Perspectives

Role of Angel Investor in

Indian Startup Ecosystem
by S. V. Ramana Rao & Lohith Kumar
Abstract
The economic growth story of India in the last two decades is on the fast lane and proving that it is one of the fastest
growing economies of the world. The number of startups will increase to 11,500 by 2020 as per the report from
NASSCOM, 2015. The present economic scenario in the country is providing access to various sources of finance to
the entrepreneurs. Apart from financial resources, production, and human resources are now accessible with ease
which has paved way for increase of entrepreneur spirit in India. The World Bank report ranks India at 130 out of
189 countries in the ease of doing business, moving up 12 places from last year which is an indicator of the growing
importance of entrepreneurship and its culture in India. This paper aims to provide an overview on angel
investor(s) and their role in the Indian startup ecosystem. Initial capital provided to start-ups by angel individuals
and angel networks in the country grew by 81 per cent in 2014-15. To realize the estimated growth rate by India,
startups should be encouraged by providing the ecosystem. One of the major constraints for a startup is a paucity of
financial resources which can be resolved to some extent by encouraging the active presence of angel investor(s)
and Angel networks.

Keywords
Startup Ecosystem, Angel Investment, Entrepreneur, Financial Resources, Angel Networks

Introduction
Economic growth story of India in the last two decades is on the fast lane and proving that it is one of the fastest
economies of the world. Mr. Narendra Modi, Prime Minister of India made an appeal to the nation that “Startup India, Stand
up India” while addressing the people of the country on his Independence Day speech. The entrepreneurial spirit has been
ignited in the minds of Indian people and India is driving towards to create awesome products and services. His
inspirational words were echoing the sentiments of today's India and companies may change the world soon. The Prime
Minister's call was reassurance that the government is understanding and supporting the sentiments of the people in the
country (Gore, 2015). India is all set to outperform among all the nations with the trend of new and innovative ideas of gen-
next. Indian economy will be fuelled with young entrepreneurs especially by small entrepreneurs and startups. As per the
NASSCOM report 2015, Indian startups stood at fourth position in the world having 3100 startups. United States of America
stood first with 41,500 startups followed by United Kingdom with 3,500 and Israel with 3,300 startups. Further it has been
projected that Indian startups will increase to 11,500 by the year 2020. Startups are having presence in many sectors of the
Indian economy; however many of these will have presence in the sectors like adtech, edtech, healthtech and agritech etc.
Indian startups might generate around two and half lakhs jobs in the coming five years if the present growth rate continue
with the same pace (Malviya, n.d). To encourage startups and entrepreneurship in India NASSCOM initiated services like
incubation, funding and mentoring with support from Google for Entrepreneurs, Microsoft Ventures, Verisign, Kotak and
Intel which will fuel growth in startups over a period of time. In April 2014, this initiative was launched and so far 350 events
were conducted covering 22 cities attended by 25,000 people. Michael Dell, Eric Schmidt, Satya Nadella, Sundar Pichai and
Vinod Khosla were some of the luminaries attended these events organized by NASSCOM to encourage and inspire the
entrepreneurship spirit among Indians.

Concept of Angel Investor

Successful individual(s) invests their own funds into a prospective business project for respectable returns.
Investments are made by wealthy and business people to startups which are started either by friends, acquaintances

