One of India’s biggest startups offers a valuable lesson in how to attract angel investors

The one with potential.
The one with potential.
Image: Reuters/Shailesh Andrade
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One of India’s most successful startups was built on the back of wealthy individuals willing to bet on first-timers.

In December 2010, when IIT graduates Bhavish Aggarwal and Ankit Bhati launched a bare-bones ride-hailing venture, they had few options to finance it aside from their own pockets and backing from immediate family.

At the time, seed funds and early-stage venture capital were relatively rare in India. But less than six months after starting Ola, Aggarwal and Bhati found their angels—literally.

In April 2011, a bunch of individual investors—Rehan Yar Khan, Anupam Mittal, Ramachandran Ramjee and Zishaan Hayath, Kunal Bahl and Rohit Bansal—together pumped in just over Rs1 crore ($160,000) into Ola.

Most of them invested on blind faith, trusting Ola’s founders’ vision.  Most of them were entrepreneurs themselves. Prior to investing in Ola, Khan founded and ran a floral gifting business out of India that served customers in the US. Mittal was already the founder and CEO of media and entertainment group People Group. Hayath was co-founder and vice president of product at Chaupaati Bazaar, a phone-commerce startup. Bahl and Bansal had co-founded their own e-commerce startup, Snapdeal, 10 months before Ola started up.

Ramjee, a principal researcher at Microsoft, appears to be the one exception. Aggarwal knew him from a two-year stint at Microsoft before founding Ola, and convinced him to come onboard.

The idea was to come together as an army since no one could individually meet the cash needs of a business-to-consumer venture such as Ola. “Nobody can write the full angel cheque of Rs1.5-2 crore for one startup,” Hayath, now co-founder and CEO of ed-tech platform Toppr, told Quartz India.

Over the years, a slew of notable names ranging from high-net worth individuals to illustrious industry icons such as industrialist Ratan Tata and Flipkart co-founder Sachin Bansal have joined those early angels as investors in Ola.

Ola hasn’t neared the coveted prize of profitability yet. But that hasn’t held it back from expanding in and outside India or making various risky bets beyond its core business.

🤝 First-movers and the founder

For one of its earliest angels, Ola was his first ever investment in a start up. Hayath invested in the Bengaluru-based company for one major reason: his trust in Aggarwal.

“I knew Bhavish. We spoke and met often. I had enough insight into how he thought, and whenever I heard him speak about what he wanted to build, I was interested and fascinated. His thoughts around mobility were too far ahead. He was not thinking about a taxi business in a rupees-per-kilometre or per-ride way—his thoughts were at a different level. I knew this guy was going to do something that’ll be crazy to be a part of. I could’ve either quit what I was doing and joined him, or I could put some money in and be a sideline spectator.”

Khan, a more seasoned angel investor, was already looking into ground transportation companies like RedBus, an online bus ticketing platform, and Meru, one of India’s earliest cab aggregators. But what impressed him about Ola’s cab aggregation model was how asset-light it was. “I realized one requires a lot of technology to build a large-scale business. I waited till I came across someone who was strong in tech,” Khan said. Khan, now a partner at early-stage venture capital fund Orios, ended up funding the bulk of Ola’s first round.

“Founders are very important when investors are coming in so early because you only have two things to go on: opportunity and founders. We have to assess whether these people can build a large company, whether they have the chops to do that. When I met the founders of Ola at some event, I realized both are computer science graduates, strong in tech and these guys were doing something interesting in cabs. So we kept in touch.

One good thing about the founders of Ola is they always [have an] experimenting mentality. The core business is growing and they devote small amounts of money to new things like payments, food, electric vehicles (EVs), etc. Some of these things don’t work but one in seven or 10 become interesting. EVs and foreign expansion seem to be working.”

Khan brought in Mittal to offer a few lakh rupees. Mittal wasn’t entirely convinced at first but Aggarwal managed to woo him.

“I initially kind of dismissed the problem Ola was solving of a cab being at your beck and call.

At that time, Ola did not have an app. It was a call center. Every time I called, the same guy would pick up the phone and painstakingly go through queries and promptly dispatch a cab. This person was Bhavish, the founder. I wasn’t a big believer in the space but really liked his commitment and sincerity.

Integrity is very important [for founders]. Entrepreneurship is a long journey where you are giving your all to serve a stranger in a lot of ways. The other thing is hunger and learnability. It has to come across as somebody doing it from a purpose or mission standpoint rather than a financial objective. And for me, personally, some level of chemistry is important. I’m not saying the guy has to be my best friend but we should be able to have a free-flowing conversation transparently, otherwise it becomes a bit of an ordeal dealing with people.”

Aggarwal’s reputation remains pristine. It bagged him another notable investor recently. In February, Flipkart’s Bansal stepped up with an investment of Rs650 croreclose to 10% of the $1 billion he made selling his e-commerce venture to Walmart.

“We have been friends for a long time, since 2012 or 2013. We have met often since then. When I had some liquidity post the Flipkart event last year, it was an obvious choice for me to approach Bhavish to see whether he was interested in something like this,” Bansal told YourStory in February. “I have seen his journey from the beginning, seen him evolve as an entrepreneur, seen Ola become what it has become.”

Over the years, Ola has attracted some of the world’s most prominent venture capital investors including SoftBank, Tiger Global, Matrix Partners, Sequoia Capital, and Tencent. And they’ve chosen to stick around.

🧘‍♂️Staying put

Investors typically bankroll startups to earn high returns within a short timespan. But for at least three Ola angel investors, that hasn’t been the case. In the decade since Ola’s inception, Hayath, Khan, and Mittal haven’t sold their stake, despite Ola’s mounting losses.

So what exactly do they still see in the company?

Hayath says:

“A measure of success for any investor is a profitable business that can IPO. That’s true value creation and value allotting. But that measure of success is usually so far away. Companies like Flipkart, founded as far back as 2008, haven’t reached there. So I consider the four-year-mark: If the startup you angel invested in survives four years then you know, it was just an idea before you invested but because you did, they were able to raise more capital. And if that’s the case, somebody after you thought this idea is worth it. It’s not a monetary outcome but it is gratifying.”

Khan is willing to wait it out patiently, too, because he doesn’t feel Ola has peaked yet.

“Supposing you have an asset stock growing strongly every year. You want to hold on to it. Otherwise, where else could you put your money at the same rate of growth.

Certainly, Ola has done well from 100 rides a day back then to almost 2 million rides a day. In any investor’s portfolio, Ola has always been a shining star.”

Mittal is impressed with how the company has diversified.

“Building a company is not a straight path. It’s zero to one; creating something from nothing. During the journey, you can take some wrong turns as long as the direction and velocity are broadly correct, and on both these grounds, you can’t fault Ola.

When we invested in Ola, we wouldn’t have thought in our wildest dreams it could become as big as it has. It is one of the defining stories of our times in India. These are the home runs you hope for in your portfolio that justify all your other sins.

All three will eventually exit the business, they say, but for now they’re choosing to wait it out because they’re still expecting growth and higher returns in the future.