Antler aims to invest in up to 40 startups within its first year in India and to build more than 150 startups in the next four years. Initially, the plan will begin with Bangalore and, further will expand to other major cities in the next 3 to 5 years. Rajiv Srivatsa, co-founder of Urban Ladder, is joining Antler as Partner and will lead the Indian operations.
On Monday, the global early-stage venture capital firm Antler had made an announcement of launching itself in India to empower more entrepreneurs to establish startups through their platform, support, and global reach. Antler aims to invest in up to 40 startups within its first year in India and to build more than 150 startups in the next four years.
Initially, the plan will begin with Bangalore and, further will expand to other major cities in the next 3 to 5 years. Rajiv Srivatsa, co-founder of Urban Ladder, is joining Antler as Partner and will lead the Indian operations.
In the second half of 2020, the inaugural India program will commence in Bangalore. The Antler Program will be in two 2 phases and it will be covered within 6 months. The first phase will be of ten weeks which is about forming a right team with adept co-founders. After this, Antler will invest in the strongest teams in order to move in the Second stage basically to build and scale the startup.
Founder and CEO of Antler, Magnus Grimeland, stated, “We believe the Indian entrepreneurial ecosystem has massive potential. We want to lower the barriers for exceptional people to start a technology company, regardless of their background or geography. Over the next 5 years, India is expected to be the third largest market and grow into a 5 trillion-dollar economy, fuelling a much higher growth for the digital economy. In addition, we want to provide India originating startups with Antler’s global platform to ensure startups from India can expand, scale, succeed and tap into expertise on a global level.”
Additionally, Rajiv said, “Antler will collaborate with VCs, angels and work closely with corporate partners and functional specialists as mentors, to power the Indian startup ecosystem.” Antler is a Singapore-based firm which has presence in 11 locations worldwide. Antler has become one of the world’s largest early-stage investment platform by investing in over 160 technology-firms.
iSeed is named as a bridge between Silicon Valley entrepreneurs and Indian founders. The Silicon Valley entrepreneurs are those already established entrepreneurs and Indian founders are those who are in search of money as well as expertise and knowledge of startup.
Utsav Somani, a well-known name familiar in Indian start-up environment is strengthening the investor ecosystem in India with yet another early stage fund. Somani who is already being credited for bringing AngelList to India, is now all set to launch his own micro fund ‘iSeed’ to help Indian startups to get their initial investments.
Somani revealed, “The fund is going to be sector agnostic but will invest mainly in startups leveraging technology for SaaS, remote work enabling tools and tech enterprise software. The new fund is going to invest in around 32 to 35 Indian startup at an average check of $150K. The fund will be deployed for around three years.”
Bridge between Silicon Valley entrepreneurs and Indian founders
iSeed is named as a bridge between Silicon Valley entrepreneurs and Indian founders. The Silicon Valley entrepreneurs are those already established entrepreneurs and Indian founders are those who are in search of money as well as expertise and knowledge of startup.
Somani added, “Founders of Silicon Valley can interact with their peers in India while Indian founders can get the expertise. The aim of iSeed is to build a bridge between these two. We are not talking only about capital but also about knowledge sharing.”
Not only capital but knowledge sharing too
The US market has a good lot of investors who are in a place where they can easily write from $100K to $500K cheques for Indian startups. Many of them have been eagerly waiting to participate in Indian tech boom so that they can access the early stage deals.
“Investors selected based on their knowledge, network and willingness to help portfolio companies scale. These investors can also guide Indian startups looking to target International customers and investors.” Somani said.
Some of the notable investors in iSeed include AngelList Naval Ravikant, Hike founder Kavin Bharti Mittal, Thumbtack’s co-founder Jonathan Swason, WikiHow’s CEO Jack Herrick, Polychain Capital’s general partner Niraj Pant. DSG Consumer Partners MD Deepak Shahdapuri, eDreams co-founder James Hare, NBA star Matthew Dellavedova, 500 FinTech founding partner Sheel Mohnot, and Spearhead’s partner Jake Zeller have backed the fund. Bolt’s Eric Feldman, Flutter founder Josh Hannah and TaskUs confounders Bryce Maddock and Jaspar Weir, along with senior leaders at DST Global, Matrix Partners India and Xiaomi also pooled their capital in the fund mop-up.
