Mumbai: Angel investing, the critical stage of funding that precedes the first stage of venture capital money raised by start-up companies, is seeing some encouraging signs of a take off. Mumbai Angels Venture Mentors, a seed funding network formed in November 2006 by a group of high net-worth individuals, has already notched up five deals and even exited one-online DVD rental start-up Madhouse Media, in which it invested in January, was acquired by Bangalore-based Seventymm Services Pvt. Ltd in June. With average deal sizes at $200,000-500,000 per company, the outfit plans to close three more deals within the next three to four weeks.
Unlike other angel and seed investors currently active in the country, such as Erasmic Ventures in Bangalore and Band of Angels in New Delhi, Mumbai Angels is not a fund. Rather, the individuals who are affiliated to it invest directly in start-ups. The angels usually have a board representation in the start-up. It specializes in investments in Mumbai-based companies only.
Here’s how Mumbai Angels works. The group has a four-member screening committee that goes through business plans of start-ups—it receives about five plans a week. Every month, the group organizes a Super Saturday, at which three chosen start-ups pitch their ideas to the entire team of angels. Depending on the interest expressed by the individuals, the committee then goes back to the board and selects one person to lead the deal. Typically, not more than three people (angels) invest in one company. The four members on the screening committee are Praveen Chakravarty, director of investment banking firm Thomas Weisel International Pvt. Ltd, Shantanu Surpure, managing advocate and attorney at Sand Hill India Advisors, Sasha Mirchandani, partner, BlueRun Ventures and Prashant Choksey, chief executive of real estate company Choksey Constructions.
“Some of the companies that come to us are very raw,” says Chakravarty. mKhoj Solutions Pvt. Ltd, the first company Mumbai Angels invested in seven months ago, approached the members with just a PowerPoint presentation. The mobile advertising company launched services in Mumbai this week, tying up with 15,000 merchants to offer mobile users best deals based on search category and location.
Other investments in its portfolio include search marketing firm NetElixir, Inc. and three other undisclosed startups. The total investment in all five firms is nearly $1.5 million (Rs6.1crore at today’s rate).