For most of us, last weekend would have, most likely, been just like any other weekend – for “regular folks”, it would have meant a time to relax with family and friends, take a break, catch a movie or just chill and vegetate before the idiot box, for “startup folks”, it would have probably meant working around the clock as usual to finish that urgent item that was meant to be shipped last week!
But for the founders of four Indian startups, last weekend was momentous – these folks pitched for funding at the StartupRoots event and not one, not two, not three but all four of them were successful in securing the funds that they were looking for!
While this would have been a great achievement in itself, what was particularly remarkable was that the event was in a “Shark Tank” format – in the space of 10-15 minutes, the startup has to make a pitch to a panel of angels and if the angels like the sound of what they hear, they revert with an offer (binding in nature) which the startup has to accept or reject in real-time.
What’s more, in the case of the StartupRoots event, the angels apparently hadn’t interacted with the startups before the event and in most cases, had not even heard of them earlier. So basically this was a “first touch” to “signed cheque” loop in a space of 20 minutes! And considering that all four presenting startups got funded, this was a case of lightning striking the same place four times in succession!
Predictably, this sparked off a litany of opinions and responses from both ends of the spectrum within the “Indian startup ecosystem” – some people heralded this as an inflexion point, marking the beginning of a new chapter in the ecosystem while others were more cynical pointing out that one swallow doesn’t make a summer.
So, where is the truth?
Before attempting to answer this, allow me to take you back to another time and place:
Once upon a time, an angel investor meets a couple of student entrepreneurs on a college campus. The young ones have a product that they have developed that seems useful but has no semblance of a business plan or even a general idea on how it will make money. The angel has to run off to another meeting but before he leaves, decides that the entrepreneurs seem smart enough to back and signs out a cheque for $100,000 (allegedly in the university car park!). Unknown to the investors, the entrepreneurs didn’t have an actual company at that point of time – it would take a further two weeks for them to incorporate and they use the spelling specified by the angel on the cheque for the company name rather than the one that they had originally conceived!
In time, this investment would go on to be regarded as the “world’s greatest angel investment” as the value of that initial $100,000 would eventually rise to be worth nearly $ 2 billion! The name of the angel was Andy Bechtolsheim, a co-founder of Sun Microsystems and the name of the startup that he funded was Google!
So what has this got to do with StartupRoots? While this story might be an urban legend that gathered nuances with each retelling as it passed into folklore, the investment itself is an indisputable fact that epitomizes the “culture” of Silicon Valley. The original pioneers, who sparked off the emergence of Silicon Valley as the hub of technology, graduated into angel investors who were willing and hungry to “pay it forward”. They did this in various ways: helping out young entrepreneurs with connections, advice and most importantly, with seed capital. Unlike traditional institutional investors, these angel investments represented massive “leaps of faith” where the primary rubric to determine if an investment needs to be made or not is based on gut or instinct rather than a checklist type of scoresheet.
Now in India too, there are angel investors today – both individuals as well as institutions such as Mumbai Angels and the Indian Angel Network. But hitherto, most, if not all, investments made by such entities follow a due process that is more akin to what a traditional institutional investor would put you through – multiple cycles of interviews and discussions with the startup, extensive background checks, demanding detailed, five-year projections that display your Excel skills and finally, requiring demonstrable traction in terms of revenues and even profit. One reason why this is so is that in India, there is a palpable “trust deficit” – the first reaction to any new idea is cynicism, if not outright criticism and every claim or contention is by default, rejected at face value unless it is backed by empirical evidence to the contrary.
The reason why the StartupRoots event was significant is that the angel investors who voted with their wallets did so in a manner that is closer to what Andy Bechtolsheim followed rather than what angel investors in India typically do! So in a way, the event basically marks the coming of age of the Indian Angel Investor! If the angel has had a grand total of twenty minutes to understand the entrepreneur, evaluate her pitch and make an investment decision, it implies that it was a decision that was made on gut rather than painstaking due diligence. For this alone, this event needs to be lauded and marked in red letters!
Now a cynic would be arguably justified to say that these investments were made because of the “spotlight effect” – that is to say that because this was a public forum where the actions of the angel were visible to all for scrutiny, they might have behaved in a way that is significantly different from what they might have otherwise done in the “real world”. While there might be a smidgen of truth in this, it would be uncharitable to say that this was the only reason why the investments were green-lighted. If one were to burrow a little deeper, it is easy to see that angels like Rajan Anandan have been putting their money where their mouth is for a while now and have been investing in a number of really early stage companies where the entrepreneur probably just has a prototype and is far away from generating revenues, much less profits. Hopefully these angels will continue to invest in this manner and bridge the trust deficit that ails our ecosystem to the point where angels and potential investors hearing new pitches will provide feedback on what it will take for these ideas to succeed on a grand scale rather than why they will fail inevitably!
So, what does this mean for the Indian startup entrepreneur?
The first caveat is to not start believing that the “StartupRoots” event and its presumed sequels represent the startup equivalent of Willie Wonka’s “golden ticket”! While the opportunity to pitch at an event like this is definitely valuable because the format of the event is such that it gives the entrepreneur a better chance of getting funded than in the wild (in the worst case scenario,it exposes you to genuine angel investors). But just because all the four startups who pitched in the first edition managed to get funding does not mean that if you get a slot, you are guaranteed of getting a mandate yourself.
More importantly, don’t get fixated about the StartupRoots event itself but instead, use the success of the first edition to understand and appreciate the fact that there are now angel investors in India who are “angels” in a true sense – they will not only give you wings but will also be the wind beneath those wings! Don’t take this as an invitation to spam the angels who were present at the event though! They probably already have more deals flowing in that they would care to evaluate! But keep in mind that there are others, hopefully many others, like these folks and find a way to connect with them.
And the best way to connect to such angels is to by going back to work and trying to deliver the best product that you can possible roll out – become so good that the angels themselves will find a reason to seek you out and connect with you rather than the other way round! If this means that you continue to work through weekends plugging away on your product in your dingy little garage rather than attend a startup event in an air-conditioned hall, so be it!
Best of luck!
Average Joe Entrepreneur 