How Anicut Angel Fund is building a curated platform to nurture young startups

Anicut Angel Fund, the angel investment platform of Chennai-based asset management firm Anicut Capital, has invested in more than 25 startups so far. The industry and sector-agnostic fund invests in founders as much as it does in startups.
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“This is the best time and the best market to be an early-stage investor, and Anicut is here to create long-term businesses of value built on transparency, communication, and trust,” Ashvin Chadha, Co-founder of Anicut Angel Fund tells YourStory.

Ashvin has been bullish on the Indian market for over a decade now. Initially founded in 2015 as a debt fund, in late 2019, Anicut received approval to launch its Category 1 Angel Fund called Grand Anicut Angel Fund (GAAF). 

“We were already funding growth-stage startups through our debt funds, because of which the team was well connected with the startup community. Our founders have significant experience in PE investments. Thus, starting Anicut Angel Fund was a step towards growing the company by leveraging our capabilities, diversifying, and nurturing the startup ecosystem that forms the foundation of our business,” Ashvin says.

Amid pandemic-induced opportunities, Ashvin is looking to scale Indian startups to a new height with Anicut Angel Fund. Early-stage fund disbursement has increased for the angel fund in the last one and a half years.

“In the first year, we did 10 deals and deployed about Rs 30 crore of capital. In this calendar year (2021), we have already done 20 deals, and deployed close to Rs 60 crore of capital,” Ashvin says.

About Anicut

The name “Anicut” ' is drawn from the world’s oldest check dam, Kallanai Dam, also known as Grand Anicut Dam, which is built across the Kaveri River. Anicut Capital’s founding principles are centred on this dam: opening a debt and equity dam for small organisations and bridging capital to opportunities.

With its angel fund, Anicut offers equity investments in early-stage ventures through a model where the team takes ownership of the deal and does the heavy lifting for its founders and investors. This sector-agnostic angel fund can invest in ventures with a turnover of up to Rs 100 crore. It offers a clean-cap table and no hassle of ‘angel tax’ to founders and investors.

On the debt-fund side, it structures debts as per the convenience and need of founders - acquisition/ buyback financing, promoter financing, growth capital, and/or capital restructuring. The debt repayment schedule is prepared in accordance with the company’s projected future cash flows.

“With these two offerings, Anicut is one of the few institutions that offers both debt and equity investment for the growing Indian startup ecosystem.”


Investment thesis

Ashvin believes the startup ecosystem is the most exciting space because it's like “a fantastic culmination of different sectors” and allows one to meet the smartest people. 

“These people are solving real problems and changing the nature of how business is done. And it’s very exciting,” he adds.

Anicut invests in the founders, as much as it does in the company. It is always on the lookout for founders who have great ideas, and the vision and conviction to turn them into a reality. 

“The founder must demonstrate strong execution and domain skill sets for the startup to garner the investor’s interest,” Ashvin says.

At Anicut, most offerings are for bankable customers, who do not have access to solutions in the current system. The company also looks at market size and scalability of the business, attractive unit economics, exit opportunities for the investors, and competitive investment terms that can provide an upside for investors in succeeding rounds.

On how Anicut is creating a differentiation for its portfolio companies, Ashvin says there is a limited amount of work a fund can do to help companies on the investing side. But Anicut supports its portfolio companies with its existing network of established funds, 20 years of legacy in the investment ecosystem, and its pedigree of coming from a large debt fund size.

“This helps our portfolio companies to minimise uncertainty around later funding rounds as well as scaling opportunities,” he says.

Plans for the future

Ashvin says the Indian startup ecosystem has matured a lot in recent years. 

“There is a whole trend of 2X/3X entrepreneurs. With experience, startups are becoming much larger entities, pushing investors to make larger bets. So there is a natural evolution happening,” he says.

In this calendar year, Anicut angel fund has invested in close to 16 deals and deployed roughly Rs 50+ crore of capital in startups. The target is to deploy Rs 100 crore in startups by the year-end.

The fund is in talks with major educational institutes (various IITs and IIMs) to build a relationship with their incubation centres to provide seed funding to upcoming entrepreneurs of India.

“It's a great time to be an early-stage investor in India. But, going with one or two deals will not give you the expected home run. You need to build a portfolio over time, do some due diligence; that's where an adequate angel fund comes in. Because we help investors through the whole journey of investing,” Ashvin says.
Edited by Teja Lele Desai