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48 Volume 2, Issue 8 (August, 2014) INTERCONTINENTAL JOURNAL OF FINANCE
RESEARCH REVIEW Peer Reviewed Journal of Inter-Continental Management Research

Consortium http://www.icmrr.org
ANGLE INVESTORS AND VENTURE CAPITALISTS PERSPECTIVES FOR
ENTREPRENEURS INSIGHTS FROM TIE-ISB CONNECT CONFERENCE 2012
KAVITA MEENA1 SITA VANKA2
1Assistant Professor, Department of Management and Commerce, Maulana Azad National
Urdu University, Hyderabad.
2 Professor & Dean, School of Management Studies, University of Hyderabad, Hyderabad.
ABSTRACT
The purpose of the paper is to reflect on perspectives of angel investors and venture capitalists
in India by providing inferences from the conference conducted by the TiE-ISB connect, one
of the Indias largest networking forum that brings entrepreneurs , venture capitalist and
academicians together to build successful enterprises. The paper is based upon observations,
notes and discussions on a range of issues relating various sources of funding, how to tap
them and areas with potential opportunities that the investors are looking for. The paper brings
the views of impressive rosters of Indias influential angel investors and venture capitalists
.This would familiarize aspiring entrepreneurs with the Indian scenario of investors and
surface the sectors which are having potential to attract funds.
Key words: Entrepreneurs, Angel investors, Venture capitalists
Introduction
Entrepreneurship has gained greater significance at global level under changing economic
scenario. Global economy in general and Indian economy in particular is poised for
accelerated growth driven by entrepreneurship. The growing Indian economy and its positive
outcomes of many of these financial contributions have eventually led to spike in emergence
of many angel investors and venture capitalists. These angel investors and venture capitalists
are acting as catalyst in creation and growth of business ventures by providing financial
support.
Identifying their importance in entrepreneurial ecosystem, TiE-ISB connect staged a
discussion of influential angel and venture investors of India on 23 Nov 2012, during the TiEISB connect conference 2012 .The theme of this years event was Growing your CompanyThe next big leap, held from 22 to 24 Nov 2012 at Hotel Avasa, Hyderabad. The TiE-ISB
connect is a joint initiative of The Indus Entrepreneurs (TiE), Hyderabad, and ISB s
Wadhwani Centre for Entrepreneurship Development (WCED). The Event is a popular annual
event and attracts best names in the industry.
The paper is based upon observations, notes and discussions on a range of issues relating to
various sources of funding, how to tap them and areas with potential opportunities that the
investors are looking for. The paper focuses on providing the insight of the views of angel
investors and venture investors in India, which would provide cognizance to entrepreneurs in
evaluating their options, how to position themselves for getting the right investors and what
are the investors looking for. The remainder paper is followed in two parts, first part discusses
the angel investors perspectives and the second part discusses the perspectives of venture
capitalists based on the discussions at the conference, followed by a summarizing the key
eruditions of the discussion.
IMPACT FACTOR VALUE: 0.604 ISSN: 2321-0354-Online ISSN: 2347-1654- Print
www. icmrr. org 49 Volume 2, Issue 8 (August, 2014) INTERCONTINENTAL JOURNAL
OF FINANCE RESEARCH REVIEW Peer Reviewed Journal of Inter-Continental
Management Research Consortium http://www.icmrr.org
Angel investors perspectives
Angel investors have become a critical part of the start-up ecosystem in India in the last
3years and supporting the idea of investing in smaller amounts. An angel investor is an
individual who invests his money directly in a seed stage venture in which here is no family
connection. And a seed stage venture is a business which a) has turnover below 25 crore b) is
unlimited c) is not promoted, sponsored or related to an individual. (Report of the committee
on Angel investors and early stage venture capitalist, June 2012)
The track chair person ,Sashi Reddi,founder and executive chairperson of Applabs and a serial
entrepreneur, explained the rationale underpinning the discussion designed to identify the
various sources of seed stage funding and need to evaluate these options.Futher stated that
there is need for an entrepreneur to know how to position himself .The discussion followed on
these lines.
