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Scores of local angel networks are bringing entrepreneurship to Tier II and Tier III towns by providing early-stage ventures with much-needed seed capital

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Bilaspur, Cuttack, Siliguri, Ajmer, Kota, Rajkot, Amravati, Jammu, Surat, Nagpur... The list goes on. These are some of the prominent non-metro cities and towns in India that are famous for a variety of reasons ranging from teas to textiles and from education to temples. But there is a new, unique thread that binds these and many other Tier-II/III cities in the country — angel investor networks. Individual angel investors have been around as long as start-ups have. But over the past few years, the ones from India’s smaller cities have come together to create regional angel platforms or networks dedicated to participating in the country’s vibrant start-up environment.

These platforms were created to facilitate investments in early-stage start-ups that typically look to raise between Rs 5 lakh and Rs 2 crore. While they started out developing regional start-up ecosystems, the likes of Surat Angels, Chandigarh Angels, Marwari Catalysts Ventures and Nagpur Angels, among others, now fund start-ups across the country.


Most of the nearly 60 angel networks have been around for a few years but were deprived of the spotlight by their more affluent national-level counterparts such as Venture Catalysts, LetsVenture and ah! Ventures. However, their count has surged in the past year as a multitude of start-ups, most notably direct-to-consumer e-commerce ones, blossomed during the pandemic. The regional networks provided seed capital for new ventures or growth capital for brick-and-mortar establishments transitioning online. Angel networks are the first source of external capital for a start-up after founders and their family and friends, says Deepak Ahuja, who is a member of a few angel networks in India. “The Indian start-up ecosystem has witnessed rapid growth in the number of deals funded by angel investors,” says the Dubai-based Ahuja. “They bring an overall efficiency in deal sourcing and investment evaluation processes, which are normally considered to be notoriously inefficient.” But that’s not all, he adds. Not only are these regional angel platforms a saving grace for start-ups as well as investors who would normally fly under the radar of institutional players, they also raise awareness about the start-up ecosystem in smaller cities.

“In the past few years, some angel networks have been working very hard to educate and create awareness about start-ups as an asset class in Tier-II/III/IV cities, which has initiated the process of democratisation of angel investing in India,” says Ahuja. “These networks bridge the gap between individual angels and institutional venture capitalists.” The former banker also invests in his personal capacity and through Venture Catalysts, one of India’s most active early-stage investors. The regional angel networks have, in a way, transformed start-ups from an alternative investment option into a mainstream asset class in the smaller cities of India. And while regional networks have no doubt helped birth quite a few start-ups, they have also played an equally vital role in another factor.

Fewer Shutdowns

There were 17,660 start-ups launched across India last year, in the middle of the pandemic. According to data from Tracxn, which tracks and analyses data on start-ups, that is the highest since 2015 when 19,410 ventures were birthed. Of last year’s count, as many as 3,660 hailed from Tier-II/III cities, raising almost $3 billion over nearly 400 rounds. That isn’t even an all-time high number. Instead, the record lies on the other side of the story.


“Deadpooled” in start-up terminology is a venture that is forced to shut down for any reason, which, more often than not, is due to a lack of funds. The number of deadpooled start-ups fell to an all-time low in 2020, according to data from Tracxn.

They accounted for a mere 0.35 per cent of all the start-ups launched last year, well below the near 5 per cent mortality rate in 2015. The rate surged to just shy of 16 per cent in 2016 and remained in double digits in 2017, at 11.09 per cent, before easing since then. This alleviation coincided with Indian start-ups attracting truckloads of investments over the past few years. The cumulative funds raised between 2016 and May 2020 was about $63 billion, according to a report by consultancy major Praxis Global Alliance and industry body Indian Private Equity and Venture Capital Association (IVCA) last year. This period saw the emergence of 27 unicorns — a start-up valued above $1 billion — from India, making it the third-largest start-up hub in the world. Interestingly, 23 more start-ups have already achieved unicorn status this year, including BharatPe, Meesho, upGrad, Cred and CoinDCX.

The diminishing count of deadpooled start-ups clearly shows that an increasing number of founders were getting access to capital. And, more pertinently, this capital gold rush since 2016 also coincides with the rise of regional angel networks since the middle of the last decade.

