Invest local, scale global: The Indus Entrepreneurs launches TiE India Angels to fund startups
Global entrepreneurship support network The Indus Entrepreneurs was founded in Silicon Valley in 1992. There are now 64 TiE chapters in 14 countries, with a 20,000 member base of entrepreneurs, advisors, and venture capitalists.
See also our profiles of activities by TiE Global, and the city chapters of Bangalore, Mumbai, New Delhi-NCR, Silicon Valley, New York, Melbourne, Pune, Chennai, Kerala, Hyderabad, Ahmedabad, and Kolkata.
Serial entrepreneur and investor Mahavir Pratap Sharma is the Chairman of the TiE Global Board of Trustees, TiE India Angels, and RAIN (Rajasthan Angels). His experience in India and the US includes trade and marketing. He was earlier the Chairman of the Carpet Export Promotion Council of India, and President of the Rajasthan Carpet Manufacturers and Exporters Association.
Mahavir joins us in this interview on the vision of TiE’s latest initiative — TiE India Angels — and shares insights on the angel investment scenario in India, opportunities for startups, and resilience in the pandemic era.
Edited excerpts of the interview:
YourStory [YS]: What was the vision behind launching TiE India Angels?
Mahavir Sharma [MS]: TiE’s vision has always been to mentor, educate, promote entrepreneurship, and network. We were investing in startups either individually or through funds. And, since we as TiE could not create a network of investors, all the cities of chapters that we were active in started having a mushrooming of angel networks, initiated by the active and interested charter members [CMs].
Examples of angel networks that have proliferated include SV Angels, Indian Angel Network (IAN), Mumbai Angels, Hyderabad Angels, Rajasthan Angels, Chandigarh Angels, and others. It was a few years ago that angel investment into early-stage and idea-stage companies became formalised in TiE, with the launch of TiE Atlanta Angels, TiE Boston Angels, TiE Tampa Angels, and a national TiE Global Angels — all in the US.
Hence, it was just a matter of time before it came to India. The TiE India Angels is a pan-India angel programme that unites all CMs and makes collective investments across India.
The core vision of TiE laid down by our founders and elaborated by the late management guru CK Prahalad, to work at the bottom of the pyramid, has further been strengthened by our resolve to invest in early and idea-stage startups. They are the riskiest, but the most in need of funds – and more importantly, in the need of mentoring, hand holding, education, guidance, and networking.
These are our core strengths. Hence, the launch and vision behind TIA.
YS: What opportunities and gaps does TIA address, given there are already other angel networks?
MS: There are about 1,400 TiE CMs in India alone, out of which only around 200 are overlapping with other angel networks or funds. The balance 1,200 are still not part of the startup domain as investors.
The first gap that we at TiE can fill is to get most of them on board and widen the net of investors in early and idea-stage startups. Secondly, TiE is a non-profit, and hence, our cost to angels or startups will always be the least among others. This will help new angel investors or encourage startups to come to us first.
Thirdly, no investment is a good investment if we can’t provide them with access to market, mentoring, and possible exits. With the vast pool of mentors at TiE from various sectors, members spread across the globe, and most senior angels and VCs as part of the network for an exit to happen, we are at a huge advantage in comparison to others — not just for us but also for the startups.
YS: What does TIA offer charter members? What are the fees involved?
MS: All the CMs — from across the globe — can enroll to be part of TIA for free. For a very small due diligence fee and application usage fee, if required, this is probably the best way that they can be part of this and invest in the startups of the future.
The due diligence fee is paid by the local chapter upfront and taken out from the startup funding, if successful. If the funding doesn’t happen, the chapter bears it. The fee can be anywhere from Rs 25,000 to Rs 50,000, depending on the sector and size of the startup.
The application fee is $100 per investor per year, but this will be payable post-2021. It is going to be borne by TiE Global for the first few months until the deal flow is smooth.
YS: How can non-members of TiE take part?
MS: This service is only for CMs. Non-members of TiE cannot take part, except when there is a funding round that still has room, and a non-member does want to invest. They can then co-invest and benefit from all the other things that TiE has to offer as mentioned earlier.
YS: What are some of the targets or objectives for the coming years?
MS: One is to enrol and educate as many non-participative members to the great field of angel investment. Two, to make sure we teach all chapters to follow a process with full disclosures, non-compete and no conflict, compliances, governance, and so on, in place.
Thirdly, to invest in at least 10-12 pathbreaking startups, who will become the flag bearers of the TiE India Angel programme. Lastly, and most importantly, to work with the government and its Startup India campaign and policy, which is ready post-COVID or is COVID-proof.
YS: What is the international scope of TIA in terms of those who can become members or overseas startups who want investment?
MS: All CMs — who are not even from India, but have rupee accounts as NRIs — can easily participate in this. As a matter of fact, 15 percent of all the enrolled CMs for TIA are CMs from non-India chapters. We are not yet ready for investments outside of India, but in about two years or so, we will start to invest across the globe.
YS: Are there similar angel initiatives by TiE in other countries?
MS: Yes. For example, the TiE Global Angels programme is a US-based angel programme, which invests in startups from across the US. CMs from all the US chapters can participate as investors.
YS: What partnerships are in place with government or academic research institutes?
