The high-risk-high-return angel funding space is attracting more organised investors. Kolkata based Seeders is the latest firm to enter this form of early stage investing. Seeders - founded by two former entrepreneurs Abhishek Rungta and Pallav Nadhani - will invest tiny capital (Rs 5 lakh to Rs 25 lakh) mainly in technology startups. The duo wants to emulate the model of the successful Y-Combinator, an early stage incubator and investor in the US.
There has been a spate of launches by early stage investors in India such as Morpheus Venture Partners, which invests about Rs 5 lakh in a startup, and Grow VC, a crowd funding programme. Besides these firms, there are also established angel investing groups like Mumbai Angels, Chennai Fund and Indian Angel Network.
Morpheus, founded by former entrepreneurs Sameer Guglani, Nandini Hirianniah and Indus Khaitan, also follows the Y-Combinator model, which is to provide seed funding and basic infrastructure to “pre–revenue companies” and hand-holding them to make a pitch to VC firms. Y-Combinator's investments are rarely more than $20,000 in a company in return for a high single digit equity. The venture firm specialising in early stage funding in the US has provided seed funding to about 115 companies till now. Some of the companies that they have funded include Inkling Markets, Reddit, Loopt, ClickFacts, Snipshot, among others.
“We are looking at bringing the Y-Combinator model to India,” Pallav Nadhani, co-founder, Seeders, told VCCircle in an interview. Nadhani is presently the co-founder of InfoSoft Global, the company behind FusionCharts, which was selected in "Top 10 Emerging Companies of India" by Nasscom in 2009. Its flagship product FusionCharts claims to be the industry's leading flash charting component with over 13,500 customers and 250,000 users spread across 110 countries, including 80% of Fortune 500 companies.
The angel network presently has Nadhani and other founder - Abhishek Rungta, the founder and CEO of Indusnet Technologies, a firm that specialises in internet - design, development, market, training and SEO. The company currently has a team size of 300 people spread across three offices - Kolkata, Chennai and London (UK).
Seeders, which began a year back, started its formal operations only a few months ago. The angel fund has begun to receive interest from startups now and is closing two deals in the next two weeks. The company also plans to bring in guest mentors – the best names in the industry to advise portfolio companies.
The fund plans to invest about Rs 5 lakh to Rs 25 lakh per venture apart from providing infrastructure for incubation in return for a stake in the company. Though devoid of a fixed corpus to invest from, the angel fund is looking to invest up to Rs 1 crore and more across portfolio companies. “We have the capacity to invest from Rs 2 crore to Rs 10 crore," said Nadhani.
In terms of business plans, which are seeing maximum investor’s interest is the information management space. Nadhani said, they are eyeing investment in this space and are not really looking at “me-too startups who blatantly copy models from other ventures and want to create it all over. Re-inventing the wheel is fine only if you've a clear and compulsive differentiating factor” .
He added that they do prefer tech startups as the founders of Seeders as “tech entrepreneurs” and it is an advantage with those “who can provide evidence of their concept like prototypes or even wire-frames. This helps us understand better what the end goal of the venture is, and how to engage with the market".
Nadhani added that there is still a huge gap in funding the “pre-revenue” companies and having bootstrapped a company all by himself, he knows the mind-set of an entrepreneur. Added to it is the entrepreneurial ecosystem in Kolkata which has essentially been under the radar till now. He believes that funds like these will help in bridging the funding gap available to Kolkata entrepreneurs.