Angels Take Wing

Gaurav Singhvi was an investment banker for over two decades before he started Surat Angels in 2014 to evolve the start-up investment ecosystem in Gujarat. The platform currently has nearly 50 investors from Surat alone, as well as others from neighbouring towns. But his initial aim was to join a network, not create one.

Between 2012 and 2015, I approached some of the bigger angel networks of the country that have a pan-India presence only to realise that most of them were not keen on taking in members from the smaller towns

Gaurav Singhvi,
Co-founder, Surat Angels

“Between 2012 and 2015, I approached some of the bigger angel networks of the country that have a pan-India presence only to realise that most of them were not keen on taking in members from the smaller towns,” he says. “Thereafter I started thinking about the next step and then started Surat Angels with a group of people and started investing in start-ups.” Singhvi himself invests in 15 start-ups each year and has 74 ventures in his portfolio.

Nearly 1,400 km north of Surat, Nitika Khurana and her husband had noticed a slightly different dimension to this dilemma. Chandigarh is the joint capital of Punjab and Haryana and is touted as India’s first planned, modern city. But the city is known more for its heft in manufacturing agricultural and automobile equipment than for its entrepreneurial prowess. Budding founders from the city, therefore, faced a recurring problem—the dearth of a proper, supportive ecosystem as mainstream angel networks mostly ignored calls from non-metros.

That’s when the Khuranas stepped in to form Chandigarh Angels Network in 2015. “We launched our network to help start-ups from our region but have received applications from all over the country,” says Khurana. “This only proves that early-stage start-ups, especially from the hinterlands, face a lot of issues and need help in the form of correct matchmaking with investors.”

The network has around 40 investor members and has funded about 20 start-ups, with Biryani by Kilo, goStops, The Gourmet Jar, Leegality and PayMart among the marquee names in its portfolio. They screen applications based on parameters such as the quality of the founding team, scalability of the business model and the funding requirement as they typically don’t invest more than Rs 2 crore in each start-up.

“One good thing about angel networks is that they do not really compete but work together to develop the overall ecosystem. Everyone is working together and partnering with each other on deals. For a start-up, it is a sort of validation if three-four known angel networks co-invest,” adds Khurana. That means growing the ecosystem. And that is the mindset with which Sushil Sharma founded Marwari Catalysts Ventures in 2019.

Traditional businesses alone cannot create the ecosystem since it is more about mindset and culture and less about money

Sushil Sharma,
Co-founder, Marwari Catalysts Ventures

Choirs of Angels

“The start-up journey needs to be enjoyed but unfortunately Tier-II/III towns do not have the ecosystem. Traditional businesses or businessmen alone cannot create the ecosystem since it is more about mindset and culture and less about money,” says Sharma. “Our network is not based on money but on professionals and founders as start-ups do not need just money but also a lot of hand-holding to face challenges related to the legal and compliance aspects plus business development.”

Currently, the Jodhpur-based accelerator platform has more than 20 shareholders. It has invested in more than 30 start-ups across the country, with the cumulative valuation of its portfolio rising from Rs 5 crore to Rs 50 crore in just two years. Sharma, however, says growth should not be gauged based on money, but on the platform’s popularity.

“Once every two months, we invite start-up applications and while we get 300 to 350 applications, only 5-10 ventures remain eligible for funding after our screening process,” says Sharma. For context, the platform attracted just 10 applications from the Jodhpur region and around 35-40 more from the rest of Rajasthan in the initial days.

Regional angel networks are attracting much more than start-ups and national investors. Overseas investors are also making a beeline to such platforms, viewing them as their ticket into the Indian start-up ecosystem. Industry estimates peg the share of such investors at over 20 per cent of all angel investors in the country.

Most of them are Indians who have settled overseas, such as the Dubai-based Ahuja. A lot of Indians, especially from Punjab, have settled in Europe and North America, and that made Chandigarh Angels Network their favourite. “While most of our investor members are from Punjab and Haryana, we do have people from the US, Canada and the UK. Around 15 per cent of our investor members are from overseas,” says Khurana.

