India is seeing an increasing number of angel investors channelling risk capital towards early stage companies. With the development of incubation centers for high-growth companies, angel investors have an opportunity to provide financial and strategic resources to new companies across a range of sectors. Scores of angels are descending on India’s booming entrepreneurial sector as risk capital for very early stage firms emerges as a profitable investment category.
In Mumbai, early stage investment firm Seedfund has set up Seed Farm, a dedicated facility to incubate business ideas that will be funded by a sub-$7-million corpus. Sasha Mirchandani, one among India’s successful angel investors and founder of the Mumbai Angels network, is setting up Kae Capital, a seed fund that will help germinate high-risk high-reward business ideas.
While in Chennai, Vijay Anand, founder of networking event Proto.In, is kick-starting ‘Start-up Centre’, an incubation centre for high-growth enterprises that will be replicated across other major entrepreneurial hubs in the country.
This influx of new funds will join a plethora of individual investors, referred to as Super Angels, such as Ravindra Krishnappa in Bangalore to Alok Kejriwal in Mumbai, who provide money and world-class mentoring services to a range of enterprises in sectors from technology, retail, mobile and internet services.
“$200,000 is the new $5 million. You don’t need more to set up a new business in capital-efficient sectors such as the internet,” says Mirchandani. His success in spotting big-ticket seed investments for the Mumbai Angels with companies such as mobile advertising company InMobi and mobile on TV firm Apalya Technologies has played a huge part in driving investor attention to this segment.
In Bangalore, marquee investment firm Sequoia Capital notched up near seven-time return on investment from online education firm TutorVista. Success stories are many. Seedfund had a bumper exit from Carwale.com.
Nexus Venture Partners quit profitably from social media firm DimDim. All these have set the stage for a veritable boom in seed investing. At the end of 2010, Nexus Venture announced the launch of Nexus Seed with a dedicated corpus of $10 million for very early stage investments.
This growing trend mirrors similar moves in the Silicon Valley. Slow-to-move VC funds are being replaced by nimble footed mercurial individuals, who call themselves ‘Super Angels’ and are mostly successful entrepreneurs. This includes Ron Conway, an early investor in Google; Reid Hoffman, the founder of Linked In; and Peter Thiel, the founder of Pay Pal.
Three factors set angel investors apart from formal funds. The investments are smaller – ranging from $250,000 to $1.5 million as opposed to $5-10 million invested by VC funds. They generally get the entire investment done in less than two weeks. Most importantly, angels take a smaller stake – from 10-25% as opposed to 30% taken by a VC firm.
Buoyed by the opportunity, more investors are jumping in to the fray. Mumbai Angels members Sanjay Nath and Karthik Reddy are setting up Blume Ventures, with a plan to raise $6 million from high network individuals by the end of the month.
Karthik Reddy, an alumnus of the Wharton Business School and the founder of Blume Ventures, says: “The key difference between an angel fund and an angel network is the time you take to close the deal. At an angel fund, you tend to close a deal quicker because you are interacting only with one person rather than a group of people. Also, the vision is much more focused.”
It’s also about giving entrepreneurs just the right amount of funding to get their venture up and running, says Mirchandani. “Venture Capitalists look towards capital-intensive sectors such as clean energy, while the Super Angels look at sectors such as entertainment and mobile.”
http://economictimes.indiatimes.com/india-emerging/start-ups-rising-tide-of-angels-boosts-seed-capital-flow/articleshow/7567083.cms