Hyd can breed quality startups

There has been an emergence of stalwarts like Ratan Tata and Mohandas Pai as angel investors who are now investing in new-age ventures. Also, first-generation entrepreneurs like Flipkart and Snapdeal founders have turned into angels and are now investing in scalable startups. Where do you see this trend going?
Lately, India has become a hot bed for startups and entrepreneurs. Huge amount of money is being pumped into startups from all corners and now the government support has brought in a fresh air to the thriving ecosystem. The number of active investors, both angels and venture capitalists, has grown significantly in the last two years. This growth in the angel investing activity, led by high-networth individuals, isn’t unusual given that the country’s startup funding market has grown exponentially over the past few years. First-generation entrepreneurs invest in startups for mainly two reasons – they have a passion for startups and they want to give back the learning they have received in their entrepreneurial journey so far. Many of them have finished their cycle of investments in their ventures and understand the power and value of entrepreneurship. Therefore, they are increasingly engaging with startups and investing in them. With the growing startup ecosystem in the country, the trend is here to stay for some time.

Of late, angel investors are co-investing with VCs to lead larger rounds. In 2015, angel investors have clubbed investments with institutional investors, primarily VC firms, across more than 90 deals worth over $400 million. Is IAN game for this?
While VC investors bring a degree of stability and the ability to invest large amount of money in later rounds, angel investor brings in the perspective on scalability, business operations and mentorship. VC firms focused on seed-stage funding are beginning to bring in financing in sizeable numbers, too. These seed funds are backed by institutional investors and normally enter after a business has raised angel funding. At IAN, about 10 per cent of our deals have so far been co-investments with VC firms. As an ecosystem partner, IAN has co-invested with VCs and other angel group globally like inventus, Blume ,IDG and many more. They are about 10 deals, which have been invested with VCs till date.

How many startups has IAN invested in so far? Of these how many are in south, and specifically in Hyderabad?
Since its inception, IAN’s portfolio, with over 100 companies, spans 17 sectors across seven countries. We have invested in close to 30 startups based in south India. Some of the IAN investee companies in Hyderabad include Flatpebble, Vitas Pharma, Zippr, Transcell Biologics, SP Robotics and Jiyo Naturals.

Typically, what is the investment sweet spot for IAN? How many more startups is it planning to invest in the next two years, including in Hyderabad? Which are the sectors that IAN focuses on, the typical holding period and how much ROI does it expects from each investment?
Our sweet spot is between Rs 3 crore and Rs 5 crore. However, it also depends on the startups. For example, we had also raised Rs 10 crore for one of our portfolio companies, WoW Momos. IAN is a sector-agnostic group, which is always on a lookout for disruptive ideas and passionate entrepreneurs. An angel investor typically looks at an exit after the gestation period of three to five years, but as the investment is done at the early stage of the startup, it can go up to seven years as well. IAN portfolio companies have given 70x returns in six years, 21x in 30 months, 22x in 60 months and 6x in 15 months, with ventures such as Druva, Stayzilla, and Webengage well on their way to become unicorns (a unicorn is a startup valued at over $ billion).

What is your take on Hyderabad being considered as the next ‘startup hub’ after Bengaluru?
While the startup activity in Hyderabad cannot be compared to Bengaluru, the city is nevertheless working slowly and steadily to become a strong ecosystem base. The Government support and the city’s intent to bring in different elements together provide Hyderabad a conducive environment to breed quality startups. IAN has so far invested in four city-based startups and with the growing entrepreneurial culture in the city, it is actively looking at investing more. Sectors such as fintech, Internet of Things (IoT), cleantech and healthtech are doing quite well here.

K Rajani Kanth