Even Marwari Catalysts has members from countries and geographies like Indonesia, Middle East and the US. “We have 10,000 investors from 60 countries on the platform. About 40 per cent of our investors are foreign. These are Indians who are global, they might have global citizenships, but they are investing because the beauty about Sebi-registered angel AIF is that it allows 100 per cent foreign shareholders to come in. There are a lot of global investors who want to invest into companies in India,” says Shanti Mohan, Co-founder and CEO, LetsVenture, whose startup portfolio is worth $2.5 billion.

We have 10,000 investors from 60 countries on the platform. About 40 per cent of our investors are foreign

Shanti Mohan,
Co-founder and CEO, LetsVenture

Moribund Public Platforms

While their city or town of origin undoubtedly has a role to play, it’s not as if overseas investors have a lot of choices. Neither do domestic investors. If they aren’t deep-pocketed enough to be a part of the national-level private networks, India’s public funding platform holds little allure as well.

The Securities and Exchange Board of India (Sebi), India’s capital markets regulator, started the Institutional Trading Platform in 2015. The idea was to provide a separate dedicated platform to list start-ups without much red tape and threafter open them up to public market investors. However, there has not been much traction on the platform — which was rechristened to Innovators Growth Platform (IGP) in 2019 — even though Sebi has relaxed the regulatory requirements on more than one occasion.

The latest moderation was this May when Sebi lowered the holding period for pre-issue capital while allowing discretionary allotment to eligible investors. Despite that, the IGP remains a non-starter, especially when compared to the private funding market.

However, people associated with the platform are optimistic, especially after the recent bull run in the start-up ecosystem. They hope some start-ups will consider public funding as an alternative means of fundraising or the first step towards the main bourses.

“There is a marked movement at all levels to promote and nurture innovation and new-age business models,” says Mahavir Lunawat, Managing Director, Pantomath Group, an investment banking firm. “Policymakers are putting in place frameworks to attract orderly capital for startups.”

There is a marked movement at all levels to promote and nurture innovation and new-age business models

Mahavir Lunawat,
Managing Director, Pantomath Group

Hedge it Like Stocks

Angel network honchos believe that investing in start-ups is quite similar to investing in stocks — a diversified holding to hedge risk, and staying the course. Typically, an angel network invests a minimum of Rs 5 lakh in each of around half a dozen start-ups and holds the portfolio for at least a couple of years. “Invest in at least five to six startups; it doesn’t matter whether they are big or small. That is the call of the investor but that is a good number to start with. I feel an annual return of 4x (four times) looks good considering the start-up ecosystem and its potential over the next 10 years,” points out Sharma of Marwari Catalysts.

Once in, investors gradually move their portfolio towards the double-digit range, with many owning a stake in a few dozen start-ups, while chasing the multi-baggers. Khurana of Chandigarh Angels suggests building a diverse and large portfolio based on the thumb rule that five out of 10 start-ups may go bust, while four may give just 1x to 5x returns, with only one giving extraordinary returns.

One good thing about angel networks is that they work together to develop the overall ecosystem. Everyone is working together and partnering with each other on deals

Nitika Khurana,
Head - Operations, Chandigarh Angels Network

“Start-up investing is probably the riskiest asset class but one should definitely try to diversify the portfolio. Everyone tries to have that one start-up that turns out to be a multi-bagger. Realistically, if you are able to generate a 25-30 per cent internal rate of return (IRR), then it is a good overall investment,” says Khurana.

Of course, that means casting a wider net and playing the long game. “When you are an angel investor, you should have 35 to 40 companies in your portfolio. You could look at 20, too, but you have to diversify when you are looking at angel investing,” says Mohan. “The holding period could be anything from five to eight to 10 years. The longer you hold the higher is the return as companies start to grow. If the return multiple is good, then one must hold on as the multiple will only grow.”



"We Want to Create the World’s Largest Integrated Incubator"

Apoorva Ranjan Sharma,
Co-founder, Venture Catalysts, India's largest integrated incubator, says national and regional investor platforms have democratised startup investing. Edited excerpts from an interview with BT:

Q. How has the Indian start-up ecosystem changed in the past five years?

India’s start-up ecosystem has undergone a sea change in the past one decade with the emergence of players such as Flipkart and Snapdeal. The success of these companies inspired several young professionals to take the entrepreneurial plunge. While a few founders with good pedigree managed to attract the attention of global VCs, a few had challenges even getting seed funding. In the past five-six years, however, the start-up landscape has witnessed the birth of several accelerators and incubators along with many regional angel networks. Venture Catalysts came into existence in 2016 on the day Prime Minister Narendra Modi flagged off the Start-up India initiative. We were the first integrated incubator and accelerator in the country and in the past five years have expanded to more than 60 Tier II/III towns and cities. Hundreds of networks have come up since then.

