Launching a startup in India is a massive struggle.
Despite being the third-largest tech startup ecosystem in the world, India has an acute shortage of seed funding, which is secured shortly after a company is first incepted. In 2018, seed funding in India dropped over 20%
Investments in new firms are hard to come by because statistics show that it’s a very high-risk bet. Nine in ten
However, as the ecosystem matures, a handful of angel investors have found the secret sauce to success and hit gold multiple times. One such investor is Anirudh Damani, managing partner at Artha Venture Fund and an angel investor in 57 startups.
Damani’s angel investments include unicorn budget hotels chain OYO, online cosmetics retailer Purplle (that turned profitable funds from several foreign investors backed by Google
Quartz asked Damani to share his mantra for investing in a startup. Below are the reasons for some of his biggest bets and how the investments turned out:
The budget and alternative accommodation space in India was deeply fragmented, with terrible customer experiences. The scale of this platform, increasing travel spends by Indians, and founder Ritesh Agarwal’s passion and “whatever it takes” attitude nudged me into this investment.
I expected OYO to do well as it was the first mover in this space, but I knew OYO was going to do very well when other startup founders’ elevator pitches started with “We are the OYO of…”
Monetarily, yes, as it clearly achieved the investment returns I wanted. OYO’s success was important for our ecosystem, and their global expansion plans will boost the image of Indian startups.
A focussed e-commerce play was missing and penetration of non-FMCG brands outside of tier-I cities was limited. Moreover, cosmetics as a category has a higher average order value and repeat orders.
I expected them to be profitable soon but due to competitive challenges, it took some time to get there. But, Purplle has now achieved the scale I expected.
We’re yet to exit the company but the markup in the valuations has been good.
Bookmycab (BMC) -
BMC was the only player with the licence to operate radio taxis in Mumbai (and later in Delhi and Kolkata). The entrepreneur was very passionate about the space and the scale of the problem was massive.
I had a strong conviction that BMC would do well and that the licence made the company very valuable.
BMC did well for a brief period but Uber and Ola stormed the moat of the radio-taxi licence. Unfortunately, the company could not survive in the face of intense competition and was
sold to Wings .
SeekSherpa – Mobile travel marketplace (2014, 2014)
This was a deal where I liked the entrepreneurs more than the business. The business model was unique and had the potential to scale if the entrepreneurs stayed focused on it.
I didn’t expect SeekSherpa to become a unicorn. It could have been a business that would be acquired by one of the larger online travel agents.
After doing well initially, the entrepreneurs lost focus and opened another entity to do a similar business, raised money there, and the company suffered.
The parenting market is difficult to crack, as the business needs to create a strong bond of trust, especially with mothers. Founder Naiyya Saggi understood this problem and built a platform that provided the privacy that parents seek along with first-hand information from other parents. I really liked Saggi, her idea, and execution, along with a strong leader in Karan Maheshwari, the other co-founder. It was a deal that I had to do!
I have a strong belief that BabyChakra has all the right ingredients to become a global company and deliver stellar returns to our portfolio.
Over a million Indian mothers use the BabyChakra platform every month. It is a testament to BabyChakra’s position in the market. The next 18-24 months hold a lot of promise and I believe BabyChakra will cement its position in India and abroad.
India is the world’s biggest wedding market. The money spent on the event is often the biggest life-expense a person makes other than buying a home. I have experienced the amount of effort that goes into planning weddings when I saw weddings in my family. Therefore, investing in a platform that provides access to wedding planners, vendors, etc. made sense.
I expected WMG to be a cash cow business due to the large revenue it makes from each customer. If WMG could extend its business to becoming a full-fledged wedding planner or a branded venue manager, it has the potential to reach greater heights.
The company is doing well and has a strong and growing revenue, but it has been a sluggish performer for my portfolio and I am disappointed that it has not been aggressive at scaling.
The opportunity to take offline stores online through point-of-sale level integration answered the pain point faced by many online shoppers—authenticity. Secondly, the brand’s store level managers did not receive credit for sales initiated by them but closed on the brand’s website. Fynd’s solution catered to both those problems and the initial traction was very promising. I also liked the entrepreneurial team.
I believe the Fynd model has a lot of potential and as long as they continue the excellent work, they can become one of the biggest successes of our portfolio.
Yes, because the company has exceeded its targets. Its technology has the potential to transcend borders which is why Google has invested in it directly.
Jed McCaleb is a very well-known name in the crypto space. He set up Stellar Development Foundation to fix the gaps in Ripple, where he was a chief technology officer and co-founder. Lightyear was addressing the gaps in the multi-trillion dollar remittance industry by fixing the gaps in the archaic international banking network. Lightyear was referred to me by a professor at UCLA and the strong referral was important in making the decision to invest.
I believe Lightyear has the potential to be a unicorn and its solution has the potential to save billions of dollars in fees for the end consumers.
It is too early to assess the success of the investment, but they recently acquired Chain, which has been a very positive improvement.
The second-hand fashion space in India has a tremendous scope as the aspirations of the Indian consumer have continued to climb but the wallet hasn’t grown thicker at the same pace. Coutloot’s focus was to increase the confidence in the transaction for the buyer by inspecting each item for sale internally before shipping it. They also increased the confidence in sellers by ensuring that the sellers would receive their proceeds as long as the item was in the condition promised and had passed all quality checks. This focus, along with the investment deal the founders offered, made the decision to invest quite easy.
There is a unicorn in southeast Asia that is working on a model similar to Coutloot and I have similar aspirations of this startup.
The company has done very well with the limited capital it raised and with the recent fundraising rounds, they have enough resources to scale which puts them in a really good position overall.
