STARTUP
FUNDING All in the IIT Family
How funders and founders who are the
alumni of India's premier institutes of technology are creating their own,
unique startup ecosystem
In April 2014, Himanshu Kapsime was
franti cally hunting for funds for his fledgling start up ShaadiSaga, a
one-stop online wedding planning solutions provider. While the Indian Institute
of Technology, Delhi (IIT-D) graduate was in talks with a couple of investors,
in June-end a friend introduced him to Niraj Singh, founding partner of Outbox
Ventures, an investment firm that specialises in seed funding and early-stage
support for startups.
In early July, Singh called Kapsime
to his office in Vasant Vihar, Delhi, for a business pitch. The closed-door meeting
lasted for over two hours; rather than brainstorming or strategising, the duo
spent the morning rewinding to some hilarious snapshots of their hostel life.
They met again after a week; this time to sign a deal. Singh, an IIT-D alumnus
from the 2007 batch, invested `32 lakh in the startup of Kapsime, five years
his junior at the institute.
“It's a blessing to be well
networked, es pecially for startups,“ says 25-year-old Kap sime. “It makes your
initial journey a hell lot easier.“ Like Kapsime, his batchmate from IIT-D,
Bhuwan Arora, too, met up with Sin gh, who took a hard look at his plans to
scale his startup ReadersDoor, an online commu nity for book lovers which has
now been re branded as Oditty.me. Within 20 minutes, Singh was convinced. He
decided to invest `25 lakh at their next meeting that took place in a couple of
days.
Of the 10 angel investments made by
Sin gh, five are in startups run by his IIT-D juniors, four in businesses
founded by grads from other IITs, and just one in a venture started by a
non-IIT alumnus. While the investment in each startup ranges between `20 lakh
and `60 lakh, Singh has invested under `5 crore so far.
“It's not network but net worth. It
pays to be connected, personally as well as professionally,“ says 31-year-old Singh
who himself has turned entrepreneur with Spinny, an online marketplace for used
cars. Singh admits that he may be emotionally attached to his alma mater, but
says that his business decisions are based on hard-asnails business logic. “At
the end of the day you are investing money, so you have to be prudent,“ he
says.
Over the past couple of years, like
Singh, a slew of IITians has been systematically funding the ventures started
up by the grads of their respective alma mater. The logic is simple: The odds
of the next big thing coming out from an IIT are more attractive than from most
other educational institutions. “Therefore, entrepreneurs from these institutes
receive the maximum support and investment, placing them well to actually have
a better shot at success than others,“ says Ganesh Nayak, who heads investor
relations at LetsVenture, an online platform for angel investors that has
enabled 37 startups to raise about $10 million so far.
Karmic Cycle
New angels coming to LetsVenture are
often keen to first look at startups from their alma mater, he adds. Since big
successes -think Flipkart and Snapdeal -have come out of IITs, the willingness
to bet on entrepreneurs from these campuses is high.While a few angels
proactively make themselves available to their alma maters, most startups need
a platform to identify alumni and get discovered by them.
Nayak believes that the trend of
seniors investing in juniors is one of the ways to sustain the karma. In some
ways, successful alumni are paying it forward.
In the financial capital of Mumbai,
Zishaan Hayath too is peddling the karmic cycle. The IIT-Bombay graduate from
the 2005 batch has made over two dozen angel investments, more than half of
which are in startups run by IITians from his alma mater. Ask Hayath about the
reason for his propensity to invest in startups run by grads from IIT-Bombay
and he throws a oneword answer after a long pause: “Network,“ mutters the
33-year-old cofounder of Toppr, an online test preparation startup. Because he
knows these entrepreneurs through his net work, “it becomes easier for me to
understand, and relate to them“, adds Hayath, who is also the founder of Powai
Lake Ventures, a Mumbai-based angel investment club that has most of its
investments in IIT-Bombay startups.
