When startups love the same ventures as their founders
In March 2022, Rahul Garg, founder of business-to-business (B2B) industrial goods marketplace Moglix, invested nearly Rs 50 lakh ($ 65,000) in electric vehicle company Euler Motors. Barely a month later, Moglix acquired a 7.2% stake in Euler for ~ $ 5 million. In this brief period, Euler’s valuation jumped by 8% to ~ Rs 520 crore ($ 67 million), as per market research firm Tracxn.
Or take investment platform smallcase. In September 2020, Kunal Shah, founder of fintech major CRED,
participated
participated
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in its Rs 100 crore ($ 14 million) Series B round. And then, in February this year, it was reported that CRED is in advanced
talks
talks
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to acquire smallcase.
Cases like these, where successful founders are investors in businesses that eventually evoke interest from their own companies, are becoming increasingly common in India’s startup ecosystem. Angel investments by individuals and organized networks in India grew by 63% in 2021 to 666. The first four months of 2022 have already seen 231 such deals, as per market research firm Venture Intelligence.
Fueling this, in part, is the liquidity in the broader markets, which is allowing founders to dilute equity in their companies at favorable valuations. And founders are increasingly reinvesting this money into the ecosystem.
It’s a mutually beneficial partnership.
“For a long time, Indian startups did not have the risk capital for ideas, with venture capital firms typically coming in at later stages,” says Shriram Subramanian, founder and managing director at InGovern Research, a corporate governance research and advisory firm. “With founders-turned-angels, we’re seeing an era of value-added early-stage investing, which goes beyond just capital to the experience and network that these founders have with them.”
As for the founders, they’re getting to support and solve problems in sectors they’re passionate about. They may also look to find a solution to problems they might not have the bandwidth or expertise to solve at their own firms. The investments are often sector agnostic, as many queries are common across the process of building a company.
“Conversations could be about building the leadership team, marketing strategies or about the timing of fundraising, etc.,” says Atul Singhal, founder and chief executive at Scripbox, a digital wealth management company. Scripbox counts Girish Mathrubootham * and Deep Kalra, the founders of
SaaS
SaaS
Software as a service (or SaaS) is a way of delivering applications over the Internet — as a service.