Start-ups rarely get chosen by angel investors for funding. However, a lot of Venture Capitalists (VCs) and micro-VCs are emerging specifically for idea stage start-ups in India. The Indian Angel Network (IAN) has been actively investing in promising early-stage start-ups especially in the technology space and supporting them with mentoring and market access along with money. 

However, getting shortlisted by IAN requires start-up founders to be very precocious and start-up ideas to be very promising. Shortlisted start-ups can enjoy value-add by IAN and even get introduced to other investors by the latter.

Who is Indian Angel Network?

IAN is a network of angel investors in India comprising hundreds of investors across multiple countries who are primarily interested in funding early-stage start-ups. It is Asia’s largest network of Angel Investors and includes highly successful CEOs and entrepreneurs based in India and elsewhere. 

Why was IAN formed?

IAN was initially formed to discover, cross-refer and link start-ups in Asian countries mainly in India and Bangladesh. IAN was also formed with a vision to create an environment conducive for venture investing in the start-up ecosystems of these regions. 

The founding team of IAN

The founding team of IAN includes Padamaja Ruparel, Raman Roy and Saurabh Srivastava. Raman Roy is well known as the pioneer of the Indian BPO industry and Saurabh Srivastava is one of India’s leading entrepreneurs and investors. 

Padmaja Ruparel 

Padmaja Ruparel is the co-founder and President of the IAN Fund, an early-stage investment fund by the Indian Angel Network. She is recognised as an authority figure in the Indian entrepreneurial ecosystem. 

Successful start-up funding and  sectors covered by IAN

IAN has covered a wide variety of industry sectors including manufacturing, cyber security, ed-tech, hospitality and new-age technology like AI (Artificial Intelligence) and drone technology. Start-ups funded by IAN that made it big include high value companies like Kwench, LBB, TagBox, Propelld, FabAlley, MySpinny, Wow! Momo, Box8, Uniphore and Native Special. 

EGreens, an investment firm headquartered in Delhi focuses specifically on Agri-tech start-ups. They have launched a seed fund valued at $2.1 M (INR 15 Cr) for early-stage investments into agri-tech start-ups. 

Eligibility Criteria for Start-ups

• Early stage Agri-tech start-ups in India are eligible beneficiaries for funding. 
• Start-ups that operate on disruptive business models spread across the end-to-end value chain of food production, storage and transportations can be at the receiving end of the funding.
• Start-ups who are providers of market linkages are eligible. 
• Start-ups who leverage technologies like AI (Artificial Intelligence) and ML (Machine Learning) in farming practices are eligible. 
• Start-ups who implement IoT (Internet of Things) across the supply chain also come within the scope of benefits. 

The Objective

The objective behind EGreens is to identify and invest in start-ups that are offering last-mile delivery solutions in the agriculture sector. EGreens is interested in utilising valuable opportunities to fund Agri-tech start-ups that will address the fragmented agricultural supply chain in India. 

With the inception of this new fund, EGreens wants to make a move into food distribution and retail from the FMCG sector. EGreens is also a ‘people first retail company’ alongside its investment firm and has amassed decades worth of experience in the FMCG sector. 

Start-up funding success

EGreens has made its maiden investment of INR 15 Cr ($2.1 M) in its in-house brand VegEase. VegEase is a food retail brand which delivers fresh fruits and vegetables to customers’ homes through its ‘cart-at-home’ model. 

After being bootstrapped by its parent company, VegEase acquired a user base of over 5000 customers within a span of 3 months. It has also reported a volume of 200 orders per month. They have also established two warehouses in two cities Delhi and Gurugram, each spanning 9000 sq. ft. in total area. They have also achieved a turnover of INR 7 M and reported a return rate of 0.25% in their sales which is tremendous given the average industry return rate in this segment is 2-3%. 

10 Club is a Bengaluru based start-up which is focused on acquisitions of fledgling e-commerce sellers. Upon acquisition, this startup works to scale these sellers. It was founded in 2020 by ‘Bhavna Suresh’ (ex-CEO of Lamudi, a Real-Estate Marketplace based in the Philippines), Joel Ayala (Co-Founder & Managing Partner at Class 5 Global), and Deepika Nair. 

10 Club has raised $40 M in a seed funding round which is the highest for any seed funded start-up in India. It is backed by Fireside Ventures, Hayday, Class 5 Global, PDS International, and Secocha Venture. 

What is the Thrasio model?

The ‘Thrasio model’ was fashioned after ‘Thrasio’, a US-based unicorn start-up. It’s based on the ‘e-commerce roll up space’ and is about building a house of online brands. The Thrasio model is a raging success and is quickly being emulated in India. 

How the Thrasio model paves the way for success and funding? 

Companies which follow the Thrasio model are pitching start-up acquisitions by offering to help them scale 10x within a span of 3 years. They propose to accelerate the growth of these firms by integrating supply chains, providing performance marketing expertise and gleaning insights from data analysis. 

The secret to the success of Thrasio style start-ups is attributed to their target market, seller quality, purchase valuations, debt availability and the relationship they build with the owners of the acquirers. 

Good chemistry, understanding and trust between the Thrasio start-up and the founder/owner of the company being acquired are key to success in this model. Thrasio model start-ups are also betting on sellers that can target pan Asian, and foreign markets like Europe and America to touch their growth targets. 

Which Industry Sector does 10 Club belong to?

10 Club belongs to the Venture Capital and early-stage funding league of start-ups and will be investing in the Indian start-up ecosystem. It belongs to a league of new-age funding start-ups that want to build a house of e-commerce brands by identifying promising sellers on Amazon. 

