Blume Ventures, an angel investment firm founded by two members of Mumbai Angels Sanjay Nath and Karthik Reddy, is looking to raise a $20-million fund and is targeting the first close at about $6 million by December.
Sanjay Nath, a member of Mumbai angels since its inception, holds interest in companies such as InMobi (mobile advertising), Atyourprice (online travel), Algorhythm (supply chain software), Speakwell (English speaking & accent training institue) and Asiatic (clinical research).
Most recently, Sanjay was co-founder and CEO of Loxodrome Solutions, a legal process outsourcing firm. He has over 15 years of management consulting, business development and operational experience in the Indo-US corridor, with a deep understanding of IT and BPO services.
Apart from being the Managing Partner at Blume Ventures and member of Mumbai Angels, Karthik B. Reddy was till recently Vice President, Private Treaties, at Bennett, Coleman & Co. Ltd. As a member of Mumbai Angels, he holds interest in companies like Apalya (mobile video), InstaHealth (hospital management software), Onward Mobility (mobile applications), TalentBridge (a vocational education enterprise), and AWACS/Trikaal (a pharma Information services). Karthik Reddy sits on the board of Asiatic and Algorhythm. Outside of Mumbai Angels, he is also an angel investor and board member in Earth2Orbit, a space exploration company.
The Investing Model
As opposed to a plain angel investment firm, the duo are trying to build an angel investment ecosystem with a network of venture partners, advisors, deal sourcers and sectoral experts.
The high risk angel investing space needs more organised players, feels Reddy. “What these angel groups are doing is phenomenal but probably we are addressing 10-15% of the problem,” he says.
The idea stems from a need to plug the gap in the angel investing landscape as sub-$2 million funding is very difficult to get in India. "How do you get a startup worthy of a million and a half dollar cheque,” asks Reddy.
Having been on the investment committee of Mumbai Angels and investment advisors to various family offices, both the investpreneurs feel that there are enough companies, still at a power point stage, or bootstrapping, with a solid team, some operating history and revenues, and yet are not able to raise money because they don’t have scale yet.
Blume Ventures fund will put in monies at the seed stage and look to co-invest with angels or the VCs at the subsequent stages. The sweet spot for the fund will be anywhere up to $1 million.
While there are other angel groups catering to a million and a million half a dollar range, they are typically single cheque writers, Reddy says.The gap in the angel funding space gets more pronounced with the ticket size at every level in the investment ecosystem getting bigger. While VCs are shifting to a more micro-PE structure, angel groups are targeting more of an early stage play.
Apart from coming in early into the companies as a value-added investor, Blume Ventures will see to it that their execution process is much quicker.
“If you look at the existing angel network in India, as little as a Rs 1 crore to Rs 2 crore fund raise takes an average 3– 5 months to close. We are very realistic about how much time we will take in closing these deals,” says Nath.
The Blume Ventures' ecosystem will comprise of venture partners, sectoral experts, deal sourcers, in different cities who will all be incentivised so that they have their skin in the game. “We are in talks to be able to keep a significant part of the carry pool as discretionary. Those people who will help us will also be entitled to the carry," he adds.
The angel investing firm has already got a few industry veterans on board as advisors. Abdur Chowdhury, Twitter's Chief Scientist (earlier founder of real-time search company Summize which Twitter acquired) and Sridar Iyengar (ex-TiE Global head, ex-KPMG Chairman and CEO, and on the boards of Infosys, Rediff and other companies ) will act as advisors to the fund. They are looking at having 4-5 more advisors.
Leveraging this ecosystem, the investment firm will help companies for a Rs 50 lakh round or a potential venture capital round.
"We are targeting domestic HNIs who have successfully exited companies and are sitting on Rs 100 to Rs 200 crore and above, and want to participate in the early stage eco-system."
The anchor $2 million will come from both Nath and Reddy and their family offices. What makes Blume Ventures confident of achieving the first close of $6 million by December is the soft commitment from a 40-50 HNIs who have expressed active interest in the fund.
“We are getting feelers from HNIs on why it makes sense to partner with us,” the duo say, adding, "They are happy to participate with us because they don’t see it as a capital deployment but a platform to add value better. So that they could technically become buyers or bigger stake holders in these companies.”
The fund, structured in the typical 2:20 format, is currently conducting soft road shows and wants to do a few deals before approaching more LPs. The firm is already negotiating term sheets with couple of companies and has about $2 -2.5 million to invest. It is seeing interesting business models in data infrastructure, biotech, R&D, mobile application, and consumer internet. While essentially being sector agnostic, the fund will look at investing in businesses which have technology as their enabler, or differentiator, for the underlying business model.
Once the fund has formally raised capital commitments, it will look at ramping up its team by hiring two-three executives at associate levels by January.
On whether Blume Ventures can morph into a Mumbai Angel network in future, Reddy says, “We are not an open platform,” while adding, "The idea is not to be seen as competitors but collaborators.”