This is the age of new labels. Companies above $1 billion in private valuation are now called ‘unicorns’ although, just like the fabled creature, the valuation might prove mythical when the firm lists on a stock exchange.
Another emerging label is ‘archangels’ that refers to angel investors who are at the forefront in investing at the seed or initial stages of a startup when raising funding is tough for unproven ideas. Unlike unicorns though, there is nothing fictional about it – these are concrete funding rounds that give a startup the resources on which it can build on. Failure to get angel or seed funding — as happens often — puts the future of a budding startup in peril.
This chart shows the top 10 Indian angel investors in the last decade, during which Indian startups came into their own, powered by increasing levels of funding and ambitious goals to solve problems that have plagued the largely unorganised economy of the country. They have invested in a total of 425 startups, according to data from startup database Xeler8.
Angel investors also play a role beyond funding. They mentor founders to help transform the business into scalable models, which can then attract higher funding rounds from bigger investors. In the last five years, both the quality of ideas and the skillsets of founders have risen substantially in the Indian startup eco-system.
Rajan Anandan, managing director at Google India, leads the list with more than 80 investments in the last 10 years. Sunil Kalra, who was into leather apparel manufacturing in the early 90s, comes second with about 50 investments, followed by Anupam Mittal, founder and CEO of People Group, which has been successful with popular portals like Shaadi.com and Makaan.com.
Other investors in the top 10 include Mohandas Pai, chairperson of Manipal Global Education and founder of Aarin Capital, Sanjay Mehta, member of Indian Angel Network, Rajesh Sawhney, founder of GSF Accelerator, Anand Ladsariya, founder of chemicals maker Everest Flavours, Sharad Sharma, co-founder of software product association Ispirt, Zishaan Hayath, founder of Toppr and Rehan Yar Khan, managing partner at Orios Venture Partners;
Most of Indian startups are based on clever and innovative use of technology. That is not a surprise, given India’s traditional strength in information technology, which came to the fore during the first wave of startups in the mid-90s, such as Infosys Technologies that had $8.7 billion of revenue in the last financial year. A large number of engineering schools have created a continuous supply chain of talent in software and tech, while several founders have returned to India after being trained in top schools in the US to tap a growing market that holds big opportunities.
Angels focus on their own areas of expertise and investment philosophies to make quick decisions about whether to invest. Most of them focus on the quality of teams, and the extent to which the startup’s ideas can make a difference when translated into products and services.
Angel investors were very busy in 2015, when they accounted for close to half of all funding deals, a rise of 42 per cent from the year before. That surge in funding amounted to more than $300 million, compared with $196 million in 2014. Startups that have come up in the last 4-5 years have focussed on capturing markets by solving lingering problems, from hyperlocal logistics services and food delivery, to big data and e-commerce.