It was just another day at work for Soham Choksi, who had boarded a metro train to deliver a package from one side of Delhi to another. During the journey, Choksi gave up his seat for a kid he spotted in the crowd. The kid’s father thanked him, noticed his blue shirt, and enquired about his company.
This was two months ago.
In September, the stranger from the train led an angel round of funding in Choksi’s ondemand logistics service Shipsy. Dheeraj Jain, a partner at UK-based hedge fund Redcliffe Capital, was so impressed with Shipsy he got along a bunch of angel investors to invest in the firm in less than a month.
"I somehow believe in destiny," said 24-yearold Choksi, whose company handles 150 orders a day. "Plus, I wanted to raise money from people who can add strategic value. That was my key criteria."
With startups bumping into angel investors in trains, cafes and on sidewalks, early-stage investing in India has become vastly different from what it was a few years ago. The emergence of new sector-focused angel networks, microventure capital firms, online deal-making platforms, and more entrepreneurs-turned-investors is forcing traditional angel networks off the main lane, but the flag-bearers of early-stage investing are finally beginning to buck up.
Mohan Kumar, executive director at Norwest Venture Partners India, said deal flow from traditional angel networks dropped in the past few years. "We rarely hear from them anymore. Instead, accelerators and incubators have started reaching out," said Kumar.
"Entrepreneurs have become selective about raising capital from angel networks and are cherry-picking individual angels who can add value to their venture," said Sameer Brij Verma, director and junior partner at Nexus Venture Partners. "Most of the venture capital firms in the country have also started seed programs targeted at very early stage ventures."
According to startup data tracker Tracxn, seed funds have become more active in pursuing early-stage deals, investing $60 million 9(Rs 390 cr) across 152 transactions this year, almost double that in 2014. Angel networks, too, doubled their number of deals, but to 104 this year from 50 in 2014. They have invested $35.5 million so far this year.
The traditional angel networks understand they have a problem, and are working on it."We have begun to accept that there are new forms of competition and substitutes to our business," said Sameer Mehta, cofounder of Chennai Angels. The network, founded in 2007, has started venturing into tier 2 cities like Tiruchirappalli, Madurai and Coimbatore to tap upcoming investors early on in their life cycle.
New Delhi-based Indian Angel Network, the country’s oldest and largest, said its more than 350 members have started looking beyond technology startups to find investment opportunities in the food, semiconductor, medical sciences and other sectors.
"We plan to get into newer geographies as well," said Padmaja Ruparel, cofounder of Indian Angel Network, adding that the platform now closes a deal every 10 days.
Mumbai Angels, another early angel network, is reaching out to universities and accelerators to be able to strike deals with promising startups early on, and is also planning an online platform to help its member-investors manage their portfolios.
The networks are also trying to eliminate some of the common problems they hear from entrepreneurs, such as the time-consuming bureaucratic process of getting permissions from multiple shareholder-angel investors. These are also trying to make term-sheets less onerous and ensure faster deal closure. All three angel networks said they now take an average of two months to wire money to startups.
The bugbears of the traditional investor networks are the new options that have emerged in the form of online deal-making platforms. LetsVenture has smashed walled gardens that angel networks had erected, allowing qualified persons with money to invest through the platform for free. Three-year-old ah!Ventures offers a hybrid model of online discovery and offline deal closure, to speed up processes.
Globevestor, backed by Tim Draper, founder of venture capital firm Draper Fisher Jurvetson, operates like a fund. It allows global angels to invest, enables digital signatures of documents, and handholds portfolio companies through the growth phase.
There is also competition from offline angel networks looking to fund deals in specific sectors. Infuse Ventures backs only clean-tech companies. CIO Angel Network has chief information officers of enterprises as members, who invest only in technology-based business-to-business startups.
The CIO Angel network was started by Indian Angel Network member Sanjay Mehta, and another former IAN member Rehan Yar Khan has started Orios Venture Partners—a worrying trend for India’s angel ecosystem, said professor G Sabarinathan, chairperson of the NS Raghavan Centre for Entrepreneurial Learning at the Indian Institute of Management, Bengaluru.
According to data from Venture Intelligence, the number of active angel investors, or those with at least five early-stage deals, has stagnated at 50 since 2013-14. "It raises the question of sustainability of angel networks," he said. The bigger problem to focus on, is the lack of active angels who can mentor startups and influence new investors, said Kris Gopalakrishnan, Infosys cofounder and IAN member. "At the end of the day, I see all these networks as complementary," he said. "All kinds of models can co-exist in India today because there is a need of early-stage capital."
