From founders to funders

A few months back Kunal Bahl and Rohit Bansal came together to seed-fund a novel HR bot company called Leena AI. The founders of Snapdeal are not just busy turning around their company, but they are also serial investors who are helping other start-ups grow. Till date, Bahl has invested in 28 start-ups including venture rounds in the healthcare start-up Visit, which also has the backing of Twitter co-founder Biz Stone. 

Rohit Bansal has so far funded 23 start-ups. He undertook some of these bets along with Bahl, for example, Visit and Mamaearth, a baby and personal care brand.  

But the duo is not alone. In the list of illustrious founders who have invested into the start-up ecosystem is Flipkart maven Sachin Bansal. Last year, he made his second investment in SigTuple, an AI-aided medical diagnosis firm. Now, he is setting eyes on fintech and agritech sectors, which are touted to be the next growth areas.

The start-up career 

So, what makes start-up founders invest in other ventures? “Founders who are either invested in or have exited their investments have made a career of entrepreneurship and fund-raising, which is their comfort zone. Since entrepreneurship is their chosen career, though it might look like they are taking a risk, they have better chances of making successful investments,” says Rishi Kapal, the author of Kites in a Hurricane: Startups from Cradle to Fame, and head of Global Corporate Innovator. 

Start-up founders who saw themselves through the journey become in-built experts, who are all set to make investments. “There are many boot camps to educate start-up founders but none for investors,” says Kapal.  

The starting years of founders are also spent in chasing after investors and working with them, which trains them into investors themselves.   Experts believe that founders can play a key role in start-up investments. “They can come up with ingenious investment funds, debt and equity options and debt ventures. Collectively, they could set-up investment banks and flip volume of funds available for venturing. They can easily attract HNIs  (high-networth individuals) due to their credibility,” opines A Xavier Raj, professor in entrepreneurship management and chairperson at C K Prahalad Centre For Emerging India & head of Loyola Inclusive Incubation Centre.

Ka-ching

Successful start-up founders also tend to chase investments with high returns. While the risk ratio of investing in a young start-up is high, the returns are also huge. The return ratio of healthcare and fintech start-ups is upwards of 20%, a rate which few other investments can boast of providing. 

“A large number of start-up investors who made money when valuations were at a high and encashed their holdings are flush with cash. The fact that they know the sector inside-out makes them invest in interesting opportunities,” explains Parimal Sheth, director - corporate strategy and relationship at Capital Square Advisors. 

Value investing

The number of start-up founders turning investors is growing, including Ola founder Bhavish Aggarwal, Bhavin Turakhia of Directi, Ola Cabs co-founder Ankit Bhati. 

The start-ups which founders invest in also have a lot to gain. Especially in the seed funding stage, when a new venture receives the backing of a well-known entrepreneur, it makes it much easier for them to pitch their idea to other investors.  

“If start-up investors commit time into a start-up in addition to money, the chances of its success also increases. Successful founders understand the phase of transforming subscribers into paying customers and this advice can help a start-up greatly,” says Kapal.