Q. What are the reasons for the exponential growth of start-ups and more recently a record number of unicorns?

India is one of the fastestgrowing large economies in the world, with rising consumption driven by increasing incomes and an aspirational upper-middle class segment. Besides the technological innovation, wider digital connectivity with projected 900 million users by 2025 is likely to create more digitalsavvy consumers that will further boost growth. Access to cheaper data and faster internet even in the remotest parts of the country are boosting start-ups. To start a business, all one needs is a good smartphone and a decent data connection. However, the most important reason is easy access to seed capital, which was scarce till five years ago.

Q. Has availability of funds played the biggest role?

Accelerators and incubators have been able to mobilise funds and make them available for earlyand idea-stage start-ups. Angel networks have brought down the startup mortality rate. Evolution of VC and angel networks has made funding and growth capital accessible while making start-ups an emerging asset class, which, in a way, has been the biggest driver of growth. The perception towards entrepreneurship is changing as India moves from a job seekerto a job creator economy. What was seen as taboo by the society is now being awarded, as entrepreneurs are celebrated along with their failures and successes.

Q. Are funds for startups coming from nonmetro locations, too?

Start-up investing is still very new in India and investors in smaller towns develop trust and conviction in the presence of a regional or known player. We have democratised start-up investing by creating more than 70 regional partners in 40 Indian cities. We want to break the stereotype that start-up investors can only be from metros. We started with an idea of democratising angel investing while making start-ups an asset class available to investors across Tier II/III towns of the country and also the globe. We are creating the largest community of entrepreneurs and investors globally through education and technology. We are looking to onboard 1,500+ investors in our angel fund in the next three months. We want to create the world’s largest integrated incubator.

From Angels to Unicorns

The regional angel networks are still some distance from the numbers that Mohan suggests, but are well on their way. Their journey was given a fillip by the pandemic, which turbo-charged India’s entire start-up ecosystem. Unicorns are no longer mythical and are being minted by the fortnight. The gold rush of private capital has made the likes of Byju’s and Flipkart more valuable than even some marquee publicly-listed companies. Meanwhile, Zomato going public, with Paytm to follow, is finally proving that the start-ups can reach the pot of gold at the end of the rainbow.

This has helped drive home the idea among millions of investors that start-ups are a trustworthy asset class and should be part of their investment allocation. Lunawat of Pantomath Group points out that investors have an increasing number of options to gain a foothold on India’s start-up rocket.


“There has been a discussion on organising newer means of capital-raise such as crowdfunding, IGP, SPACs (special-purpose acquisition companies) and the like. We expect some of these initiatives to see the light of the day and fund the innovation growth of our nation even as regional angel networks mushroom rapidly across the country,” says Lunawat.

On their part, these regional networks are slowly adopting a more professional, pan-India approach. For example, the success of Surat Angels encouraged Singhvi to co-found ‘We Founder Circle’ last year to expand his focus area to include other smaller cities in the country. This formal platform provides its members with a curated list of early-stage startups across the country that are looking for seed funding.

“The primary objective (of We Founder Circle) is to get people from Tier II/III/IV towns to invest in startups and there has been a huge influx in the past eight-nine months. We saw more than 1,500 investors coming on board from such towns across the country. In just eight-nine months, we have invested in around 20 start-ups with some of the recent deals also seeing bigger cheques coming from the member investors,” says Singhvi.

These cheques could well be the genesis of the next generation of Indian unicorns. And they will have their regional angels watching over the journey.


Story: Ashish Rukhaiyar

Producer: Vivek Dubey, Rashi Bisaria

Creative Producer: Raj Verma, Anirban Ghosh

Video Editor: Vivek Sheel, Mohsin Sheikh

UI developer: Ravi Kumar, Mohd. Naeem Khan