Learnings for aspiring Thrasio-style start-ups

Aspiring Thrasio style start-ups need to focus on acquiring up-and coming brands that are selling like hot cakes on Amazon. Also, profitable companies are your potential target. Before venturing into the Thrasio space, you need to research and study the market in-depth. Interact with potential sellers on Amazon, tune into their plans and processes. The next step would be to shortlist the most promising sellers who deserve a buyout. 

Your pitching strategy can be unique depending on what works best in your relationship with the seller. There are numerous options to lay out attractive offers on the table. You can offer marketing expertise, strong media coverage, a partnership, etc. 

Start-ups have become the most valuable asset of the country. But what’s backing the unprecedented growth of some of the highest valued unicorn, IPO, and pre-IPO stage start-ups in India? Money, of course! A downpour of funding from private equity firms, M&As (Mergers & Acquisitions) and some good old VC deals. Money is thus the bloodline of the Indian start-up ecosystem but with all the funding pouring in, start-ups naturally have questions they need answered.

Giving up shares for deserving stakeholders.

When a number of investors come on board, it’s a tough call to decide about dilution of shares. But it’s important for start-ups to be in tune with the goals of the business to understand what’s best. If you’re a team of co-founders or if you plan to give up shares to your employees, make the decision based on who has the best interests of the company at heart. A number of start-ups are giving up small percentages of their company to employees via Stock Appreciation Rights (SARs). By giving stakes in your company to the core team, you know your company is in the right hands.

How to raise start-up funding without losing equity

The worry about having to give up full or partial ownership of your business to fulfil your operating capital needs shouldn’t keep you up at night. Funding often leads to loss of equity but there are ways to ensure that you have full ownership of your start-up. Bootstrapping is surely the best method to keep your equity. If you are a start-up with low capital expenditures, you are at an advantage because you can become a fully bootstrapped start-up (reliant purely on your existing revenue). The next best way to keep equity is to go for business loans. There are a ton of start-up and MSME loan options that you can avail now that the Government is actively supporting the start-up community.

How to get Funding

Getting start-up funding has become relatively easy. If your idea is based on a ground-breaking technological revolution, you can pitch to Angel Investors, Incubators/Accelerators or Venture Capitalists. You can also apply for the Start-up Seed Fund scheme, The Atal Innovation Mission, and look into other Governmental Grants and schemes to get funding for your start-up.

Which Funding option suits me?

The biggest Angel Investors are generally scouring for unicorns to add to their portfolio. On the other hand, Venture Capitalists rarely take a second look at pitches that don’t excite them right off the bat. So how will you know which funding option is best suited for your start-up? Irrespective of the industry you belong to, you can always choose to crowdfund your start-up, approach an incubator/accelerator as an early-stage start-up, or apply with a micro-VC (they usually pitch into pre-seed and seed funding rounds). You can always approach NBFCs (Non-Banking Financial Corporations) who are microfinanciers that are much more flexible than traditional banks. Bank loans are also an option but one that’s not highly recommended for start-ups that are scaling up. Unless you are confident of your ability for timely paybacks. There’s also always a degree of risk involved in bank loans.

The best funding option for all start-ups in India is to seek capital from Government programs. There are several new programmes launched like the 10,000 Crore Start-up Fund, the Bank of Ideas and Innovations Program (a program to share your innovation in exchange for capital). There is also the ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited’ (MUDRA) which is funding SMEs. There are also several state level programs dedicated for small businesses. You can also approach SIDBI (Small Industries Development Bank of India) which is dedicated to offering loans for MSMEs.

The Start-Up India Seed Fund Scheme (SISFS) is an initiative by the Government of India to spur entrepreneurship across India via an extensive network of home-bred start-ups. With the devastation that the COVID-19 pandemic continues to cause, the need for Start-up India Seed Fund Scheme is more important today than ever.

India’s entrepreneurial community is formed by a large mix of MSMEs, emerging tech-driven businesses that are easing the traditional ways of doing companies and catalysts for start-ups that guide and aid entrepreneurs – the start-up incubators.

The Startup India Seed Fund Scheme (SISFS) aims to provide Rs. 945 crore over five years to help 3,600 entrepreneurs through 300 incubators. The guideline is exhibited under the auspices of the financial department, the Department for Promotion of Industry and Internal Trade (DPIIT).

The DPIIT will invest in qualified start-ups to support concepts, prototype development, product testing, market penetration and marketing guides. The plan was given the nod on 19 April 2021 and will be considered in effect from 1 April 2021.

Objectives of Startup India Seed Fund Scheme 

The scheme’s funding plan aims to build a robust start-up ecosystem, especially in non-urban areas in India. Start-ups selected under the scheme would preferably be from sectors including social influence, waste management, water control, economic inclusion, education, agriculture, food processing, biotechnology, healthcare, power, mobility, security, space, railways, oil and gas, textiles, etc.

To start a start-up with a good business idea, one must first find apt fundraising channels and the capital for it. An entrepreneur’s new business philosophy must reflect the value of her/his models and products, as well as the prospects for further development.

The final definition of any business idea requires several blueprints and immense strategization, which can be achieved using SWOT and PEST analysis techniques. Defining a customer development plan and developing business development plans are essential criteria for a business’ success. However, many companies fail because, due to their inability for fundraising enough capital. At the end of the day, money or capital is needed for the business’s work at all stages.

If you are at the step in your journey where you want to know how to initiate the fundraising process for your business idea, you have come to the right place. Let’s find out the basics of raising funds for a start-up and the steps involved in the process.