Somani said “iSeed is powered by AngelList back office, which makes it easy for full time founders to run venture funds on the side. My day job remains CEO of AngelList India while I run iSeed on weekends.”
COVID-19 pandemic and the side effects
“I would have raised more funds if it would have launched your earlier as investors have also taken hit in their investments in public markets, portfolio startups and private placements.” Somani on how covid-19 situation has complicated fundraising for iSeed.
Somani considered himself lucky because the investors have trusted his judgement to some extent which helped iSeed raise funds for the next couple of years or three.
“I have already invested in more than 40-50 startups personally and this fund powers me to give larger cheques in 30-35 startups. Raising the fund was much easier than what’s coming next.” Somani said.
However, a larger fund would have spread the investments and would force Somani to step out of his comfort zone which is to work with VCs and angels rather than compete. ” I think I like this space where I operate $100K to $150K cheques. That’s a sweet spot to play,” he added.
‘Crisis never stops innovations.’
Somani urged startups to use this time to build while focusing on continuity and creating market value.
“Crisis never limits innovations but it’s actually the opposite. The last decade was exemplary of capital abundance but now people need to make Ventures where they a don’t buy users but will make products that users will love to buy without much incentive attached to them. It was a much-needed reset for the ecosystem.”
Navi Technologies has made allotments of 1.45 crore equity shares, at a price of ₹140.5 per share. Three entities belonging to Gaja Capital, including Gaja Capital Fund-II, GCFII-B and Gaja Capital India AIF Trust have received the allotments. The latest private placement follows a fundraising of over Rs 3,000 crore by the company, led by Bansal and other investors earlier this month.
Sachin Bansal’s financial services startup Navi Technologies has raised ₹204 crore in fresh equity capital from Mumbai-based private equity firm Gaja Capital and other ultra-rich individual investors.
Co-Founder of Flipkart, Bansal is now also the managing director of Navi Technologies. Bansal has already invested over half of his wealth from Flipkart’s exit on Navi.
Bengaluru-based Navi Technologies has made allotments of 1.45 crore equity shares, at a price of ₹140.5 per share. Three entities belonging to Gaja Capital, including Gaja Capital Fund-II, GCFII-B and Gaja Capital India AIF Trust have received the allotments.
The latest private placement follows a fundraising of over Rs 3,000 crore by the company, led by Bansal and other investors earlier this month. It is, however, unclear if Gaja Capital’s investment is part of the same preferential allotment.
The firm Navi Technologies is not yet disclosing much about its future expansion plans rather than explaining their services. They are highly focussed on making financial services more simple, affordable and feasible for customers. Their website also gives the space and invite people to join in for their initiative.
Gaja Capital, promoted by Gopal Jain, has bets in Chumbak, Avendus Capital and Carnation, among others. The investment in Navi is part of a larger round, mostly subscribed by promoter Bansal.
Bansal has completed his education from well know IIT Delhi. Kickstarted his professional career early. He was previously working with Amazon web services and then joined Flipkart. Gradually became the CEO at Flipkart, he worked there for a total span of more than 10 years.
The basic idea behind equity is the splitting of a pie. When you start something, your pie is really small. You have a 100% of a really small, bite-size pie. When you take outside investment and your company grows, your pie becomes bigger.
A hypothetical startup will get about $15,000 from family and friends, about $200,000 from an angel investor three months later, and about $2 Million from a VC another six months later. If all goes well. See how funding works in this infographic:
First, let’s figure out why we are talking about funding as something you need to do. This is not a given. The opposite of funding is “bootstrapping,” the process of funding a startup through your own savings. There are a few companies that bootstrapped for a while until taking investment, like MailChimp and AirBnB.
