Amid the COVID-19 crisis, this angel network is seeing new startup investment opportunities

The COVID-19 pandemic has negatively impacted startup funding and business activity, with early-stage startups among the worst hit. And yet, one angel network is eyeing investment opportunities that are emerging as a result of the coronavirus outbreak, albeit more selectively.

Lead Angels, India’s first privately owned angel network, is seeing investment opportunities in startups whose products and services cater to behavioural changes brought about by the coronavirus outbreak, Founder and CEO Sushanto Mitra told YourStory.

The sector-agnostic angel network, which was set up in 2014 to improve early-stage investment outcomes across sectors, is also stepping in to help the many startups in its portfolio during this crisis by offering them much-needed guidance and support, Sushanto said.

“COVID has, of course, changed a lot of things. If I look at the post-COVID scenario, I’d be far more selective than in the past. A lot of behavioural changes are taking place, some of which may be very subtle but will have a huge impact on startups,” said Sushanto, referring to the fact that people have become more health conscious and are likely to eat out less and travel only when necessary.

“Behavioural changes will impact what sort of products and services consumers and even businesses use. Things that were considered nice-to-have will sort of become necessary-to-have, forcing businesses to innovate and launch new products and services. At the same time, nice-to-have will go out of consumer budgets as they try to save money. So, we’re definitely looking at those businesses that will ride on these behavioural changes of people going forward,” Sushanto added.

Lead Angels, which has more than 25 startups in its portfolio across a range of sectors, has recently invested in a startup that sells green tea online in a move that signals the start of more such investments in businesses that are digital and focus on sustainability and healthy living.

End-to-end startup services

Founded in 2014 by a three-member team from IIT Bombay, Lead Angels has since expanded to 130 members across five chapters – Mumbai, Bangalore, Hyderabad, Delhi, and Ahmedabad – and gone beyond providing just angel funding to early-stage startups to offering end-to-end services.

Realising that early-stage startup founders do not have the necessary exposure and guidance on entrepreneurship, Lead Angels believed that providing angel investments alone wasn’t enough.

Startups needed guidance in running various aspects of the business and in raising venture capital funding – all of which Lead Angels now provides via its three distinct arms: Lead Angels Network, Lead Advisory Services, and Lead Angels Management and Professional Services.

Today, in just five years since its inception, Lead Angels has already received more than 9,000 applications from startups and recorded over four exits, including micro-delivery startup Supr Daily, which was acquired by foodtech unicorn Swiggy, and beauty services provider Belita, which was acquired by Enrich, and intercity taxi service firm AHA Taxis, which is now a part of EbixCash.

Through its angel network, it facilitates angel investments of up to Rs 2 Crore, while its advisory services arm helps startups raise growth capital from institutional investors so they can scale their businesses.

Its management and professional services arm, on the other hand, offers startups consulting and execution services for business planning, incorporation, and other regulatory related activities.

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Due diligence in post-COVID-19 world

Startups can apply to the angel network through its website, following which they go through three levels of screening before they can eventually pitch to the angels on the network, Sushanto said.

The investors in the network are a mix of accomplished entrepreneurs, high-net-worth individuals, and business leaders with networks to marquee educational institutes and alumni associations.

“Once the companies present to the angels, our members take it forward based on their interest and/or expertise in the area, while our team facilitates the process of business evaluation,” he explained.

For the angel network, meeting entrepreneurs face-to-face to gauge a potential investment opportunity is a critical part of doing due diligence on the company, he said.

“If we have to do due diligence before we invest in a company, we prefer to visit it once. Now in the post-COVID-19 world, most of the process is online. But we believe that visiting the company, understanding them, and seeing them in their workplace must be a part of the business review,” Sushanto said.

Speaking about one of their earliest investments, Sushanto recalls how a Lead Angels team of executives travelled to Indore to study a potential investment in B2B-commerce company ShopKirana.

“We visited ShopKirana at the time and we really liked the fact that while they were so small and the entrepreneurs were not your typical IIT and IIM variety, they were very ambitious… and from the time when we have invested in them to now, they have grown their revenues by at least 500x. So it’s been a huge success, which is why you sometimes have to make that journey to find such success stories,” he stated.

And this continues to be true even in a post-COVID world, said Sushanto, citing the example of how a Lead Angels member in Hyderabad travelled 70 kilometres to the city a few days ago to meet the founders of a startup they are looking to invest in.

“While we can do all the math and draw up statistics, we still believe that eyeball-to-eyeball evaluation is a critical part of evaluating a company,” Sushanto said.

Supporting its portfolio companies, particularly in situations like the current COVID-19-caused crisis, is also an important element of the services provided by Lead Angels – something the angel network has been doing for its investee companies during this crisis, said Sushanto.

“Of course, when we talk to our portfolio companies, one of the first things we tell them is to not to get overanxious, because a lot of these companies are started by young people. Second, is on how they can reduce the negative impact, in terms of their cash flow, day-to-day operations, etc.,” he said.  

Lead Angels’s current portfolio includes startups like Noida-based background screening platform HelloVerify, Gurugram-based logistics platform Transporter City, market information startup Market Pulse Technologies, and Mumbai-based fashion-tech startup StyleNook.