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Indian Angel Network plans to raise Rs150 crore early stage fund

Fund to co-invest with angel investors in the deals that IAN invests in and also make follow-on investments

Indian Angel Network (IAN), one of the largest angel investor networks in the country, is raising an early-stage fund of around 150 crore to co-invest along with its angel network, said two people aware of the development.

An angel network is a group of angel investors—high-net-worth individuals—who invest collectively in early-stage businesses.

“They have already registered a fund with the Securities and Exchange Board of India (Sebi) and are on the road to raise it. They are looking to raise at least 150 crore for the fund. The fund will be raised from within their own network of angel investors," said one of the two people cited above, requesting anonymity as the talks are private.

IAN, which has more than 400 angel investors on its network, was founded in 2006. Apart from the angel investment network, IAN also runs several incubation programmes with various partners such as the National Science and Technology Entrepreneurship Development Board of the government of India, leading automotive tyre manufacturer Michelin and Small Industries Development Bank of India.

“The idea behind the fund is to co-invest with angels in the deals that IAN invests in and also do follow-on investments," said the second person cited above, also requesting anonymity.

“Angel networks operate on a first-come-first-serve basis, so when an interesting deal comes along, only the angels that show interest early are able to participate in the round and many angels end up losing out on that particular investment. With a fund that co-invests in these deals, all the angel investors who are part of the fund still get an opportunity to invest, indirectly through the fund," he said.

The other advantage of the fund is that it can continue to invest in follow-on rounds in good companies. “Typically, angel investors do not participate beyond one round. With the fund, they can continue to invest in follow-on rounds too, where angel investors are not able to participate due to the large ticket sizes," he added.

Padmaja Ruparel, president of IAN, declined to comment on the development.

According to data from Venture Intelligence, IAN has made 17 investments so far in 2016, compared to 16 and 11 investments in 2015 and 2014, respectively.

Companies that IAN has invested in so far this year include shared accommodations start-up Square Plums Technologies Pvt. Ltd, hotel booking platform FindMyStay, fashion technology start-up Protinus Fashion Networking Pvt. Ltd, media-tech enterprise Little Black Book and entertainment app Roast Media Pvt. Ltd.

IAN’s plans to raise an early stage fund come at a time when angel investments hit a five-year-high in the financial year 2015-16, highlighting rising interest among high-net-worth individuals to invest in start-ups.

According to a report by venture-debt firm Innoven Capital, angel investment in India in FY16 stood at 113.6 crore across 69 deals, a rise of about 62% in deal value and 47% in deal volume from the previous financial year. In FY15, about 70 crore was invested across 47 deals, said the report which takes into account investments made by major angel groups: IAN, Chennai Angels, Calcutta Angels, Hyderabad Angels and Mumbai Angels.

The development also comes at a time when about two-dozen private equity and venture capital industry executives are on the road to raise up to $2 billion for their new funds, as the fund-raising environment for Indian fund managers has improved significantly in the past two years.

Several of these new funds are betting on the early-stage consumer Internet/technology ecosystem in India. These include funds such as Unicorn India Ventures, Pravega Ventures, Stellaris Venture Partners, WaterBridge Ventures, Endiya Partners and Parampara Capital.

On 4 August, Mint reported that Tata Sons chairman emeritus Ratan Tata, in partnership with the University of California, is setting up a venture capital fund with a corpus of around $100-150 million and has already started scouting for start-ups to invest in.

The entry of new funds would offer relief to the start-up ecosystem in India that has seen a slowdown in funding this year. According to data from Venture Intelligence, venture capital investments in the first six months of 2016 were down to $634 million from $958 million in the same period last year.

Apart from IAN, India is home to several other major angel platforms such as Mumbai Angels, Hyderabad and Chennai Angels. Several new angel networks have also emerged in the last couple of years, including LetsVenture, Ah! Ventures and Stanford Angels & Entrepreneurs.

Anil Joshi, founder of early stage fund Unicorn India Ventures, said, “In the last couple of years with the increased activity in venture capital investments, increasing knowledge about start-ups as an investment asset class and growing entrepreneurship in non-metro cities we have seen HNIs in several cities such as Jaipur, Nagpur, Surat and Ahmedabad have started local angel networks to support entrepreneurship in these cities."

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