If you know the basics of how funding works, skim to the end. In this article I am giving the easiest to understand explanation of the process. Let’s start with the basics.
Every time you get funding, you give up a piece of your company. The more funding you get, the more company you give up. That ‘piece of company’ is ‘equity.’ Everyone you give it to becomes a co-owner of your company.
Splitting The Pie
The basic idea behind equity is the splitting of a pie. When you start something, your pie is really small. You have a 100% of a really small, bite-size pie. When you take outside investment and your company grows, your pie becomes bigger. Your slice of the bigger pie will be bigger than your initial bite-size pie.
When Google went public, Larry and Sergey had about 15% of the pie, each. But that 15% was a small slice of a really big pie.
Funding Stages
Let’s look at how a hypothetical startup would get funding.
Idea stage
At first it is just you. You are pretty brilliant, and out of the many ideas you have had, you finally decide that this is the one. You start working on it. The moment you started working, you started creating value. That value will translate into equity later, but since you own 100% of it now, and you are the only person in your still unregistered company, you are not even thinking about equity yet.
Co-Founder Stage
As you start to transform your idea into a physical prototype you realize that it is taking you longer (it almost always does.) You know you could really use another person’s skills. So you look for a co-founder. You find someone who is both enthusiastic and smart. You work together for a couple of days on your idea, and you see that she is adding a lot of value. So you offer them to become a co-founder. But you can’t pay her any money (and if you could, she would become an employee, not a co-founder), so you offer equity in exchange for work (sweat equity.) But how much should you give? 20% – too little? 40%? After all it is YOUR idea that even made this startup happen. But then you realize that your startup is worth practically nothing at this point, and your co-founder is taking a huge risk on it. You also realize that since she will do half of the work, she should get the same as you – 50%. Otherwise, she might be less motivated than you. A true partnership is based on respect. Respect is based on fairness. Anything less than fairness will fall apart eventually. And you want this thing to last. So you give your co-founder 50%.
Soon you realize that the two of you have been eating Ramen noodles three times a day. You need funding. You would prefer to go straight to a VC, but so far you don’t think you have enough of a working product to show, so you start looking at other options.
The Family and Friends Round: You think of putting an ad in the newspaper saying, “Startup investment opportunity.” But your lawyer friend tells you that would violate securities laws. Now you are a “private company,” and asking for money from “the public,” that is people you don’t know would be a “public solicitation,” which is illegal for private companies. So who can you take money from?
Accredited investors – People who either have $1 Million in the bank or make $200,000 annually. They are the “sophisticated investors” – that is people who the government thinks are smart enough to decide whether to invest in an ultra-risky company, like yours. What if you don’t know anyone with $1 Million? You are in luck, because there is an exception – friends and family.
Family and Friends – Even if your family and friends are not as rich as an investor, you can still accept their cash. That is what you decide to do, since your co-founder has a rich uncle. You give him 5% of the company in exchange for $15,000 cash. Now you can afford room and ramen for another 6 months while building your prototype.
Registering the Company
To give uncle the 5%, you registered the company, either though an online service like LegalZoom ($400), or through a lawyer friend (0$-$2,000). You issued some common stock, gave 5% to uncle and set aside 20% for your future employees – that is the ‘option pool.’ (You did this because 1. Future investors will want an option pool;, 2. That stock is safe from you and your co-founders doing anything with it.)
The Angel Round
With uncle’s cash in pocket and 6 months before it runs out, you realize that you need to start looking for your next funding source right now. If you run out of money, your startup dies. So you look at the options:
Incubators, accelerators, and “excubators” – these places often provide cash, working space, and advisors. The cash is tight – about $25,000 (for 5 to 10% of the company.) Some advisors are better than cash, like Paul Graham at Y Combinator.