Nitin Saluja, cofounder of tea café
chain Chaayos, was two years junior to Hayath in IITBombay. Both met for the
first time in 2003 during a college festival managed by Hayath.After that, they
would sporadically bump into each other, but a bond had already developed.
After college, they worked together
in a New York-based company Opera Solutions for a little over a year. In 2008,
Hayath left the job and cofounded Chaupaati Bazaar, a mobile commerce
marketplace in Mumbai. The duo stayed in touch. Saluja too soon moved on and in
November 2012 launched Chaayos.
In early 2013, Hayath contacted
Saluja. It was 7:30 in the evening; Saluja was already late for the birthday
party of one of his IITBombay friends and pleaded his wife to get ready in 10
minutes. “He [Hayath] called and asked about how my venture was taking shape,“
recalls Saluja.
By the time his wife was ready with
her makeup, Hayath had decided to invest some `2 crore, along with his group of
angels at Powai Lake Ventures. “He is super quick,“ says Saluja, who raised
another $5 million from venture capital firm Tiger Global Management in May
this year. Saluja believes that networking works only when it gets converted
into a relationship. “On its own, it doesn't work.“ It invariably begins,
though, with the net work -and with a success story within it. Ab hinav
Choudhary remembers the first time he met Snapdeal cofounder Rohit Bansal as a
22-year-old student in March 2013. The duo arrived at a Café Coffee Day outlet
near the IIT campus in Delhi. Over cappuccino, the two, both of whom had a
Computer Science de gree, relived their IIT-Delhi hostel days.
Choudhary and Bansal met again in
early April, this time at Snapdeal's office in Delhi; Bansal offered to invest
in Smartprix, a price comparison startup cofounded by Choudhary along with
batch mate Hitesh Khandelwal in December 2011. “It was unbelievable, a turn ing
point in my life and my start up,“ says Choudhary, now 24.
The IIT-Delhi graduate from the 2013
batch started his venture during the ninth semester but couldn't find an
investor in spite of trying hard for several months.
Snapdeal's Bansal has also invested
in Routofy, an online travel planning startup that has cofounders from
IIT-Delhi. Bansal has reportedly also made investments in three IITBombay startups:
Shipler, TinyOwl and Bewakoof. When contacted, Snapdeal declined to comment. An
email from a Snapdeal spokesperson said: “Unfortunately, we will not be able to
participate in this story.“
Snapdeal rival Flipkart too has its
skin in the game. Cofounders Sachin Bansal and Binny Bansal, both from
IIT-Delhi, have reportedly made investments in seven startups, of which four
are in IIT-Delhi grad-run ventures.
An email sent to Flipkart didn't
elicit any response.
If Smartprix's Choudhary got fund ed
over a cappuccino, his junior by two years at IIT-D Ronak Gupta did it over a
few glasses of lager.
Ronak, who graduated from IIT-D in
June this year, met his senior by a year Abhishek Gupta in Noida last November.
Both knew each other since college days when Abhishek was working on his
startup project Zumbl and Ron ak was preparing the prototype of his fu ture
product. They would regularly go out to watch mov ies and have fre quent
sleepovers at a common friend's home, resulting in an everlasting camaraderie.
So when the duo decided to catch up
over beer, Abhishek brought along his startup cofounder Nikunj Jain. The trio
had a great time over eight bottles of beer, talked about their respective
ventures and Jain asked Ronak to come for another meeting at his office in a
week.
The next meeting turned out to be a
formality. “The moment I entered his [ Jain's] office, he said `Yaar main to
paise daal raha hoon' [Buddy, I am putting in my money in your startup],“
recalls Ronak, who had cofounded Routofy, a travel planning portal that
compares and combines flights, trains, buses and cabs in one search, with
connections all the way down to the smallest towns and villages. In March this
year, Routofy raised an undisclosed amount of seed funding from Jain and
Snapdeal's cofounders Kunal Bahl and Rohit Bansal.
