Angel investment gets a leg up in India

PRIVATE EQUITY WATCH

Indian Angel Network (IAN) and Mumbai Angels, two groups of early stage investors, are on a mission to bring angel fund culture - the process of nurturing new companies to the next level, where they could easily attract venture capital investments - in India.

The two groups based in Delhi and Mumbai, respectively, hope to make angel funding more active here in coming years, riding on their successful investments in the past, albeit in their individual capacity.

In India, angel investments are yet to catch on while in markets such as the US, it is much popular. According to industry estimates, in the US during 2004-05, venture capitalists (VCs) invested $22 billion in 3,008 deals, but angels invested $23 billion in 49,500 companies.

Some of the present members of the Delhi-based Indian Angel Network, earlier known as Band of Angels, already have good success stories in the past.

For instance, Infinity Ventures, an early stage venture capital fund promoted by investors such as Saurabh Srivastava (who is now with Indian Angel Network), had invested in some of today's successful companies such as Avendus Advisors, an investment bank offering private equity syndication, M&A, fixed income, structured finance, special situations and strategic advisory services to corporate houses and investors.

Indiabulls, a leading financial services and real estate development company and India Games, one of the major gaming companies in India.

So far, IAN has invested in seven companies which includes San Shadow Consultants, a firm that helps companies create intellectual property rights (IPR) or a patent portfolio, Knowcross, an IT consulting firm and Authorgen, a firm that provides e-learning software products and services.

It has also made one exit along with Mumbai Angels in Madhouse, a DVD rental company, which was later acquired by Seventymm.

"Before investing into our company, we were mentored by the angels for more than a year and thereafter they invested into our firm. But, then it has been a great experience as we have received their network and mentorship and that really makes the difference. We have got a huge value added to out team," said Shaleen Raizada, MD & CEO of SanShadow Consultants, which is planning to raise more funds next year through venture capital.

"We are about to invest in two more companies shortly," said Saurabh Srivastava, member of Indian Angel Network. "We are engaged in discussion to form a fund," he added. So far all investments made by IAN are by individual members and not from any fund.

Mumbai Angels also will be shortly making four more investments in the Internet, travel, manufacturing and software space. It has also invested in Mkhoj, a mobile search engine and NetElixir.

"By the end of this year, we will do 10 deals. Right now we are open to ideas and companies from all over India but eventually we will become Mumbai confined, so that we can spend more time with the investee companies. There is a lot of scope for angel funding in India. Mumbai itself will have more than 20 angel groups within next 5- 10 years and every city will have angel groups," said Sasha Mirchandani, one of the founder-member of Mumbai Angels.

IAN's network has grown to 60 members and now includes institutions such as Google, IBM, Punjab Venture Capital, Sidbi Venture Capital, Naukri.com and Greylock Partners.

Mumbai Angels also plans to expand its 25 member team to 100 members in the next 2 years.

"There are currently more than 25 people waiting to join the band," added Sasha.

Indian Angel Network consists of reputed entrepreneurs such as Jerry Rao, Pramod Bhasin, Raman Roy, Saurabh Srivastava and Rajiv Luthra.

Mumbai Angels was founded by Sasha Mirchandani, Praveen Chakraborty, Prashant Choksey and Shantanu Surpure and the other 21 members consists of Ranjan Kapur, country head, WPP, Rafique Malik of Metro Shoes, Javed Tapia, director of Red Hat India and Gulu Mirchandani, chairman, Onida.

Typically, the investments made by these angels could be as low as Rs 1 crore and can go up to Rs 5 crore and they stay invested for a period of 3-6 years. Also one of the angels who has invested or co-invested with other angels get a board seat on the startup.

"More importantly, angels provide advice, mentoring and help the budding entrepreneurs to have an access to their vast and valuable network of business contacts apart from the money itself," Srivastava pointed out.

IAN has operations in Delhi, Bangalore and Mumbai whereas Mumbai Angels are just operational in Mumbai itself.