stage and late-stage companies, allowing startups of all sizes to participate in the much awaited and well-deserved rebound in our industry.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.