where angels are not afraid to step

When BharatPe was doing the ‘friends and family round’, Rajeev Ghai, 67, from Kashipur, Uttarakhand, decided to invest some money in fintech. Ghai said, “I invested in this only because my son told me to do so.” Hub for Startups. We want Uttarakhand to attract some of them as well.”

Vikas Singh, an Indore, Madhya Pradesh based consultant, started off as an advisor to several startups. Initially, he started picking up sweat equity—a stake in exchange for mentorship—in a few startups. “Often, startups are not going to be able to pay you for mentorship, but they are good investments,” he said. 5-10 lakhs, it becomes a good opportunity. 100 crores.

Goenka, Ghai and Singh epitomize a trend among investors in India’s second-tier cities, who are looking to diversify their asset allocation, and flock to invest in startups despite the risks involved. Many of them are from successful business families and have money. From Kanpur to Coimbatore, Nashik to Guwahati, the lure of huge financial returns is driving these investors to get in on the ground floor with promising startups. And this has seen them back everything from fintech, agritech and space startups to solid waste management, drone and mobility solutions providers. Helping them in this journey are Tier II city-based accelerators like Umsebo Corp, Venture Catalysts and Marwari Catalysts.

Pratul Tandon, Cofounder, Umcebo, said, “With the next generation gradually taking over the reins of India Inc., high-net-worth individuals from Tier II cities are actively looking for various lucrative global opportunities to diversify their investment portfolios. Allocating family property for A tech business accelerator working with investors in Tier II cities across India and helping them invest in startups overseas. “Tier II investors also need awareness and training on how to invest in startups, what to look for in a business, how to scout. for investible businesses and growth trends,” Tandon said.

Beyond Mutual Funds

Goenka is one of the second generation leaders in the Shubham Goldi issue, which was started by his father and uncle in the 1980s. profit is expected in business 1,200 crore in revenue this fiscal, he said. the family owns more than 1,500 crore in mutual funds but Goenka feels there is merit in diversifying the startup ecosystem. Over time, he expects to allocate 15-20 crores for startup investment.

Over the past few years, 42-year-old Goenka has immersed himself in the startup investment ecosystem and is looking to diversify his bets beyond mutual funds. “People who are from Tier II cities are better equipped to understand startups than those from bigger cities. Because we face these barriers every day – we don’t have access to direct information, we don’t have access to airports, we don’t have people. “We have to plan for everything and everything has a cost,” Goenka said. The Startup Incubation Center at IIT-Kanpur was the starting point for him.

Today, Goenka is convinced that investing in startups is a good way to be agile in business. “In our current business, you get used to having the best stuff, you don’t bother about the cost. But through a startup, sometimes you can see that the same thing can be done at one-tenth the cost. may be, which is more efficient.”

The Goenkas are keen to invest in certain sectors, particularly in food processing and recycling. The latter is an area that India as a nation does not pay much attention to, he said. Cashing in on his beliefs, Goenka’s second startup investment is in a business that turns flowers scattered in temples in and around Kanpur into incense sticks.

IIM effect

Like Goenka, startup incubation centers at IITs and IIMs have become the starting point for many such investors. Before investing in BharatPe, Ghai was already an avid investor and quite successful in the stock market. Ghai’s ideas about startups began to take shape when Kashipur got its own IIM in 2012, making the institute a rallying point for local investors and industry bodies. As the President of the Board of Industries of Uttarakhand, he started galvanizing the local investment community through the incubation centre, which is now about five years old.

An engineering graduate from Chandigarh, Ghai owns companies that are into wood processing. He also has three petrol pumps in Kashipur. His children live in the US but Ghai is active in Uttarakhand through the local Udyog Mandal. He has so far invested in six startups through Mumbai-based startup incubator Venture Catalysts, which also has an angel network. Venture Catalysts invests in early stage startups through various funds and has been actively tapping Tier II markets in recent years.

Ghai is encouraging others in the community around him in Kashipur to look at startups as an asset class. About startup investing, he said, “It’s taking a risk.” “It will take time, as we will have to shift them from the ups and downs of the stock market to startups. % of their funds in bank FDs (fixed deposits). This will happen when they have the confidence that they can monetize startups. “

Eventually, Ghai says as much as 15% of his total investments could be in startups. In December, he invested in Agnikul, a space startup, an area he is passionate about. “Agriculture is one of the good sectors. I like service sector in agriculture. I am also looking for good companies in drones as I think it is a growing field.

