Recently, when a start-up that had already notched revenue of Rs 10 crore approached Chennai Angels for funding, the investors were surprised. ‘‘We asked them why they needed our money. They said they wanted to work with us so that we could together raise the company’s revenue to Rs 100 crore,” said Sameer Mehta of Mehta Hospitals, a member of the Chennai Angels network. Many companies that approach the Chennai Angels don’t seek funding alone; they look for assistance in finding customers, networking and scaling up business.
This month, the network would complete five years of operations. So far, it has invested Rs 12 crore and made two exits — Schoolmate, a school/college ERP and CRM company, and SmartLearnWebTV, an IIT/JEE online entrance test preparation venture. Both are now part of EdServ, a listed education company.
In November 2007, a few entrepreneurs founded the Chennai Entrepreneurship Trust Fund to invest in start-up/early-stage ventures and translate their business ideas into viable ventures. Now called the Chennai Angels, it has 33 investors, with 10 more likely to join soon.
The founding members R Ramaraj (co-founder of internet company Sify), Gopal Srinivasan, chairman and managing director (TVS Capital Funds), K B Chandrasekar (of Jamcracker fame) and Raghu Rajagopal (chief executive of Energeate), were later joined by other prominent personalities. The other investors included Cognizant Vice-Chairman Lakshmi Narayanan, Nett10 Digital chief executive R Narayanan, Rajeev Mecheri of Mecheri Smart Capital, QuScient Technologies QuScient Technologies chief executive Babu Thiagarajan and Sameer Mehta of Mehta Hospitals.
Others who followed were Lakshmi Potluri, founder director of Jabong.com, Padma Chandrasekhar (who was earlier with Sify and The Gates Foundation), Sriram Viji of Brakes India and Arvind Balaji of Lucas TVS.
New angels
Chennai Angels is now expanding its membership base. Five new members are under probation, while 10 applications from various professionals and industrialists are pending, said Sameer Mehta, director, Mehta Hospitals and director, Atlas Ventures. A new member undergoes a rigorous screening process, through which other members evaluate his/her ability to contribute to the network. ‘‘Besides investment, the network wants members who have proven leadership and expertise in creating, building and scaling up businesses,’’ says Narayanan. The selection process may take four to six months. The network holds a meeting once every six weeks. A member under probation is invited to three such meetings.
Typically, the network receives about 150 proposals a year; 40-50 of these are considered, but only six to seven companies are shortlisted for investment.
Guardian angels
Chennai Angels also help run businesses — identifying customers, helping build and scale up businesses and assist in legal issues, public relations, accounts and audit processes. To structure a legal process for equity infusion, a legal firm from Mumbai charges about Rs 3.5 lakh a deal. However, for Chennai Angels’ investee companies, it charges only about Rs 40,000, says Narayanan.
Many investee companies have good products but struggle to reach out to customers. For instance, after taking three years to develop a product, Chennai-based ProKlean Technologies, which develops clean technology products for textile, hospitality and leather industries, found it difficult to showcase the product. This was addressed by Chennai Angels members, including Lakshmi Narayanan, Prabhakar Ram, Rajeev Mecheri, Gopal Srinivasan and Sameer Mehta. The Angels have invested Rs 2.5 crore in ProKlean, its biggest investment so far.
“They (ProKlean) came to us with a list of 500 potential customers. Through our network, we helped them get access to 25 companies immediately. This would help them break even,” said Narayanan.
“They do not recommend our products; they just help us meet decision makers who can try our products. Reference is one of the main reasons why the company raised money from the Chennai Angels, despite getting better valuations from other investors,” says Sivaram Pillai of ProKlean. After Chennai Angels came on board, the company is seeing good growth. “We were doing Rs 2.5 lakh a month, which now stands at Rs 10 lakh a month. We will close the financial year with a turnover of Rs 3.2 crore,” said Pillai. In 2009, when Chennai Angels had invested in the company, ProKlean’s annual turnover stood at Rs 30 lakh.
Mehta says the network is considering investing in good companies and teams. “We are desperately seeking great investments. These don’t have to be in the technology or the mobility space alone. We are open to any sector — health, energy, education, clean tech, consumer products, retail space, staple technology, mobility, e-commerce ventures and even beaten tracks like real estate, technology, sports and chemicals,” he adds.
