Why India’s angel investment won’t ever see a slowdown

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Angel investment in Indian startups hit a five-year high in the year that ended in March 2016. While venture capital firms may appear to be stumbling, existing angel investors are pumping in serious money into Indian startups.

“4-5 years ago, there wasn’t enough money available. As more entrepreneurs are turning angels, the money has increased. Also, more people are willing to risk being an entrepreneur. As more good entrepreneurs are out, more people are willing to invest. It’s a cycle.” Saurabh Srivastava from Indian Angel Network smiles.

According to a recent report by venture debt firm InnoVen Capital, angel investment in India in FY16 stood at a whopping Rs.113.6 Crores over 69 deals. That’s a 62% hike in deal value and 47% in deal volume from last year.

VC (Venture Capital) firms have turned increasingly cautious about their bets since late last year. This has forced several startups to shutdown or rollback. However, angel investors remained upbeat. Angel investments initially slumped from the June quarter of 2015 to Rs.20.19 Crores in the September quarter and Rs.18.9 Crores in the December quarter. However, investment activity soon picked up in the March quarter when Rs.33.36 Crores of fresh capital was pumped into the ecosystem.

Srivastava explains the phenomenon. “The funding slowdown didn’t affect the angel investment cycle because while big PE firms were affected by the Chinese slump, at the angel level, that’s never an issue. The companies we invest in will mature over the next 3-5 years. The slowdown will have moved by then.”

India’s four major angel groups are the Indian Angel Network, Chennai Angels, Calcutta Angels, Hyderabad Angels and Mumbai Angels.
Srivastava says the focus on cash conservation and unit economics instead of only growth would ensure angels never fund a startup bubble.

“It’s all about the pace at which we fund. Our typical investment is under a million dollar. If somebody wants a $10-20 million valuation, we simply won’t invest. There’s no pressure to deploy”, he observes.

So startups, that’s the bottom-line. Run fast or slow, that’s fine. Just run.

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