Angel investors or family and friends
In the initial stages of venture set up, the general trend is to raise money from promoter s
Contribution or sourcing from family and friends .The other alternative for receiving the
contribution or sourcing from family and friends. The other alternative for receiving the
financial assistance at this stage would be angel investors.The amount that can be raised
from family and friends is generally less, which may not be able to support the venture for a
long, but the amount that can be received from a angel investors is bulky enough to support
the venture in its initial growth, said; Karthik Reddi, founder and managing partners at
Blume Ventures, an early stage investment firm. He added, that raising funds from family and
friends is hassle free and easy to exit but, family and friends approach can be called as
myopic, when compared to finding funds with angel investors .The opinion stems from the
fact that angel investors not only provide fund for he start up but also paves way to reach
venture capitalist by providing support.
Mirroring on the positive side, Sasha Mirchandani managing partner and a part of investment
team at Kae Capital, stated that with family and friends there is always an advantage of
faith retaining with them. Rajesh Sawhney, leading angel investor in India alluded to similar
issue and said; I want to see skin in people .He opines that angel investors want to
entrepreneurship vesting in the individual. People having just a vision; do not qualify as an
entrepreneur. Entrepreneur is not a designation, entrepreneur is a mentality. It's the way one
thinks, not the title that you own. An entrepreneur need to prove the very existence of
entrepreneur in him to the angel investors but with family and friends one may not sell their
guts to them. Moreover, social networking sites were suggested as a good source of
indentifying and getting connected as friends to people who are interested in investing. This
alternative was identified as potential base to get finance from friends and network.
Accelerators Vs Promoters fund
A galore of accelerators has emerged in India, helping in initial establishment of budding
entrepreneurs. A Business Accelerator is program set up by variety of service/training helping
small companies for better chance of survival through the start up phase. They are more likely
financed by venture capitalists
and have higher level of hands on involvement to drive entrepreneur from ideas to marketable
products in matter of months. (The entrepreneurs advisor, 2012)
The panel opinionated that it is preferable to go for accelerator when the entrepreneurial team
is in place and there is a need for a mentor. They are also good alternative to go with when the
venture project is not yet capital intensive and one is not ready with a strong story to impress
venture capitalist. Further accelerators also help to develop relationship with venture
capitalist. They make the further journey easy.
Angel groups Vs Angel investors
In an angel group, individual angels join with other angels to invest collectively in
entrepreneurial firms. Angels work together to conduct due diligence to validate the plans,
statements and history of the entrepreneurial team, whereas , an angel investor , is a high networth individual who invests his or her own money in start-up companies in exchange for an
equity share of the businesses(Angel capital association,2012).2A012 Angel Capital
Association
Rajesh Sawhney cited that, angel networks can fund a larger amount in comparison to angel
capitalist, but the screening process goes long and decision making needs to have consensus
among all the members. The screening process may take somewhere 3-6 months, which
would cost high for a start up, in terms of time. The time taken by angel capitalist is much less
, not more than 2 months ,said, president of Hyderabad Angels,Srini Koppulu.
Angel investors preferences and criteria
On the concerns raised by the audiences on their geographic preferences for investing, the
panel commented that they basically tend to invest in companies that are located near them
regionally. They prefer to invest in their vicinities as they can keep up with the happenings of
the business and they tend to understand their geographical area much more than any place on
their opposite coast. But they do give preference to domain over geography, when the domain
has high potential, said Karthik Reddy. Rajesh Sawhney added in similar vein that when they
want to expand their geographical limit they co-invest in a wider geography if a local investor
they know and trust is involved. They collaborate for geographical hedging and domain
hedging such that the potential losses are shared and risk is minimized.
Most of the angel investors have interest in projects with technical applications .Rajesh said
NO to project which are not based on tech application. It was a common voice that ,angel
investors look for projects which are technology based ,with the view that ,such companies
reach their break even faster . Companies setting up projects in other sector were too
preferred, if they had a tech-touch. For instance, Sasha Mirchandani, said, he would be
interested in solar projects with a tech angle. Similarly, sharing his interest in rural projects,
Rajesh Sawhney, said that he would be interested in bio cells, web versions and mobile
versions targeting rural areas. The concern was also vested on whether a company would be
funded in next round (i.e. by venture capitalists) or not, as that would determine the growth
further.
