Bangalore: The country’s largest group of angel investors, Indian Angel Network Services Pvt. Ltd (IAN), is setting up an incubation centre that it says will handhold some 30 start-ups in its first year, for 18-24 months.
That’s a huge step-up for IAN—a grouping of 109 angel investors that signed just 16 deals in the past four years.
India’s entrepreneurial landscape is strewn with dead start-ups—nearly 98% of new businesses fail—mainly because of blurred strategies, a lack of proper mentoring and a paucity of funding.
“How to commercialize an idea or a product remains a challenge. Most incubators are poorly connected to help a start-up in their go-to-market strategies,” said Saurabh Srivastava, a founding member of IAN and one of its several angel investors.
Angel investors are usually rich and successful individuals who back entrepreneurs when a new venture is just getting off the ground.
Naveen Kumar Saini / Mint
The network’s incubation centre will officially launch in a month. It will be a virtual model, without providing the physical space that other incubators offer, but focusing on the post-product development stage, in return for less than 5% stake.
Most incubators take 5-15% stake in the start-ups they mentor.
IAN’s large pool of investors—serial entrepreneurs, rich individual investors and top executives—will be directly connected to the start-ups, said Srivastava.
Despite the promises, the network’s initiative may have a tough ride as neither angel funding nor early stage investments have been very successful in India.
Sceptics say unless IAN hires full-time hands for its incubatees, banking on its network may not help.
“One question always on the mind of a start-up is: ‘Will I get access to experts who will help me in the areas where I need it. Will they be accessible 24 hours? Will these experts give me 100% of their time?’,” said Indus Khaitan, general partner at Morpheus Venture Partners, which incubates and funds start-ups. Morpheus is not a part of IAN.
Selecting the right start-ups will be key to the centre’s success, said IAN president and angel investor Padmaja Ruparel. The emphasis would be on how a start-up’s product or offering addresses specific pain points and how differently a firm positions itself against its competition.
“We would like to assess an entrepreneur on their vision of turning an idea into a venture,” said Ruparel.
Srivastava said the centre will also open up opportunities to IAN’s investors.
“As an angel group, our lookout is for firms that can absorb capital. As an incubator, we would look out for ideas that have huge market potential,” he said. “What can’t be taken for granted is that all companies will be funded by IAN. What can be taken for granted, however, is that if you deserve funding, it will come to you.”
Experts say in a developing country such as India, thousands of start-ups need to come up every year to increase the pool of those with the potential for survival.
In the investment world, typically, the pool of investable firms is at its broadest at the start-up/early-stage level. In India, though, that pool’s rather narrow because of the several premature deaths of start-ups, thus resulting in fewer investment possibilities at higher stages.
“We need more start-ups to increase the base. Start-ups today will become large companies tomorrow,” said Vishal Gondal, chief executive of gaming company Indiagames Ltd and an early stage investor not associated with IAN. “The market is not saturated here; there is no dearth of ideas and investors.”