MS: TiE has an MoU at the national level with KPMG, who, in turn, has been assigned to assist the DPIIT in its Startup India programme for three years. TIA intends to work with KPMG and GoI to take startups from India to a higher level by mentoring, and possibly, investing in them. The TiE chapters in various states are working with the local ecosystem and state governments to invest through TIA in their respective states.
YS: What are some myths and misconceptions you have come across concerning how people view investing and angels?
MS: The fact that only 10 percent of the investments succeed, or give a multiplier on exit is a small number from RoI for the investor. But, what they don’t realise is that this multiplier is so huge that it more than covers up for the 90 percent that doesn’t work.
So, the myth of making investments in idea or early-stage startups as risky, and not having the kind of returns that it should have is the biggest myth around angel investing.
YS: What are the challenges for investors in these tough times of coronavirus? And simultaneously, what are the emerging opportunities?
MS: The challenges obliviously were sectoral for one, especially the startups impacted by COVID. Secondly, startups with investments made a year or so ago, that needed a follow-on round from outside of the existent investors, struggled for the first few months of COVID, and many may have folded.
Thirdly, there was a pause on investments for the first few months as investors were trying to understand the extent of the impact that COVID will have. But, in the past couple of months, investments have started to flow, and things are back to normal.
Opportunities are immense. Firstly, this has shown us investors the true strengths of the teams and the validity of an idea. There has been a clear demarcation between the good and the average.
Secondly, valuations and projections have become realistic. Thirdly, the trend towards the importance of the bottom line rather than the top line with burn was reinforced and cemented. Lastly, we now know what is the worst-case scenario, and what is COVID-proof and what is not. Hence, it does make us invest in the startups that pivoted and are ready to move forward.
YS: As an investor yourself, what are the joys and successes of investing that you have personally experienced?
MS: For me, the pitch, the questions, and answers thereof, the learnings from it; the energy and enthusiasm of the bright and young startups gives me great energy and lots of learnings. The joy of mentoring and guiding them to greater heights and the respect that once gets out of that is also heartening.
Lastly, the funding of the next round by someone else or an endorsement and validation of your investment is always a confidence booster, knowing that you are on the right path.
YS: What challenges did you face as an investor, and how did you overcome them?
MS: When I started investing seven years ago, not knowing this domain, especially the legal side and compliance issues, were a great challenge. Talking to other angels and a bunch of advisors gave me some direction, but by then, we had lost out on some good investments or lost money on some bad investments.
YS: What is the timeline of journeys for the TiE angel networks?
MS: TiE Global Angels was launched in 2016, and TiE India Angels has just been launched this year. The idea in the US came about with many chapters doing or creating individual angel programmes. We wanted to work at a national or global level, and hence, we consolidated all of this under TGA first, and now as TIA.
The fact that I had successfully created a portfolio, exits, and corpus at Rajasthan Angels (RAIN), and sharing that with the global board, got us going at the India level. And, so here we are. The website was launched as and when the two programmes were launched.
TGA has had over 12 investments since late 2016. TIA expects the first investment to happen from December 2020.
YS: How many investors are on board now, and how many startups have received investment so far from the TiE angel networks?
MS: We have 80 odd angels registered in the US, and about 190 angels registered for TIA. More than 12 startups in the US have received about $10 million in funding. TIA will start investing from December 2020.
To invest in the US, you need to be an accredited US investor as per the SEC guidelines. To invest in India, you have to have an Indian rupee account and have a net worth or approval as per the SEBI guidelines.
The range at both places is up to $1 million per startup. The chapters individually will continue to invest small sums locally, and come to the national angel programme for follow-on rounds.
YS: What are your words of advice for those who want to become investors?
MS: Don’t go at it alone; co-invest with experts or experienced people who have had a few investments and exits, and also with domain experts from the sector the startup belongs.
Learning from each other on tech and investment is the best thing that you will do as an angel at an early stage. Don’t do it alone; learn to share experience and profits, because both experiences and profits could be bad – hedge, and even out your risks.
YS: What are your tips for the aspiring entrepreneurs in the audience who may want to reach out to TIA?
MS: Reach out to the nearest TiE chapter and share your pitch deck and get assigned with a lead that will walk you through the investment process. TIA will invest in ventures solving critical problems with unique solutions that are patentable and scalable, and a strong management team with a good track record, and having complementary skills, and relevant domain experience.
We look for a robust and proven go-to-market strategy, as well as proof of concept for an IP product or service, or post-revenue and month-on-month growth on traction for the last 12 months.
The startup team should have a desire for mentoring and coaching, and there should be a reasonable valuation that fits within the risk/reward expectations of our members. All compliances should be in place and ready for all due diligence as required. Finally, we expect a credible exit strategy for investors.
YS: Any other closing comments or suggestions?
MS: TIA is a very unique programme, where the CMs of all local TiE chapters invest at least 25 percent in a startup in its geography, and the balance of up to 75 percent comes from CMs across the globe.
The mentoring, handholding, due diligence, compliance, governance, reporting, and so on happen at the chapter level, and expansion and exit at the national or global level. There is true optimisation that a non-profit network of like-minded entrepreneurs and investors can achieve. A win-win for all.