The changing face of angel investing

On a Saturday, the Mumbai office of Equirus Capital in Bandra-Kurla Complex has about half a dozen investors, mostly from banks and corporate houses, huddled around an ‘interview table’. Wannabe business leaders go in, one by one, and make their pitches.

It’s a monthly affair for members of the Indian Angel Network (IAN), a network of small scale investors who try to handhold early-stage companies as they take their first few steps. But things feel different these days, says Vipul Mankad, Sidbi Venture Capital president and IAN member. “A year back, we would get a lot of ‘concept stage’ proposals. People would come and say, I have this idea. Now, it’s on the ground,” he says. Indeed, a year ago, raising money was not the most difficult thing in the world.

The scenario has changed since. “People now are not coming to start from scratch. They have already put in their money and want more to grow,” Mankad says.

The network, started two and half years ago, has over 80 members and conducts monthly ‘pitching sessions’ at Bangalore, Delhi and Mumbai. It shortlists about 6 from the hundreds of proposals that it gets every month.

With the downturn, the quality of not only the businesses but also the people coming the network’s way has improved,” says fellow ‘angel’ Bharat Banka, the managing director and CEO of Aditya Birla Private Equity. “We are seeing people exploring the idea of starting a company on their own…becoming entrepreneurs, as corporations start restructuring,” he says.

So more richly-decorated CVs and more companies funded with own savings. “It’s cruel,” agrees Mankad, “but that is how it works. Entrepreneurial activity picks up when jobs are not readily available.”

Another difference is in the sectors. The network mostly invests in businesses that are ‘knowledge-based’, but even these have changed in their nature as the slowdown progresses. “A year ago, it used to be mainly tech-related,” says Sanjay Bhasin, the CEO of Essel Propack, who is an investor member of the IAN. “Now, it’s spread across. The businesses are from all kinds of sectors - there’s healthcare, there’s environment.”

Do the changes mean investors play hardball and squeeze out a mean valuation from entrepreneurs? “The fact is,” says Equirus MD Ajay Garg, “it works only if both the investor and the entrepreneur feels it’s a win-win. It is suicidal to come with the mentality of ‘now we have the upper hand’. We make sure that doesn’t happen.”