Veteran entrepreneurs look to ramp up their bets in Indian startups

Early last month, Zerodha founder Nithin Kamath announced that he would allocate as much as Rs 1,000 crore to Indian startups through his investment firm Rainmatter Capital.

“We are now increasing our commitment by increasing the allocation by Rs 1,000 crore in a perennial structure or with the ability to stay invested forever,” he had said at the time.

This unique investment structure with no exit mandates, Kamath said, would help founders build an enterprise in the Indian market, where, unlike developed countries, it can take much longer to become “resilient and sustainable.”

This increased optimism comes at a time when the startup world is going through a funding slowdown, where investors have tightened their purse strings and become more selective with their bets.  

Over the last three years, Kamath has written cheques for four startups. The total investment tally, however, reaches 10 startups when considering investments made by his brother Nikhil Kamath over the same period, according to data from Tracxn – a market intelligence platform.

After setting up Rainmatter in 2016, his investment arm has pumped in around Rs 400 crore into 80 startups so far, as it looks to ramp its bets further.

Seasoned entrepreneurs taking bets in up and coming firms is, however, not a novel trend. Founders, after building their own companies, have often sought to invest in newer startups. According to data from Tracxn – a market intelligence platform, funding from angel investors to India startups stood at $683.6 million across 281 deals in 2021. The next year, these investments stood at $517.3 million from 177 rounds.

This year, however, the quantum of investments for individual investors has come down to $28.1 million from just 9 deals so far, in line with the ongoing funding slowdown in the startup ecosystem.

Regardless, optimism for investments in startups remains among veteran entrepreneurs. Kamath is not the only Indian entrepreneur writing large cheques to budding companies. Fellow fintech entrepreneur Kunal Shah, the founder and CEO of Cred, has, for the past two years, been the most active angel investor among Indian startups.

Shah, an early backer in companies like Razorpay, M2P Fintech, Jupiter and Coinswitch, has invested in 15 startups since 2021.

“I do not have any mutual funds, or any stocks, I only invest in startups as a way of paying it forward,” he told a prominent media outlet earlier this month.

Shah claimed that, earlier, he would meet startup founders before making investment decisions, but he now has these discussions over email or WhatsApp.

Likewise, the co-founders of e-commerce marketplace Snapdeal, Kunal Bahl and Rohit Bansal, are also among the most active angel investors in India, having also made combined investments in as many as 32 startups over the last three years – both with 16 bets each. These are in companies like Hike, ChefKart, ANS Commerce and Supertails.

Varun Alagh, the CEO and founder of Honasa Consumer – the parent company of personal care brand Mamearth, similarly, has made as many as eight separate investments in Indian startups since 2021.

The continued investments from veteran entrepreneurs are music to the ears of fledgling startups who have, as a consequence of the so-called funding winter, struggled to raise funds.