Further apart from the technology, few investors have inclination towards social ventures too.
Sasha Mirchandani said that Kae Capital does look for social ventures, but generally they look
ventures from the angle of profit. And Rajesh Sawhney also did show interest in social
ventures the domain of education and skill building is their interest areas.
On the issue of, evaluation criteria, that the angel investors set to select the ventures .It was
specified that there is no thumb rule for evaluation .Sashi Reddi; the track chair stated that
balance sheet is the most obvious criterion. All financial projections are driven by a series of
assumptions. It should be made sure that the assumptions are well-explained and justified.
Even so, its important that the assumptions and financial ratios are consistent with industry
standards in the same or similar spaces. Moreover, the entrepreneur need to sound realistic
about and how much they need. It should neither be overestimated nor underestimated.
Further the angel investors put forth that how much the entrepreneur is motivated to carry out
the venture is also something which scores good while of product which can be
commercialized i.e. they look for more realistic ideas.
Venture Capitalist perspectives
Venture capitalist is an entity, which is registered with he appropriate financial regulatory
authority and invests in venture that a) has turnover of less than Rs 25 crore in case of seed
stage and less than 50 crore in case of early stage b) unlisted c) not promoted, sponsored or
related to an industrial group whose group turnover is in excess of 300 crore. (Report of the
committee on Angel investors and early stage venture capitalist, June 2012)The track chair,
Satish Andra, Managing partner at Ventureeast, formulated debate that surfaced issues related
to areas with potential opportunities and attendees were provided opportunity to have a dialog
to uncover their myths.
Areas with potential opportunities Venture capitalist perspective
The discussion brought out the trends and sectors venture capitalist are looking in positive
direction and eyeing to make more investment.
Technology
Indian venture capitalist are inclined to invest in technology firms based on internet
/mobility/cloud , with their consensus that these companies are capital intensive ,have the
staying power and marketing muscle.
Sameer Kumar, Managing Director of Inventus (India) , stated that e -commerce is one of the
fastest-growing sector in technology and e-commerce companies in service sector that truly
and repeatedly delight the customer , has wide scope. Inventus has shown their interest in ecommerce firms in service sector and have invested in Cbazar, an e-commerce site for ethnic
Indian apparel and accessories and Redbus, leading on-line bus service.
Similarly increasing broadband and smart phone penetration builds interest of venture
capitalist in internet companies. Providing a more easily acceptable evidence for the growth
potential of internet companies, Mahesh Murthy, founding partner at Seed Fund said, the
steepness in the number of users on Face book and LinkedIn. is prediction that internet
companies have potential to create consumer stories in India. Sameer Kumar, adds, they
would like to invest with entrepreneurs that have bootstrapped the company to some customer
validation in the area of internet and have invested in Sokrati, a fully customized search
marketing solutions for advertisers, agencies and social networking sites. Further, the
companies which can establish in India and spread overseas are the attractive ones.
Ganesh Rengaswamy, Managing Director of Lok Capital, a microfinance venture capital fund,
stated, companies, if not purely based on technology, but with application of technology in
multiple sectors also interest them. But what interest them most are the projects with the
characteristics of accessibility, affordability and quality.
Healthcare
Inefficient delivery mechanisms, low public expenditure and low health insurance penetration
are the constraints the restraint the accessibility of quality healthcare to a vast majority of
population in India.
Venture capitalists in India are eyeing on investing in healthcare sector, as they see large
opportunity and potential in innovative delivery mechanisms. Moreover, Mahesh Murthy,
state that healthcare space is capital intensive and have wide scope from demand side. For
instance, they have invested in Vaatsalya, a hospital network focused on Tier II and Tier III
towns. Vaatsalya is managing hospitals/clinics in semi-urban and rural areas and bringing
healthcare services where it is needed most. And in My dentist, a multispecialty chain of
dental clinics which offers transparent and affordable prices across Mumbai.
Ganesh Rengaswamy, said, Lok Capital is India focused and have great interest in Education
and Healthcare space, serving middle and low class .He adds , that Increase in the middle
class in India, does represent the potential of these sectors.
