Indian start-ups accelerate entrepreneurship

BENGALURU, India: Angel investments in India have been on the rise in the past couple of years, driven by technology entrepreneurs and corporate honchos willing to back early-stage ideas with risk capital.

Enter TermSheet, Asha Impact and Applyifi — a breed of startups that has sprung up to help other startups. They are platforms that streamline the process of pitching for funds, make the assessment of startups easier for investors and reduce the time taken to close deals. While TermSheet and Applyifi are focussed on companies, Asha Impact seeks to address development challenges.

TermSheet works with investors to reorient the way they evaluate early-stage companies, depending on the amount they are looking to raise. It addresses the mismatch between expectations of entrepreneurs needing funding and the lack of awareness among early-stage investors. “Most problems arise because investors apply late-stage capital investment techniques to early-stage companies and are diverting capital here,” said Vivek Durai, founder of Chennai-based TermSheet. Currently operational offline, it will go online in February. The other challenge for TermSheet is to help close deals faster.

“We spend so much time closing a deal and on the term sheet and at the end of it, they all look similar. That’s the problem Vivek is trying to solve. Also, the number of deals has shot up, so now you need to go through 100 to find five to evaluate further to get one you want to invest in finally,” said Ajit Khurana, an angel investor registered on TermSheet’s network and chief executive officer of the Society for Innovation and Entrepreneurship at the Indian Institute of Technology, Bombay.

Khurana has been an angel investor since 1998 and has 22 deals in his portfolio outside of TermSheet. “The other key part is that it saves me time of sifting startups. If it scales up, it will make things easier for angel investors and we’ll trust validation they make,” said Gaurav Lochan, an angel investor at TermSheet and an engineer at Facebook. He has made one investment through the company.

TermSheet has 100 investors registered on its network. It has closed one deal and has 20 in the pipeline. It operates in the range of Rs65 lakh to Rs6 crore and takes about 1% of the deal value from startups as commission.

The platform focuses on sectors such as hardware, Internet of Things, healthcare and embedded systems programming, in addition to product companies. “These sectors need to come to a stage where venture capitalists will fund them. Investors want a hot opportunity and operate with a herd mentality,” Durai said.

Asha Impact, launched by Vikram Gandhi, former vice-chairman of investment banking and global head of financial institutions business for Credit Suisse, addresses the other end of the spectrum, providing angel money to social enterprises.

Operating as an informal network with the backing of high net worth individuals, Asha focuses on ventures in financial inclusion, affordable housing and alternative energy, with investments ranging from $100,000 to $3 million.

“Most impact investing in India is actually foreign money. Poverty elimination can be done through the NGO path. The other way to deal with poverty problems is the third leg of bringing entrepreneurial business principles that will encourage entrepreneurial activity in these areas and bringing scalable models which are not dependent on bringing government grants,” said Gandhi.  

Editor’s Note:  This article was first published on December 30, 2014, with the title “Bridge the Gap Between Expectation and Funding for Early Stage Start-ups.”  

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