About Padmaja Ruparel
She is co-founder & president of Indian Angel Network (IAN). She built IAN from inception, making it within 10 years a unique institution globally, with close to 500 investors across 10 countries. Apart from cofounding IAN, she also set up and operationalised the Delhi chapter of The Indus Entrepreneurs (TIE) the world’s largest organization focused on entrepreneurship with 15,000 members in 60 chapters across 14 countries. She is a member of the National Expert Advisory Committee on Innovation, Incubation and Technology Entrepreneurship.
01. As India’s first and world’s largest business angel network with over 500 members across the world. Could you briefly share your journey with us?
Indian Angel Network (IAN) is a sector-agnostic seed- and early-stage investment platform committed to supporting high-potential start-ups by providing them with funding, mentorship, and accessing global networks. IAN initially started out as a close-knit group of like-minded successful entrepreneurs who were keen to support and participate in the journey of young entrepreneurs which was the genesis of India’s first angel investor network, way back in early 2006. Within a decade, the Network emerged as one of the world’s largest business angel investor networks composed of successful entrepreneurs & intrapreneurs, industry doyens, domain experts, leading corporates among others.
Today, IAN has investors from 12 countries who continue to proactively invest their capital, time, and effort into nurturing various enterprises in India and abroad. The Network’s rich portfolio currently comprises more than 180 companies from across 18 sectors. These include agriculture, education, healthcare, biotech, SaaS, hospitality, gaming, etc. It also holds the distinction of achieving an enviable IRR of 35% over the last 11 years. Some of our marquee investee companies include Druva, Box8, Sapience Analytics, WOW Momos, Consure, Fareye amongst many others.
IAN has also launched the IAN Fund, an INR 375 crore fund, which is a uniquely differentiated seed/early stage fund which aims to transform India’s entrepreneurial landscape. The fund invests in innovative companies in sectors including healthcare and medical devices, VR, AI, software as a service, marketplaces, fin-tech, big data, artificial intelligence, agritech, and hardware. With this, IAN has created the single largest platform for seed and early-stage investing, enabling entrepreneurs to raise from Rs. 25 lakhs to Rs. 50 crores.
02. Angel investors have been actively investing across sectors and asset classes – In recent times, do you observe a greater shift or inclination from angel investors towards impact-oriented assets? Since you have both international and domestic angel investors in your network – are domestic angels more interested in impact-related assets versus international angel investors?
It is key for any startup to succeed, to focus on a need / key problem and a large market. And the opportunities to solve for the larger social good is ideal for startups. In addition, for the solution to have a larger and continuous impact, it is imperative that startups continue to grow. This is a perfect recipe for investors to invest! Hence, there has been a growth in impact investing and these assets have provided excellent returns to investors. More importantly, it has provided double bottom, both financial and impact, returns.
Investors, be they based in India or overseas, use a sharp filter of the investment opportunity. We have seen both domestic and overseas investors invest in these opportunities. In fact, the overseas based investors have helped the investee companies to build global aspirations as their solutions could well be applicable in some other part of the world.
03. Since the IAN fund has investments spread across various sectors like Agri-tech, Ed-tech, Med-tech, Energy, Waste, Financial Services, Food and Hospitality, Deep Tech, and so on.
a) Is the angel investor interest skewed towards any particular sector, or is evenly distributed?
The Pandemic created a new category of “Anything Tech” – hence In 2020, we saw technology and digital innovation took the centre stage in sectors such as agritech, cleantech, fintech, healthtech, manufacturing, etc. And 2021 is clearly seeing an increase in funding in these tech-centric plays, B2B SaaS plays, which can scale quickly across geographies – be they in India in tier II and III cities or overseas.
COVID-19 has thrown up excellent opportunities in digitisation but sectors healthtech, pharma, has seen atlease a 3 times, if not more, increase in innovation and investment. The customer behaviour has seen a paradigm change: a sharp move from the offline to the online and this has created excellent investment opportunities
b) Basis your experience and observation, are there any (emerging) sectors (like climate-tech) which you anticipate will attract greater investor attention in the next five years?
