Pune’s angel investors who help startups take root and fly
With the startup ecosystem gaining ground in Pune, it is investors who will make or break the city’s entrepreneurial dreams.pune Updated: May 26, 2018 16:29 IST
Though the startup community is vibrant and growing in the city, it always faced one critical roadblock - the lack of local fund houses. Whatever funds Pune’s startups have raised have been from outside the city. It would be natural for money to follow entrepreneurs, but so far this had not happened in Pune. Up until now, Pune’s startups had to go to Mumbai or Bengaluru to seek funds for their business ventures. However, with the startup ecosystem gaining some traction in the recent past, three fund houses - Better Capital, Venture Catalysts and Alacrity have found it worthwhile to set up shop in the city. Namita Shibad speak to these three early birds - Vaibhav Domkundwar of Better Capital; Gireendra Kasmalkar of Alacrity; and Apoorv Sharma of Venture catalysts - to know what brings them to the city and what plans they have for Pune’s startup community.
What brought you to Pune?
Vaibhav: After spending 16 years in Silicon Valley, I moved to Pune as this is where I grew up. As a career entrepreneur, angel investment was a natural progression for me.
Gireendra: I grew up in Pune and my entrepreneurial journey of 26 years has all been in the city. After selling my testing company, VeriSoft, to European global leader SQS two years ago, it was natural for me to start investing in Pune. Luckily for me the co-promoters of our fund, Alacrity India, also did not want to be headquartered in entrepreneurial centres likes Delhi, Mumbai or Bengaluru, and decided to base their operations from Pune. I really believe that it pays to stand out from the crowd. At the end of the day, you benefit from opportunities that others don’t see.
Apoorv: We decided to have a dedicated chapter in Pune because we felt that Pune startups were not getting the kind of support that they merited. Despite their level of innovation, they had to struggle to find investment, mentorship, and business networking opportunities. Having already invested in Pune-based appSAY, we felt the time was right for us to expand our presence into the region and unlock the next phase of growth for the city’s budding startup ecosystem.
Why in your opinion does Pune have a dearth of fund houses?
Vaibhav: Good startups and good investors is a chicken and egg problem. If we don’t have enough risk capital to fund early-stage ventures in Pune, then the startups will migrate to other cities where there is risk capital. In the past, that was the problem with the Pune ecosystem. However, now we have capital in Pune to support city-based companies. A great example is a Pune startup called Bon.pe. I gave them one of the earliest angel checks and just now doubled down with Better Capital. The change is already here.
Gireendra: Frankly, I was surprised to know that Alacrity India fund is the first securities and exchange board of India (SEBI) registered fund headquartered in Pune. This was long overdue. Now that the start has been made, I am sure we will see a lot more action in Pune. All the other ingredients are already present.
Apoorv: Pune is currently seen as the Information and technology (IT) hub of West India. While this image has no doubt helped in driving economic growth and increasing job opportunities, it has also, to an extent, taken the focus away from the technological innovation that the city’s emerging ventures have been championing. This has been one of the prime reasons why Pune does not yet have the kind of big investment funds that you are likely to find in larger cities such as Mumbai or Delhi. We are confident, however, that this dynamic will change soon. Pune-based startups have been gaining prominence and attracting the attention of investors, both from India and abroad.
How would you compare startups in Pune compared to those in other cities?
Vaibhav: I honestly believe we don’t need to ask this question anymore. Pune startups are as good as any others. Bon.pe, MindTickle, Sminq, Bynry, Plobal and DiscoveryAI are all building world-class companies from Pune. They can rival the best.
Gireendra: Having been part of the startup ecosystem, I firmly believe that talent is everywhere, but opportunities are not. In fact, the company I started after exiting from SQS is called ideas to impacts and our tagline is ‘distributing the future evenly!’ The ecosystem was lacking, but we are correcting that as we speak. We are already seeing success stories such as Icertis, Druva, Mojo and Sapience among others in Pune.
