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Gaurav Singhvi

National Director-Corporate Connections, Co-founder-We Founder Circle

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Startups-The Emerging Asset Class For Retail Investors

Investing in startups or angel investing is truly becoming an emerging opportunity for retail investors who are keen to support and be a part of a startup’s growth trajectory.

Startups becoming unicorns or even decacorns, entrepreneurs becoming icons for the nation, co-working spaces springing up across the nation and many other positive developments in the entrepreneurial ecosystem we have been witnessing lately.

Ever wondered who are the ones fuelling this growth or are giving ‘wings’ to path breaking ideas and trail blazing entrepreneurs?

Investing in startups or angel investing is truly becoming an emerging opportunity for retail investors who are keen to support and be a part of a startup’s growth trajectory.

Startups are gradually emerging as a preferred asset class for investors who are looking for growth and returns in multipliers rather than %. Getting a 2x, 5x or 10x return is a common phenomena that we have come across. However, one must be mindful of the fact that it is not one the safer or secure asset class as the money is not entirely protected. The angel investor invests on the assumption that the promoter or entrepreneur will take the company to new heights ensuring sizable returns.

Keeping in mind the nature of startups as an asset class, I highly recommend early investors to have a portfolio approach whilst investing. Avoid making 1 or 2 big investments and rather opt for investing in 10-15 companies to hedge your best.

Personally, since I have embarked on this journey of angel investing, I have participated in around 12-15 deals per year for the past 6 years consecutively. Such a disciplined and consistent approach has worked for me and has helped me discover the best practices and get maximum return over time. The Power Law works in this scenario as always there will be around 40% of the companies from your portfolio that will sink or just vanish and the rest may give good returns. It may also happen that around 7-10 % from those may yield extraordinary results creating enormous wealth for you as an investor.

Whenever I conduct angel investing masterclass or am delivering a talk in any investor community, I am often posed with this question: what is the optimum ticket size to invest? Much to the new age investors delight, in present times one can start investing in the range of Rs 3-5 Lakhs, contrary to the larger ticket sizes of Rs 25-30 Lakh earlier. This empowers and gives immense flexibility to the investor who can now curate his portfolio and invest in multiple companies by keeping a relatively smaller ticket size. Many angel networks and communities are doing an excellent job in creating awareness and educating the eager investors about the ins and outs of startup investing.

Another common aspect that first time startup investor often ponder over is about liquidity. Definitely, it is not one of the most liquid asset class as it is basically an unlisted entity. However, many liquidity events happen these days including secondary rounds that are conducted by Venture Capital funds and also Mergers and Acquisitions. Moreover, after the landmark listing of Zomato and the frenzy it created, reaffirmed that there are many avenues for exits or liquidity in the space of startups.

The angel investor community definitely took notice of certain remarkable corporate acquisitions such as Fynd by Reliance, Beardo by Marico, Innov8 by OYO, Super Daily by Swiggy among many others, which got acquired owing to their brilliant traction, business model and infusion of innovation. Such companies bolster an investor’s confidence and pave the way for more strategic investment decisions with the aim to strike gold yet again.

Understanding safety, returns, liquidity and ticket size is very important to make well informed decisions about start up investing. It is equally imperative to keep in mind that this is done with a long term view. Over the years, having invested in over multiple startups, mentoring young entrepreneurs and investors alike, I have understood that early stage investments works on 3Ps-

Passion-The fire that empowers you to take risks and make bold decisions

Persistence-Keeping at it always pays off

And last but not the least

Patience-As good things take time

Investments in startups are a contribution to the growth and development of the country. This makes this asset class an emerging and preferred one in the times to come. About 10 years ago, the best startup investment deals used to be centred only in the hands of select individuals based out of Gurgaon, South Mumbai or Bangalore, however recently there has been a wave of change that has brought tier 2 and 3 cities to the forefront and it gives me great pride to be pioneering this change across these cities in India. I am truly honoured to be leading this democratisation of investment opportunities, across various cities and investors strata, through my association with Venture Catalysts, We Founder Circle and 9 Unicorn fund. I am extremely bullish that we will be bringing the small town investors with big dreams and bigger success stories at the centre of the India growth story and having a phenomenal surge in startup investments.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house



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