Ronak points out the investment is
only the beginning; the advantage of having senior alumni as funders is that
they can also serve as mentors. “As most of such investors [angels] are
first-generation entrepreneurs themselves, their thinking, ideals and goals
align with those of their juniors,“ he says.
Beer, it would seem, has proven to
be a lubricant for many a deal -at least those involving Nikunj Jain. Anirudha
Gupta, cofounder of online travel community Tripoto, first met Jain, his
IIT-Delhi senior, at a pub in Connaught Place in central Delhi last October. On
a balmy Sunday afternoon, after a few mugs, both started talking about their
common interest: spiritual teacher Osho.
Exhausted after discussing
spiritualism for an hour, the conversation inevitably veered around to the
materialistic path: Gupta started sharing his business plans about Tripoto;
Jain was listening. “It was then that he proposed to invest,“ recalls Gupta,
who got angel funding from Jain in October 2014. This March, the Delhi-based
startup raised its second round of funding led by IDG Ventures India.
A Method in Investment
Jain claims to have a method to his
investment style. “My heart helps me connect with my kind of people, but it's
the brain that makes the hard, financial calls,“ says the 26-year-old
entrepreneur and angel investor, who has made eight investments so far totaling
under `3 crore; half of them are in startups run by IIT-Delhi grads.
Jain is investing with his eyes
open, aware of the likelihood of some of his money going down the drain. Sure
enough, one of the startups he funded has all but failed. But as he says,
“Business is all about hits and misses, trial and errors. If you don't take
risk, there won't be any gain.“
Though the lead in terms of
investing in alumni startups has been taken by IIT-Delhi and IIT-Bombay grads,
other IITs are also catching up. Like, for instance, IIT-Roorkee.
When Prasoon Gupta, an IIT-Roorkee
grad from the 2009 batch, decided to raise angel funds for his second startup
Sattviko in February last year, he was flooded with offers. At least eight of
them were IIT-Roorkee alumni, from different batches. Overwhelmed by the
response, the 28-year-old closed his funding within four months. Sattviko has
raised `2 crore in angel funding till now. “80% of your success is because of
networking, and the rest is the business idea and the team,“ says the cofounder
of the Delhi-based food the cofounder of the Delhi-base chain that specialises
in Vedic and vegetarian food prepared without onion and garlic.
And it's not always the seniors who
tend to be the investors. In Sattviko, for instance, Rahul Gupta, oneyear
junior to the Sattviko cofounder, was the first to invest.
It was a ragging session that
brought the two Guptas together. Since then, the duo had stayed in touch and
when in October 2013 Prasoon met Rahul at his Barakhamba Road office in New
Delhi, the latter decided to invest.“When Mark Twain said that familiarity
breeds contempt and children, he forgot to add one more byproduct: funding,“
says Prasoon, bursting into laughter.
Down south at IIT-Madras, the IITM
Start up Fund, created through a donation of $6,00,000 from IITM alumni in
2013, has funded over 27 technology start ups incubated at IIT-Ma dras. Tamaswati
Ghosh, chief executive of IITM Incubation Cell, says that IIT-Madras alumni are
intimately aware of the entrepreneurial ecosystem on campus, as well as the
various technology and knowl edge innovations. “This means that promising
startups are spotted and nurtured early on, through mentor ing and other
initiatives,“ she says. Moreover, the alumni are also aware of the structured
checks and balances in place in IIT-M, which ensures the factor of trust,
essential for creating confidence in ventures. “Today, networks are indeed the
oxygen for startups,“ she adds.
Rahul KR, who is pursuing a BTech
from IIT-Madras, is the founder of Clozerr, an app to store loyalty cards of
one's favourite restaurants, which was nurtured at the IITM incubation cell.
“Apart from team, idea and execution, what plays a key role in the success of a
startup is the access to the right set of mentors,“ says Rahul.
