Investor / Entrepreneur – Who is the horse and who is the cart?

The Indian startup eco-system is around 10 years old and the two main constituents of this eco-system are – professional entrepreneurs (*1) and investors (angels / VCs). The growth in numbers in both these groups has been quite phenomenal; specially in the last 2 years. But despite the rise in numbers, we have not seen enough number of successful startups, that either have achieved high revenue numbers or have achieved attractive exits.

This issue of creating successful startups is very closely related to the business model of my current venture – The Morpheus, so I think about it a lot. While there are a number of important issues that need to be addressed, one key issue is the dynamics between Investors & Entrepreneurs. And there is a big fallacy in the way the two parties view each other.

  • Fallacy: Investors are the horses and Entrepreneurs are the carts 
  • Truth: Entrepreneurs are the horses and Investors are the carts

For real progress to happen the horse should come in front of the the cart and pull it forward. If by mistake the cart comes before the horse – there wont be any significant movement, as the horse will be pushing from behind. This fallacy is today plaguing most entrepreneurial ventures – funded and non-funded and hence little success has been achieved in last 10 years.

Majority of the folks believe that the Investor is the horse and the entrepreneur is the cart. Why? Because the investor is the source of  money – which is believed to be the starting point. And actually it looks pretty logical – you do need money to get started. But if you look carefully you can see that this thought process is entirely wrong. In reality its the entrepreneur who is the prime mover in a startup – he is the horse. Everyone else – angels / VCs / accelerators/ incubators are the various forms of carts and the carts need the horses to pull them and not the other way around.

This fallacy is leading to a bunch of  problems in the Indian eco-system and hence we have not made much progress in creating real start-ups that execute the classical path of – bootstrap / build great stuff / raise money / keep growing / raise more money and reach the finish line with an exit or start making serious revenues. If you look closely at the 10 odd year history of start-up investments in India – there are no profitable exits to show – except Makemytrip. (I am of course not counting the PE stage investments done by some venture capital firms). I believe the main reason “lack of startup performence” is the same fallacy.

“Cart” type Entrepreneurs  

  • 90-95% of folks who plan to do start-ups believe that they are the cart and so they need horses (Investors) to get them started and unless they get an Investor pretty early (or even before starting) they really cannot make much progress
  • These people spend a lot effort looking for funding during the initial days of the start-up
  • Which essentially means they are not putting all the effort into building the product or doing sales
  • As a result most of these start-ups make poor progress on two most important aspects – product and sales and eventually die 
  • Some of them actually do manage to raise money because of their Miss India type backgrounds 
    • Ex-CEO of so & so company
    • Worked at top tier consulting firm
    • Alumni of certain institute
    • And other such reasons 
  • Since these guys haven’t build anything great before they raised money, and now they believe have found the horse which will pull them – they become complacent. Such investments don’t really pay off the investor or the entrepreneur.

Me and my co-founder, Nandini, were in the same category of “cart” entrepreneurs when we were starting madhouse. We spent the initial months creating B-plans / spreadsheets / projections / market study and all that jazz, spent couple of months meeting the investors. We would have died in that Chakraviuh. But were extremely lucky to have a great mentor who helped us see truth – which is “If you build something great, money will find you“. That is when we realized that we come first – we are horses. The investors come later.

“Horse” type Investors

  • These are investors who believe they are the horses and whomever they fund is only a cart
  • So who they invest in does not matter that much since they believe can pull the cart to the finish line
  • In this mindset they end up funding all kind of wrong folks who also believed they are carts
  • So you have a cart (investor) who thinks its a horse and tries to do a lot of pulling – of course with no visible results and a potential horse (entreprenuer) who thinks its a cart and hence doesn’t pull – and the result is disastrous anyways
  • We see many such deals happen around us and often wonder “How come these guys raised money?”
  • Just after the deal happens there are celebrations and the founders feel they have arrived and get on with the job of burning the cash. For a while no one notices and some time later the companies die because of lack of progres
  • Many investors get fascinated by trends and start believing this is where the next big company will come from. And following the horse mentality they look for start-ups in that domain and even tell entrepreneurs whom they meet to change their business & go after this trend
  • Now when these guys meet the real entrepreneur – who knows he is a horse – they fail to recognize the opportunity and pass on the deal

All through my madhouse days we were being told by would be investors with a lot of authority about how we should build our business. Just before I started Morpheus I was asked by a couple of guys to “start something like mGinger” which was a heavily contested deal at that time – but has been long forgotten

Who can fix things? 

“Horse” type entrepreneurs

  • We need more entrepreneurs who know that they are the horses and hence take the ownership of pulling the cart – which includes the business and the investors
  • They start their journey as a young horse, gain strength and speed along the way – they become strong horses
  • Irrespective of whether they have  cartsc(investors) or not they win their races

“Cart” type investors

  • We also need more investors who clearly understand that entrepreneur is the horse / the prime mover / the creator
  • They respect the entrepreneurs and look for horses that have the potential to run a long race and win
  • They look for horses that have shown promise in the race so far
  • They do not try to manage the show but provide the right kind of support

We already have a few folks in both of the above categories. They are doing their respective jobs silently & do not really make much noise. The real trend is on their side. Eventually their successes will correct the fallacy and I am sure India will produce a great percentage of good quality, successful start-ups and good quality investors who invest in those start-ups!


1. Professional entrepreneur is someone who has gained knowledge & experience through education / work and he combines that with his intelligence, passion, hard work to create a venture.