Angels – in 2013 (Q1) the average angel round was $600,000 (from the HALO report). That’s the good news. The bad news is that angels were giving that money to companies that they valued at $2.5 million. So, now you have to ask if you are worth $2.5 million. How do you know? Make your best case. Let’s say it is still early days for you, and your working prototype is not that far along. You find an angel who looks at what you have and thinks that it is worth $1 million. He agrees to invest $200,000.
Now let’s count what percentage of the company you will give to the angel. Not 20%. We have to add the ‘pre-money valuation’ (how much the company is worth before new money comes in) and the investment
(Think of it like this, first you take the money, then you give the shares. If you gave the shares before you added the angel’s investment, you would be dividing what was there before the angel joined. )
Now divide the investment by the post-money valuation $200,000/$1,200,000=1/6= 16.7%
The angel gets 16.7% of the company, or 1/6.
How Funding Works – Cutting the Pie
What about you, your co-founder and uncle? How much do you have left? All of your stakes will be diluted by 1/6. (See the infographic.)
Is dilution bad? No, because your pie is getting bigger with each investment. But, yes, dilution is bad, because you are losing control of your company. So what should you do? Take investment only when it is necessary. Only take money from people you respect. (There are other ways, like buying shares back from employees or the public, but that is further down the road.)
Venture Capital Round
Finally, you have built your first version and you have traction with users. You approach VCs. How much can VCs give you? They invest north of $500,000. Let’s say the VC values what you have now at $4 million. Again, that is your pre-money valuation. He says he wants to invest $2 Million. The math is the same as in the angel round. The VC gets 33.3% of your company. Now it’s his company, too, though.
Your first VC round is your series A. Now you can go on to have series B,C – at some point either of the three things will happen to you. Either you will run out of funding and no one will want to invest, so you die. Or, you get enough funding to build something a bigger company wants to buy, and they acquire you. Or, you do so well that, after many rounds of funding, you decide to go public.
Why Companies Go Public?
There are two basic reasons. Technically an IPO is just another way to raise money, but this time from millions of regular people. Through an IPO a company can sell stocks on the stock market and anyone can buy them. Since anyone can buy you can likely sell a lot of stock right away rather than go to individual investors and ask them to invest. So it sounds like an easier way to get money.
There is another reason to IPO. All those people who have invested in your company so far, including you, are holding the so-called ‘restricted stock’ – basically this is stock that you can’t simply go and sell for cash. Why? Because this is stock of a company that has not been so-to-say “verified by the government,” which is what the IPO process does. Unless the government sees your IPO paperwork, you might as well be selling snake oil, for all people know. So, the government thinks it is not safe to let regular people to invest in such companies. (Of course, that automatically precludes the poor from making high-return investments. But that is another story.) The people who have invested so far want to finally convert or sell their restricted stock and get cash or unrestricted stock, which is almost as good as cash. This is a liquidity event – when what you have becomes easily convertible into cash.
There is another group of people that really want you to IPO. The investment bankers, like Goldman Sachs and Morgan Stanley, to name the most famous ones. They will give you a call and ask to be your lead underwriter – the bank that prepares your IPO paperwork and calls up wealthy clients to sell them your stock. Why are the bankers so eager? Because they get 7% of all the money you raise in the IPO. In this infographic your startup raised $235,000,000 in the IPO – 7% of that is about $16.5 million (for two or three weeks of work for a team of 12 bankers). As you see, it is a win-win for all.
Being an Early Employee at a Startup
Last but not least, some of your “sweat equity” investors were the early employees who took stock in exchange for working at low salaries and living with the risk that your startup might fold. At the IPO it is their cash-out day.
Piyush Pankaj, VP Corporate Finance and M&A at Askme Group, speaks about what are the key checklist that the company considers before investing in a company.
Piyush Pankaj, VP Corporate Finance and M&A at Askme Group, speaks about what are the key checklist that the company considers before investing in a company.
