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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (9442)	11/7/1999 5:10:00 PM
From: Mohan Marette	Read Replies (1) \| Respond to of 12475

Where 'Angels' do not fear to tread - The Decent of the Angel Investors Flight of 'angels' descends on local IT start-ups Govindraj Ethiraj MUMBAI 7 NOVEMBER ALL angels do not come from heaven, as Silicon Valley discovered some years ago. And now, start-up entrepreneurs in India are discovering the same. A booming aftermarket for tech start-up companies has led to a rash of formal and informal 'angel clubs' springing up all over the country. CEOs, stockbrokers, investment bankers, businessmen, successful IT professionals, MNC executives and non-resident Indians are rushing to put their disposable income into start-ups, with individual investments ranging from Rs 5-10 lakh to Rs 5 crore. Quick estimates already put the total amount available from such angel investor clubs at close to Rs 400 crore . Possibly the biggest of the lot is the Mumbai-based 'Angel Club', comprising some 40 members (representing close to Rs 30 crore) and expanding to 100 members soon. Rashesh Shah of Edelweiss Capital, who co-ordinates the angels, is himself an angel investor having invested in three Internet start-ups. Most of the angels he brings together are batchmates from the Indian Institute of Management (Ahmedabad). Others are tech entrepreneurs who made a packet after venture capital funds picked up stakes in their companies. Angel investments are usually made around the same time the company is born. If it does well, the venture capitalists come in, with larger amounts of money. The venture does even better, then it's time to look at a Nasdaq listing. And there is no dearth of inspiration: nine-month-old, loss making start-up Satyam Infoway has a Nasdaq market cap that hovers close to the dreamy $1-bn mark. Another big club is the Infinity Technology Fund, put together almost entirely by CEOs of IT companies. CEOs like Atul Nishar (Aptech Ltd), Harish Mehta (Onward Technologies), Pravin Gandhi (formerly Hinditron, Digital Equipment) and Raj Saraf (Zenith Computers) invested Rs 50 lakh each as seed capital to put together a fund for investing in start-ups. The targeted corpus: $20 m (Rs 85 crore), $10 m from India and $10 m from overseas. Says Aptech's Mr Nishar: "We are all from the IT industry, so we understand the quality of new ventures and certainly the potential in the industry." Adds Mr Gandhi: "You can call us a corporatised angel investor set-up." And word spreads fast. Mr Shah, who advised three rounds of international venture capital funding in rediff.com as well as Draper Capital's 51 per cent investment in legal portal, lexsite.com, says it's tough to parcel out the demand. "Our angels constantly want more stock than they get. Especially when the idea is hot," he says. Mr Shah?s latest venture indiaport.com was similarly funded. Internet solutions company On-Line Solutions CEO Sanjay Hinduja is another upcoming angel. Barely a year old, he's already funded two start-ups, even as he, curiously, finds himself approached by larger angels. "The point is that there is more money than deals," he says. And then there are the plain money bags. Investment banker GS Ganesh represents a group of four (two of them NRI), collectively willing to invest close to Rs 20 crore. Great Eastern Shipping Company (Gesco) director Ravi Sheth has put his own money into two start-ups and says he is actively scouting for more. A Reliance Industries (RIL) director, it is learned, put something like Rs 8 crore of his own money on a shopping mart website. Stockbroker Rakesh Jhunjhunwala is another willing angel. Many of the smaller angels also run Internet service companies who do the initial content work for newer start-ups. Like Mr Hinduja. "We do not accept cash for work done. We want a stake," he says. His stakes are worth close to a crore of rupees each (value of work done). Might seem small, but the values multiply geometrically when the venture capitalists come calling. Other smaller angels are just successful professionals (including Infosys Technologies staff) who get a kick out of funding an idea, not to say they would ignore the fat exit price. The risks are high, everyone knows, but the excitement is greater. Angels are of two kinds. One kind puts in the money and then lets the entrepreneur run the show. The other brings in expertise and does the hand-holding. Says Mr Hinduja: "Even things like financial discipline needs someone with experience. So you get them on board." Says Mr Shah: "An angel investor has to act like a coach. You give them strategic direction, guide them for money spending, help in negotiations and importantly, crack some deals." (ET)