 "Our returns from investments as good as high-end VCs: Saurabh Shrivastava")
The Indian Angel Network (IAN), a consortium of angel investors, is expanding by adding more high net worth individuals and investing in new start-ups. Saurabh Shrivastava, chairman of IAN, tells Raghu Krishnan it is only the beginning of the country's start-up boom, which he hopes would address India's challenge of generating 10 million jobs a year. Edited excerpts:
How different is IAN compared to other angel investment groups?
If you look at other angel groups - Chennai Angels, Hyderabad Angels or Boston Angels - they are local; you can meet informally over a drink and decide on investments. We are both national and global with 370 members, which makes us the largest angel network in the world. We are distributed in six different locations and 20 per cent of our members are from outside India. We can't operate as an informal group. So we ended up doing like what venture capital (VC) funds do. VC funds are global; they have processes, structures and rules. Angel groups are normally informal, but we have to be like a VC.
Is there too much money chasing good companies in India. Are we seeing a bubble?
We are nowhere close to over-funding. This country has to be the second largest start-up ecosystem. Our start-up system is as good as Israel and the UK. We have to be comparing with US and we are nowhere there. Yes, there are few entrepreneurs who have great idea and there is a lot of money to chase. It happens everywhere in the world, even in the US. But, otherwise we need many more angel investors, angel groups, VCs and crowd funding. The system is far from being maxed out. We are still starting.
You have been working with the government on building the start-up ecosystem in India...
When we started Nasscom, the government didn't understand the information technology industry. We explained to them and made them understand why government support is critical. Once they understood, look how an industry was made.
This is the first Budget in which there was a mention of start-ups. This is the first time a Prime Minister has talked of start-ups.
The reason why we should focus on start-ups is that we have to create 10 million jobs every year. Who will create 10 million jobs? Look around the world; in every country, net new jobs are created by start-ups or companies that are less than five years old. This is a phase of growth for companies. As you grow bigger, you don't increase employment, you increase efficiency.
US data from 1977 till today says in all the years, except for seven, the net new jobs were created by start-ups or companies less than five years old.
How has been the performance of IAN with your investments?
We are doing a rigorous analysis on the return on our investments - our portfolio in the past five to seven years. It shows we are at the upper end of returns that good VC funds would get. When we last did the analysis, less than 10 per cent of our portfolio companies failed and for an angel group, it is very good.
How different is IAN compared to other angel investment groups?
If you look at other angel groups - Chennai Angels, Hyderabad Angels or Boston Angels - they are local; you can meet informally over a drink and decide on investments. We are both national and global with 370 members, which makes us the largest angel network in the world. We are distributed in six different locations and 20 per cent of our members are from outside India. We can't operate as an informal group. So we ended up doing like what venture capital (VC) funds do. VC funds are global; they have processes, structures and rules. Angel groups are normally informal, but we have to be like a VC.
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Second, we have a big team to shortlist entrepreneurs, from around 4,000 to 250. We have a transparent process, where every one of our 370 members is informed, when a decision is taken; somebody takes a lead and we have a call with the entrepreneur. We typically make investments of Rs 3-4 crore; we close this in a matter of minutes to a few hours.
Is there too much money chasing good companies in India. Are we seeing a bubble?
We are nowhere close to over-funding. This country has to be the second largest start-up ecosystem. Our start-up system is as good as Israel and the UK. We have to be comparing with US and we are nowhere there. Yes, there are few entrepreneurs who have great idea and there is a lot of money to chase. It happens everywhere in the world, even in the US. But, otherwise we need many more angel investors, angel groups, VCs and crowd funding. The system is far from being maxed out. We are still starting.
You have been working with the government on building the start-up ecosystem in India...
When we started Nasscom, the government didn't understand the information technology industry. We explained to them and made them understand why government support is critical. Once they understood, look how an industry was made.
This is the first Budget in which there was a mention of start-ups. This is the first time a Prime Minister has talked of start-ups.
The reason why we should focus on start-ups is that we have to create 10 million jobs every year. Who will create 10 million jobs? Look around the world; in every country, net new jobs are created by start-ups or companies that are less than five years old. This is a phase of growth for companies. As you grow bigger, you don't increase employment, you increase efficiency.
US data from 1977 till today says in all the years, except for seven, the net new jobs were created by start-ups or companies less than five years old.
How has been the performance of IAN with your investments?
We are doing a rigorous analysis on the return on our investments - our portfolio in the past five to seven years. It shows we are at the upper end of returns that good VC funds would get. When we last did the analysis, less than 10 per cent of our portfolio companies failed and for an angel group, it is very good.