Other premier non-IIT institutes too
are leveraging the alumni network. Consider, for instance, what's keeping Raju
Reddy, an alumnus of Birla Institute of Technology and Science (BITS), Pilani,
busy. The founder of California-based Sierra Atlantic, an offshore enterprise
applications and outsourced product company that was sold to Hitachi in 2011,
has so far made nine investments in companies founded by BITS Pilani grads.
Reddy claims that BITS prepares
students to succeed as entrepreneurs better than any college in India. “Hence
as an angel investor, I improve my odds significantly,“ says Reddy.
There's little doubt, though, that
the IIT tag goes a long way in securing funding. Shiju Radhakrishnan, a BTech
from Mahatma Gandhi University in Kerala who followed it up with an MBA from SP
Jain Institute of Management & Research in Mumbai, will grudgingly
agree.The 34-year-old founder of iTraveller, a cloudbased travel discovery
startup that allows users to plan, customise and book their holidays online
across 450 destinations worldwide, had to toil for a good two years before he
got hold of an angel investor.
“The only red flag that I couldn't
turn green was my non-IIT background,“ shrugs Radhakrishnan, who managed to
close a round of series A funding of $1 million in December last. After working
for over 10 years as a supply chain management and technology consultant in
various companies such as Wipro and Cognizant, Radhakrishnan started iTraveller
in early 2012. “I had the degree but didn't have the pedigree [IIT],“ he grins.
For two years, the startup survived on the savings of Radhakrishnan and money
from friends and family.
Experts, though, caution that the
network -IIT or any other -can only provide the momentum, and can't take you
all the way. Sushanto Mitra, founder and chief executive of Lead Angels
Network, says that while networking can open doors and establish the initial
references, if the product or service does not deliver its promise, the initial
gains can be lost quickly. Lead Angels is an alumni-focused angel network
started by Mitra, C Amarnath and Bipin Kumar from IIT-Bombay in 2013. Of its
eight investments, five are in IIT alumni companies and the network has
chapters in Mumbai, Delhi, Ahmedabad and Hyderabad.
Doubtless, support -and not just
financial -from alumni of top technology institutes is just the kickstart young
entrepreneurs need. In the West, premier institutions like the Massachusetts
Institute of Technology (MIT) and Stanford University have honed angel
investing into a fine art. In 2010, Stanford alumni along with a clutch of
venture capitalists founded Stanford Angels & Entrepreneurs, which seeks to
beef up the Stanford startup community by fostering relationships amongst
entrepreneurs and alumni investors. And in 2013, Swati Chaturvedi, an MS from
MIT, cofounded the Angel Investors Group for MIT alumni, which has grown to
close to 300 MIT alumni and has showcased over 30 startups.For good measure,
Chaturvedi holds a bachelor's degree in architecture from IIT-Roorkee's 2000
batch .
Clearly, there's something about an
IIT, as entrepreneurs thriving in its ecosystem will heartily agree.
ET magazine VIEW
FUNDING FOR NON-IIT ALUMNI, ANYBODY?
“When you look at people who don't
go to school and make their way in the world, those are exceptional human
beings. And we should do everything we can to find those people.“ That's the
view of Laszlo Bock, head, people operations at Google.Bock doesn't look at the
school the candidates went to, nor does he bother about grades because that
doesn't tell him whether they can solve problems in a creative way. So what
does Google look for? In three words: Diversity, talent, attitude.Talk to a
sample of startup founders back home, and you'd figure that most of those who
have got funding invariably have either an IIT or IIM tag; those still looking
for funding would tend to be non IITIIM (the likes of BITSPilani are exceptions).
Whilst there's little doubt that some of the best brainpower lies in IITs -and
the money power amongst its alumni -investors who base their funding decisions
purely on the pedigree of the degree may be missing out on the real innovators
in the making.
|
Rajiv Singh
|
ET23AUG15
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