Angels keen to go where vencaps fear to tread

The largest association of angel investors in the country, the Indian Angel Network (IAN), is looking to branch out into the backwaters of the country in search of bright sparks.

Over 90% of VC investments in the country are made in the metros. Therefore IAN, which has been around for two years with a membership of over 100 moneybags, is looking at investments in Tier 2&3 cities where VCs rarely venture.

Over the next 2-3 years, IAN will get closer to the hinterland, starting with cities like Hyderabad. It is currently present in Bangalore, Mumbai and Delhi.

“This will help us get close to mentors based in new cities, apart from providing greater access to startups, as the concept is gaining acceptance,” said Padmaja Ruparel, president, IAN.

Angel networks bring together successful entrepreneurs and top corporate officials who pool in their resources, time and money to help those with concepts and ideas start a company.

For example, Jerry Rao, former promoter of MphasiS, is a part of IAN.

Angel investing, a well-entrenched concept in the Silicon Valley, is fairly nascent in India. There are said to be around 150 such networks across the US. Typically, one or more angel investors take stakes in promising startups that they would mentor and scale up.

Now, such investors are looking to plug the void left by VCs and incubators in India, too.

At present, Mumbai Angels is the only other organised angel investor network in the country.

Though some high networth individuals and top company officials do some amount of angel funding, this is largely unorganised.

“Angel investors provide seed funding to companies at an initial stage to the tune of Rs 2 crore. VCs do not play in this space and invest in more mature companies,” said Ruparel. 

Also, the early stage company incubation with research institutes in the country is not well developed due to the unfavourable ecosystem.

IAN has so far invested in 18 startups across sectors in India as well as overseas. The members meet thrice a month. The network typically receives around 130 proposals in this time, which is filtered down to around 10-15 for final assessment.

Currently, the exit routes for angel investors are through VC acquisitions or waiting all the way till an IPO.

Interestingly, IAN has already made two exits. Mumbai Angels, the other organised angel network, has also made some exits including the one from mobile marketing firm mKhoj.

IAN is also eyeing overseas startups by partnering overseas networks for co-investments.

“We bought stake in French software startup Stelae Technologies working with French angel network Femmes. IAN has also tied up with another 11 international angel network called Asia Pacific Incubation Network for overseas investments,” Ruparel said.

“We are in advanced stages of discussion in investing in two startups in the telecom sector and clinical research based in smaller towns,” she said.