One of the largest sectoral focuses is Climatech. This sector will need massive disruption and quickly. It will need innovation in different spaces: Clean / renewable energy, Water, Sanitation, Agriculture, Clean Air, Waste Management / Recycling etc. And the investors are on the look out for investment opportunities in this space. We are already seeing the huge growth in investment in the EV, Renewable Energy, Waste Management, Reduction of Pollution, etc. – but we are not even skimming the top of the pile yet!
04. As an angel network, what would you highlight as the key challenges in funding early-stage startups (parameters you could consider are – quality of deals, policy environment, knowledge about the sector, history of unsuccessful exits, etc.)?
At IAN, we have a rigorous process of sourcing the best of the best deals. Each start-up is evaluated not only for its proposition/product but the need that is being filled and the size of the market. While there is a deep dive done on the various facets of sector growth, sales strategy, delivery ability, and projected financials, the most important point of diligence are the founders: how well they know the sector, their understanding of the business and its risks, their strategy to build the business etc. BUT the most important factor is the assessment of their leadership skills and their passion to build the business.
05. Social impact is one of the sub-segments your investors look at; In relation to this, how important or crucial would you say impact measurement is? Are there any mandates imposed by the angels in your network on impact assessment and the data related to that? If not, do you think this will be an important factor to consider in the near future?
Today, the world is facing a plethora of problems ranging from climate change to inequality. Social and environmental impact therefore has become more important than ever. Corporates, governments and investors are seeking an impactful return on their investment. There is a growing demand from investors and customers to solely invest and spend with businesses who align with their value system. Whilst it is good to have an impact, one must measure it as well. This ensures that key stakeholders know the good you’re doing, and provide you with continued support. Furthermore, measuring and demonstrating impact shows accountability and transparency.
At the IAN Fund, we have instituted the ESG framework and we track the impact parameters regularly. And as IAN Angels invest with the Fund, the impact returns are also shared with them. This makes for higher investor engagement which only helps startups to connect to newer opportunities and funding sources
06. Exit timing is crucial for an investor. At what stage of the investment life cycle have you observed angels making a responsible exit? Also, could you throw some light on the financial performance of the investments made by angel investors from commercial and impact enterprises?
Angel Investors take the highest risk as they invest in the very early stage of a company. For these investors this is a high risk – high return investment. Hence, angels will prefer to continue as an investor as long as possible to harvest the best returns that they can. IN fact, in one of IAN’s companies, angels had invested at a million dollar company and are still invested when the company’s valuation is over $2billion! But like each startup provides an opportunity to invest, each milestone in the startups journey, provides an opportunity for investors to exit, depending on the specific situation.
07. What has been the impact of the Covid-19 pandemic on the investments flowing in from angel investors? Has this brought about any change in trends or strategy from an investor perspective?
The Covid-19 pandemic has had an unprecedented impact on the Indian businesses and more so for the SMEs and Start-ups. Despite the lockdown challenges in 2020, several start-ups saw the writing on the wall and quickly started to align with the new normal. They built a resilient model to respond to the ongoing crisis with a seamless shift from offline to online.
The pandemic has proven to be catalytic for the country’s start-up ecosystem. The country witnessed the emergence of 11 Unicorns. Moreover, the pandemic not just opened up new markets for start-ups but helped several of them to diversify into sectors that are bucking the trend with the creation of demand pockets.
There has been a paradigm shift in the start-up funding ecosystem, wherein many angel investors are coming from places beyond major cities such as Delhi/NCR, Bengaluru, and Mumbai.
Rapid digital adoption and a growing number of internet users in Tier 2 and 3 regions of India are significantly contributing to this change. These regions are offering start-ups a largely untapped opportunity and fertile grounds for innovation. Start-ups founders are therefore building local solutions and addressing the needs that are specific to a region. At the same, remote working is helping access customers and talent from these cities. Seeing such transformational growths, many angel investors are keen on investing in start-ups emerging from Tier 2 and 3 cities. Additionally, the fact that start-up investments have started to give excellent returns and establish themselves as an asset class, has encouraged investors irrespective of where they are based, to build their angel portfolio.