Apoorv: The Pune startup landscape is quite unique. Despite being at a very nascent stage, startups from the region have demonstrated considerable maturity and a high level of innovation, be it in terms of their business models or how they use technology to solve extant market challenges. This could be attributed to its proximity to Mumbai, India’s financial capital and one of the largest startup ecosystems in the country. There are also a lot of product-based startups in Pune, which could well be a response to its own market dynamics and consumer preferences.
What are your criteria for investing?
Vaibhav: I am an everything-agnostic investor and mainly look carefully at the market opportunity and the founding team before investing. I invest across industries.
Gireendra: Globally,our focus is on B2B-SaaS, as that allows local solutions for local problems go global very quickly. In India, we have an additional focus area of India Stack (Aadhaar, unified payments interface (UPI), eSign, eKYC and Digilocker) as this powerful data rich platform is sure to spawn many successful B2B2C startups. There is no industry focus to begin with, but that may come from our limited partners, who we call industry partners. They are from various industry verticals, with the knowledge of problems in their industry that need solutions.
Apoorv: We are not restricted to a particular geography or industry. Wherever there is a scope for large-scale disruption through technology, we are there. This is why we have incubated in startups operating in the established entrepreneurial ecosystems of New Delhi, Mumbai, and Bengaluru, as well as those belonging to emerging startup markets such as Pune, Lucknow, Nagpur, Surat, and Raipur. We have invested in ventures across diverse market segments such as fintech, new-age media, internet of things, artificial intelligence and virtual reality among others. We generally evaluate prospective incubatees on the disruptiveness of their idea, their business model, the expertise and competencies of their team, the market opportunity and competition, and the effort and the research that has gone into making the product or service market-ready. Moreover, we gauge the kind of returns that a potential incubatee will generate for us and the investors; the higher the future return on investment, the better are the chances of securing an investment. We also analyse the long-term scalability, sustainability, profitability, and growth potential of the startups we incubate.
How much do you invest in promising startups?
Vaibhav: Better Capital invests between $50,000 - $2,00,000 broad range and I intend to grow this number as the ecosystem matures. We have a backing of Rs 1.7 crore and the average amount of funding is about $1,20,000.
Gireendra: The lead investors of Alacrity India fund are a Canadian business group Wesley Clover, of Sir Terry Matthews, and my company, ideas to impacts. All Alacrity funds - there are six at the moment in Canada, United Kingdom, Turkey, France, Mexico, and India - have a local lead investor along with Wesley Clover. Alacrity India is a $10 million fund with investors being individuals or syndicates. For example, Hubli angels are our limited partners with 10 members forming a syndicate to invest a $1 million in our fund. Our investments are in the range of a $1,00,000 at the idea stage to a $5,00,000 at the acceleration stage.
Apoorv: We have created a massive international network of investors and high net worth individuals comprising corporate bigwigs, large industrialists, high-profile professionals, and small business owners. Our value-driven approach has facilitated investment worth $52.5 million, or around Rs 315 crore, in 37 early-stage startups in barely two years since our operational launch. On an average, we invest $1,00,000 to $2,50,000 in each venture, depending on the funding requirement as well as certain evaluation parameters.
What is your advice to Pune startups?
Vaibhav: Pune now has high quality and committed early-stage investors like Alacrity India fund, Better Capital and several series A venture capitalists are spending more and more time in Pune. So it’s time for city startups to get in touch with them, leverage the rich talent pool, build world-class products and reach out for advice and help early in their journey.
Gireendra: Build local solutions for local industry problems, but go global quickly. We really think it is the right time and right place for enterprise products in Pune.
Apoorv: Ask yourself what market need you’re serving, and whether you’re serving it effectively through the products and services that you’ve launched. Remember that modern-day investors want to make informed decisions, so market research has to be your number one priority. Collate and put together extensive data about the market challenges and your competition, and present a detailed plan of action of how you aim to address them. More than most, focus on building a team with cross-functional expertise and capabilities; regardless of how disruptive your business idea is, you can only realise its true potential with a strong team of passionate professionals.
First Published: May 26, 2018 16:28 IST