Education
Investors are ready to invest in categories related to consumers and since India has a
population of more than 600 million in 0-24 age bracket, the spend on education is very high.
Moreover it has got good pull from consumer side. Venture capitalists share that the
companies in the content development, supplement education and pre-school area to attract
funds.
Rajan Mehra, Managing director of Nirvana Venture advisors ,suggest that projects based on
career counseling has a potential to exist and grow as younger employees ,would require
career counseling ,as what are their interest areas, what is there aptitude, what should be there
first job etc.
Lokpal has invested in project Hippo campus in Karnataka Village, which is into preprimary
and after school remedial education for children 6-12 years. They have made their existence
due to the difference in their pedagogy of from chalk to talk where the teaching
methodology followed is more of two way .Thus projects with difference and innovation in
education sector can draw funds from venture capitalist.
A similar kind of initiative which collected lectures from you tube and complied to form
lessons and provide education online was appreciated by Siddhartha Das, General partner
with Ventureeast. Further, Mahesh Murthy added, that companies capturing on the attitude of
consumer towards the changes would grow, sports, for an example, is being viewed as career
by many parents for their children and initiatives in this directions attracts venture capitalists.
Others
Regardless of the sector, most all VCs, knowing how competitive any new market
environment is, will want to see what is something different that will allow the venture to
excel in the marketplace. They may relate to operational advantages, marketing strategies and
tactics, or financial advantages you bring to the
table. In a similar vein, Mahesh Murthy said, that he would have an inclination for investing
in companies that create sector rather than the one in the existing sectors.
For instance, Siddhartha Das quoted that they have invested in Goli vada pav, which was
incorporated with the idea of creating an ethnic snack chain offering the staple Mumbai street
food vadapav in standardized, yummy, hygienic manner at economic pricing there by
becoming an alternative to traditional fast food.
Further, what interest them, are the companies which can build consumer place and follow
trend. As Mahesh Murthy, suggested, lamp industry and carpet industry will have growth as
hotel industry is growing.
What investment bets they place?
As the primary objective of a venture capitalist is to manage his/her fund, provided as equity
financing ,before investing they in a company, they are curious to look for how much equity is
remaining with the promoter.
We do not get interested to invest in a company, in which a large chunk of the equity is with
the angel investors, said Siddhartha Das.
Further, they want to be clear about what the angel investor is bringing to the deal besides
money. Angels involved in who can add value to the company via high quality mentoring and
advice send positive signal for venture capitalist. Rajan Mehra, stated that they interested in
companies with angel investors who are comfortable to give power, so that the share comes to
them can have equity in the company.
Conclusion
Angel investors are more appealing to an entrepreneur starting-up for seeks out for funds, as
they add value by providing invaluable advice ,mentoring and business network that would
help the entrepreneur to get second round of financing. Venture Capital firms are one way to
raise a serious amount of capital by sharing equity. Since Venture Capitalists main motivation
is return on investment, they look for businesses of 21st century which has network
effectiveness and has demand pull, such as technology based (internet/ e-commerce ),
Healthcare ,Education etc. Venture Capitalists will always have an almost manic desire to flip
every deal they look for companies where they can have sufficient equity.
References
1. Creating a vibrant entrepreneurial ecosystem in India: Report of the committee on Angel
investors and early stage venture capitalist, June 2012, Government of India, Planning
Commission, and New Delhi.
2. Angel Capital Association ,
capitalassociation.org/entrepreneurs/faqs
2012
Retrieved
from
http://www.angel
3.
The
Entrepreneur
Advisor
,2012,
Retrieved
from
http://blog.theentrepreneursadvisor.com/coachs-corner/glossary-for-entrepreneurs-and-microenterprises/

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48 Volume 2, Issue 8 (August, 2014) INTERCONTINENTAL JOURNAL OF FINANCE

RESEARCH REVIEW Peer Reviewed Journal of Inter-Continental Management Research

IMPACT FACTOR VALUE: 0.604 ISSN: 2321-0354-Online ISSN: 2347-1654- Print

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