BENGALURU: Angel investor networks are now spreading their wings in tier II and III cities such as Ahmedabad, Indore, Dehradun, Rajkot, Coimbatore, Surat and Nagpur, and technology has played a big role here also. An increasing understanding of the startup ecosystem and larger risk appetite for private asset classes, are some of the other factors, which are attracting local business communities to angel networks such as We Founder Circle, Faad Network, JITO Angel Network and Inflection Point Ventures, among others.
Mumbai-based We Founder Circle said it has added nearly 4,000 investors in the last 12 months, among which about 2,500 are from tier II and III cities. Prior to 2020, hardly 10-15% of the new investors came from these cities, Neeraj Tyagi, co-founder and CEO of We Founder Circle told Fe.
“I think the pandemic was the trigger. For the first time, investors in smaller towns and cities had to adopt technology, whether they wanted to or not, for transactions, customer acquisition, and managing their businesses. This made them even more interested to enter the startup ecosystem,” he said.
The network organises roadshows in several tier II and III cities in India, to create an understanding of the startup ecosystem among the population and invite local business owners and professionals to become angel investors.
While most of these individuals have been building businesses for years, there exists a knowledge gap when it came to new-age technology-focused business models — something these roadshows aim to address. Reality shows such as Shark Tank has also educated viewers about the startup and investment ecosystem, while making valuations and unit economics household terms, investors said.
Another such network, Inflection Point Ventures (IPV), which connects about 12,000 angel investors across India, has also seen their share of members from tier II and III cities grow to 10% from a mere 1-2% in 2021-22.
“Angel investment has always been an high-risk asset class and people are conservative in tier II towns. But networks such as IPV, which has a failure rate lower than 10-20%, has made this asset class available to a large set of people by lowering ticket sizes and making it far more liquid,” said founder and CEO Vinay Bansal.
Besides investing in startups whose business models they can relate to, angel investors from tier II and III cities prefer to invest in cash-positive, profitable startups with a clear exit strategy through public market listing, noted Karan Verma, co-founder and director of Faad Network.
The organisation is looking to expand its investor network through partners, who are a part of the local business communities of tier II cities such as Nagpur, Pune and Aurangabad. These partners approach business families and professionals in the region and introduces them to this asset class.
Besides these, JITO Angel Network, which connects 700 businessmen and high networth individuals of the Jain community in India, also sees the bulk of the growth in its network coming from tier II and III cities as well as NRI investors, as metro cities have become saturated and over-crowded, said Rajat Mehta, chairman of JITO Incubation and Innovation Foundation.
At present, nearly 40% of its total members are from tier II and III cities in India, including Vijayawada, Vizag, Jodhpur and Bhilwara, up from a share of 30% a year ago. Besides local business owners, the network also has a large share of chartered accounts, doctors and lawyers from these regions.
Source: The Financial Express