FIIB Business Review. Volume 5, Issue 1, January - March 2016 3


or members of their own community. The latest entrants
to this bandwagon are corporate executives who are
looking for financially sound investing as a part of their
personal asset allocation. The angel investment activity
in India has to be viewed in the broad context of demand
for and supply of early stage in India. The demand for
early stage capital may be viewed in the light of the
positive outlook that has been presented (Sabarinathan,
2014).
Purpose of Research Work & Methodology
Emerging economies now are growing at a faster
pace, especially India is trying to tap untapped potential
than ever before. The Indian startup ecosystem is driven
by massive funding, technological advancements and
increasing domestic market fuelling the growth of
entrepreneurship spirit. It was estimated that 11,500
startups will be there in India by the year 2020 as per
NASSCOM 2015 report. India stands in the fourth
position in the world with 3,100 startups. This growth is
not possible without support and financial assistance to
startups. Institutions and individuals like venture
capitalists, Private equity firms and angel investors and
angel networks etc. are extending support to startups in a
big way. Past decade witnessed gaining momentum in
Indian startups ecosystem thanks to a number of factors,
including that of the emergence of angel networks. This
paper is an attempt to understand angel investor(s) and
their role in the Indian startup ecosystem. It also covers
aspects like entrepreneurial spirit in India and initiatives
taken up by the Indian government. Secondary sources of
data has been used by referring reports of consulting
firms like NAASCOM, PWC, McKinsey etc. and news
dailies.
Literature Review
The literature available on angel investor and
angel network is limited especially in the Indian context.
However, an attempt has been made with the available
research articles and various consulting firm's reports.
Sabarinathan (2014) highlighted the functio-
ning of angel network in emerging economy especially on
Indian Angel Network. Angel investors encounter
number of challenges like finding a potential business
opportunity, evaluation of it, negotiating and managing
investment opportunities, understanding of angel
network activity in terms of investment. The paper
focused on the state of investment activity of angel
networks in India and it's functioning and structure as it
is not similar across the world. Data availability on angel
investments world over is limited. IAN (Indian angel
FIIB Business Review. Volume 5, Issue 1, January - March 2016
Perspectives
networks) website provides some data. Venture
Intelligence a paid database tracks the number of deals
happening, volume of the business and size of the deals. It
also covers about venture capital and private equity. The
author concluded that Indian angel Network
organization processes are similar to the organizations
elsewhere but the challenges faced by these
organizations vary especially in terms of governance.
Nath (2010) highlighted the importance of angel
investor when venture capitalists are shifting their focus
to larger deals and investing in the businesses at later
stage which has created a space for startup financing.
Angel investor(s) are trying to fill the space. Many studies
have found that financing of small and medium
enterprises is a challenging. Venture capitalist are facing
a problem of funding of small of amounts hence angel
investors can finance startups and small businesses
which are on rising trend in India. The author explained
about the measures to motivate business angels. The
measures are favorable government policies and tax
incentives and availability of information and awareness
about business owners and angel investors. Create
environment for investment readiness, increasing the
efficiency of angel networks, motivating financiers etc.
The author concluded that information asymmetry
problem should be handled by the government when
angel investor role is increasing especially venture
capitalists are shifting their focus. Some of the active
measures like encouraging syndication, involving big
companies and angel networks would help encouraging
startups and accesses to public financing.
Sabarinathan (2014) focused on three aspects
like investment activities taken by the angel investors
and their approach to investing, building angel investors
profile and thrust area of investment, and finding out the
angel investors who are active in their network. The
entire work has been carried out by using publicly
available information. Angel investor has been defined as
an individual who support an entrepreneur financially.
There are different reasons for angel investor funding:
earn substantial returns, community development, eager
to learn new things, supporting startups and associate
with private companies. Financing of new technology
firms are done by angel investors and venture capitalists
that are playing complementary roles. It is found that the
presence of angel investor brings credibility, strengthens
the balance sheet and provides accessibility to funds at
competitive terms. There are multiple exit routes
available to angel investors like sale of shares, sale to
third parties, going to public through IPO, acquisitions
and sale of assets. This paper dealt with four angel