Ghai is not planning to invest in other fintechs as he feels that they will eventually have to compete with banks and making money will be difficult. He invested in Blu Smart Mobility, a ridesharing app that uses fully electric vehicles (EVs), in 2021.

unused funds

Debjeet Chaliha from Guwahati always wanted to invest in startups, but never had the time or inclination to do the research. A product of Delhi’s St Stephen’s College, Chaliha has been working with his family business, DKD Marketing, in Guwahati since 1994. The family owns Korangani Tea, a tea brand in Assam, and has some interest in airport retail. It also had a tea garden, which was sold last year.

“I thought of investing in startups but didn’t want to invest the time as it requires a lot of research. When Venture Catalysts approached me, I thought it fit the bill because they were working, they were shortlisting companies and screening investments. I loved it,” he said.

“There is a lot of untapped money in Tier II cities,” Chaliha said. No profit,” he explained.

Chaliha has interests in fintech, agritech as well as cleantech companies and has made some investments in these niche firms. One such agritech startup is Hessa, which helps connect farmers with markets for their produce, banks for financial support and insurance companies for risk cover. He has also invested in an e-commerce platform named GabbarDeals.

“These investments have nothing to do with my line of work. I see them as an investment opportunity with earning potential in the medium to long term.”

“EVs are something that is going to become big. But I am not getting into that segment right now… Let there be some churn; some companies will move out of the way,” he said. However, he regrets not investing some money in Blue Smart Mobility, as the startup has grown well in recent years. He is also an investor in a fund floated by Venture Catalysts. Eventually, Chaliha would like to see 20% of his wealth invested in startups.

try, try again

Like Tandon’s Umsebo and Venture Catalysts, there are other professional networks that are active in Tier II investor set-ups. One such network is Marwari Catalysts, founded by Sushil Sharma.

Sharma first invested in startups in 2018, but found little success. Three of his four startup investments failed because he didn’t have the right team or thesis. The fourth startup was largely successful, but Sharma didn’t get any meaningful return on investment because it didn’t have a proper share purchase agreement. They just got their original investment back.

“I realized that I shouldn’t invest based solely on emotion,” he said. There have been three partial exits from investments in the last three years, Sharma said. There has been only one failure.

Marwari Catalysts has so far invested in more than 50 startups. Sharma himself has planted 6 crores in various startups on his own. The accelerator is interested in climate change and sustainability startups, direct-to-consumer ventures as well as startups in the professional work space.

It is a transformation of sorts, not just for Sharma but for his family as well. When he first started working in startups, his family, in-laws and friends often wondered aloud what he did for a living. “We come from a simple family. My five brothers are farmers. It was challenging,” he said while speaking about his early initiation into the startup ecosystem.

Now, he considers himself a brand ambassador for investors from Tier II cities. “Most of our startups and founders are from smaller cities like Nagpur, Nashik, Bhopal, Meerut and others. Essentially, we are from Tier II and we work for Tier II,” Sharma said.

proximity factor

The rise of accelerators has also created an ecosystem of mentors. Starting out as an advisor to startups in Indore, Singh soon realized he could do much more. In 2013, Singh started an incubator called Srijan with the help of Madhya Pradesh government to train information technology focused startups in Madhya Pradesh.

Indore-based MetaStay Ventures, a hospitality venture that offers co-working services apart from running hotels, is one of the startups invested by Singh. “When we started advising them, they were not even a private limited company. today they are respected 50 crore,” he said. Instaprintz, one of his investments, provides 3D printing services and is valued at He said, 100 crores.

Singh also has investments in a solid waste management business and is keen to get into renewable energy, drones and recycling.

“Proximity is something that is important and valuable to investors. For example, we will not invest in international startups where we do not have any affiliation. 100 crore valuation. We are only interested in startups where we can add strategic value in terms of knowledge or connections. It would be pretty good money for me,” he said.

At a time when funding taps have dried up elsewhere, focusing on valuation rather than profits would be music to many founders’ ears.