Askme, majorly owned by Malaysia’s Astro Holdings, invested a whooping $20 million in Indian online market place Mebelkart last year, in turn for a stake in the company. The company also acquired online grocery marketplace BestAtLowest.com for $10 million in 2015.
The key factors checked before a partnership or funding
Piyush said that the two main criteria that the group seeks are the synergy opportunities the startup has with the Askme Group and entrepreneurial skills of the team or the founder. Once these two main requisites are checked, then the Askme looks for other qualities like market opportunity and others.
When a startup begins operations, they have very limited resources. So the first thing we do is to keep the resources so that they can rapidly grow. We focus on how the company can further grow using the Askme ecosystem and how Askme’s gross users can generate revenue for the startup.
One of the challenges that we face is to integrate Askme’s philosophy and culture in the startup and at the same time create an environment where the startup continues to develop and innovate fresh ideas with complete freedom.
When a founder approaches us they should keep in mind whether they will be able to create any synergies with the Askme Group. We have the ability to incubate in our area — the online ecommerce, hyperlocal and penetration into the SMEs and bigger markets. So whoever comes with their idea, they should keep in mind if the idea matches our ecosystem and of possible synergies. The founders should have a clear idea as to how they can help grow our business or how they themselves could grow their startup using our platform.
What made Askme to invest in Mebelkart?
The idea of Mebelkart really appealed to us, as the concept of online furniture business has a lot of growth opportunities in India. The online business mostly caters to the metro cities. What Askme can provide to them is penetration into tier 2 and 3 cities.
Our main idea was to help Mebelkart rapidly grow using the Askme ecosystem. We also looked at the promoters, who come from a good IIT background, and have successfully created a sound technology platform which is very scalable. We have also seen a great amount of hunger in their team for success which made this decision come easy.
When Mebelkart approached us they had done their research on how we can help them and what are the opportunities that we could provide.
Ecommercespace can benefit from Chinese investments
The whole ecommerce industry is still at a nascent stage and penetration into the smaller cities is not up to the mark. The ecommerce industry still requires a lot of investment to help it penetrate into smaller cities. So with the Chinese investments coming and the new FDI norms, it is going to help the ecommerce industry, especially the startups.
Currently the whole ecommerce space is led by mobile and apparel categories, all other categories continue to remain at a very nascent stage. So wherever there are more hyperlocal businesses coming to the play, those startups are going to get benefitted because the market is moving towards these new distribution models. Right now in the grocery domain, a lot of categories can penetrate into the hyperlocal model. The closer one gets to the consumer the better it is.
Lower funding in 2016 should improve quality
Money is drying up because everyone today is looking for profitability. On an industry basis, I think it’s good for the overall space as people will now stop giving several of those discounts, which the government also has tried to control via FDI rules. This will make a semblance for every player as it will make it a levelled play for everyone rather than giving the upper hand to those who were funded previously. It will help clear off the euphoria and let real businesses to emerge. People will focus on quality rather than quantity.
Compared with just 114 deals during the three months ended December 2015, there were 344 investments during January-March 2016. As many as 388 startups raised funds in the first three months of 2016.
Here is some cheer for startups this year after funding slowed down significantly in the last quarter of 2015. According to a report by venture capital and startup research firm Xeler, Indian startups raised $1.73 billion during January-March 2016.
Compared with just 114 deals during the three months ended December 2015, there were 344 investments during January-March 2016. As many as 388 startups raised funds in the first three months of 2016.
The largest funding rounds during the first three months of 2016 were by online travel venture Ibibo ($250 million), e-commerce major Snapdeal ($200 million), online grocery retailer Big Basket ($150 million), online automobile classified portal Cartrade.com ($145 million) and online retailer Shopclues ($75 million).
“On an average, we have seen at least 4 startup fundings per day between January to march 2016,” Xeler said in a report. Read full report here.
eCommerce, SaaS and health tech have emerged as the top performing investment segements this quarter with a cumulative investment of over USD 810mn across 103 startups that accounts for 47% of the cumulative deal value.