networks and their total funding and witnessed a growth
in investment activity since 1999. Angel investors
focused areas are high growth sectors like online
services, e-commerce, IT products and services,
education and healthcare. Some of these sectors are very
risky . The present study is limited as it is based on small
number of transactions. However, the results provide a
view on evaluation of angel deals, types of contracts etc.
Aernoudt and Erikson (2002) worked on the
ro l e o f a n g e l n e t wo rks i n e n c o u ra g i n g t h e
entrepreneurial culture and funding of small enterprises.
This paper highlights the practices prevailing in Europe
and various facets of business angels. Business angels
investment is estimated in the range of 10- 20 billion
euros as per the study conducted by European
Commission in 1998 where 3 million euros seed and
startup investment by Venture capital industry. Business
angels present in many nations and making it as a formal
network is a recent trend. The biggest challenge is
insufficient information about the deals happening. The
authors explained about business angel network
conditions prevailing in the European nations where
benchmarking exercise was conducted. It was observed
that each country in the European continent has a
distinctive administrative practice in spite of similarities
in certain areas. UK and Belgium has certain practices
which can be emulated by countries. Business angel
networks importance is gaining as there is growing need
for seed capital which is being funded by angel investors.
Entrepreneurial Spirit in India
Economic prosperity of a country rests on
political, social, economic conditions prevailing in the
country. India's nation building process started after
getting independence in 1947 and thrust was given on
education. Hard work coupled with quality education for
a large Indian middle class population started yielding
results with the new generation entrepreneurship.
Introduction of reforms in 1990s have given big boost to
the Indian middle class population and the Indian
economy was integrated with global economy.
Globalization of economy has brought change in the
mindset too. The rise in average income levels in the
country due to growth in the Information Technology
Industry also created a well-travelled global Indian. Rise
in the average income and global Indian prompted
Indians to think beyond the basic needs resulting into
entrepreneur spirit in the country. Lot of opportunities
are available to the young and educated Indians who are
hardworking and ambitious. The credit goes to economic
FIIB Business Review. Volume 5, Issue 1, January - March 2016
Perspectives
reforms in 1991, globalization and rise of IT industry.
The present economic scenario is more favorable to start
own business and create a global company.
Economic growth is shaped by industry
structure by using scarce resources. Technological
advancements in the last century had favored the
performance of large centralized units. The shift in the
industry structure from a bigger firms to small firms due
to rapid technological changes, decrease in employment
in bigger firms, low entry barriers for new entrants, spin
off and divestments owing to focus on core competencies
and fostering of ancillaries and vendors by bigger firms.
Throughout the world there is an increase in incidence of
entrepreneurship especially in Asian region having a
significance presence in Thailand and India as per The
Global Entrepreneurship Monitor (GEM) report 2007.
Nisha Desai Biswal, United States Assistant Secretary of
State for South Asian Affairs said “For India to achieve its
goal of sustainable growth and development, it must
assure global markets and international investors that it
is open for business". The reforms taken up by the Indian
government resulted in fewer licenses and reduction in
government controls, privatization of government
owned firms leading to a greater role for the private
sector in general and entrepreneurs. Improvement in
efficiencies by use of new technologies across industries
at various levels across markets resulted into reduction
in costs. Alibaba.com, Flipkart and Snapdeal etc. are
helping smaller firms to be competitive by providing
level playing field which is helping to promote setting up
of new firms in the new-age business communities. The
changes in customer tastes, customers' inclination
demanding customized products to meet their specific
needs which larger firms are uncomfortable to cater to
the needs of niche markets and new products are
favoring smaller firms to setup. Research studies have
proved that smaller firms have the comparative
advantage of being innovative and producing new
products (Prusa & Schmitz, 1991). Per capita income is a
parameter for measuring the economic growth.
Contribution from service sector is growing. In service
sector the size of the firm is relatively small which is
promoting entrepreneurial spirit. The service sectors
contribution to the GDP is around 60% in developed
countries and it is nearly 50% in the case of India. Service
industry has become significant for the economy and is
encouraging first generation entrepreneurs also.
Software industry and business process outsourcing
have emerged as dominant sectors and these have a large
number of entrepreneurial firms. Indian government is
5

offering sector specific incentives to encourage
entrepreneurs. There is a direct link between
subsidiaries and incentives offered by governments and
entrepreneurial spirit in the country (Loveman &
Sengenberger, 1991).
Access to financial resources has now become
easy the entrepreneurs. Apart from financial resources
production and human resources are now accessible
with ease. Information at click of mouse paved the way
for plethora of information on business related issues
and connectivity to various stakeholders of business
made simple to get necessary inputs for business. The
country's economic environment and ecosystem is
conducive for many business services which are now
tailored to suit the needs of small business owners.
Return on innovation due to strong protection for
Intellectual Property Rights (IPR) is also helping in
enhancement of entrepreneurship. Middle class in the
country inspired by people like Dhirubhai Ambani and
Narayan Murthy is willing to take risk and becoming
entrepreneurs (Chand, n.d).
India was considered as a cost effective market
for export of IT services resulted into low product
development and innovation but now the culture of
startups is gaining momentum which is helping the
Indian economy. Formation of new government at center
by a single party has created optimistic view around
Indian economy growth story. Recently India's rank in
World Bank ease of doing business has improved due the
efforts taken up by the Government of India. For a
significant time period socially accepted job in India was
a government job this trend has changed to private sector
jobs especially MNCs and this trend has changed slowly
to jobs at startups or having own startup is the order of
the day. For instance, Jeevansathi, a matrimonial site has
witnessed a 55% increase in self-employed profiles in the
last couple of years (Gore, 2015). Nowadays parents are
fine with an entrepreneur groom as long as he has good
educational background as per Rohan Mathur, the VP and
head of Jeevansathi. Couples who started companies
together is also growing in India, thus indicating a trend
that more and more families are willing to take risks. For
example, Anand Chandrasekaran and Ashwini Asokan of
Mad Street Den, Mehak Sagar Shahani and Anand
Shahani of WedMeGood, Abhinav and Radhika
Khandelwal of SweetsInbox, Atit Jain and Madhulika
Pandey of GigStart, Mrigaen Kapadia and Nupur Kapadia
of MobiFolio, Rohan and Swati Bhargava of CashKaro,
Aparna and Navin Bhargava of Yaasna are some of the
couples who have started their ventures together (Gore,
2015). Rising startup ecosystem, willingness to accept
FIIB Business Review. Volume 5, Issue 1, January - March 2016
Perspectives
challenging assignments, enhanced funding
opportunities are some of the factors attracting a lot of
talent towards the Indian startup space.
Business Ecosystem in India
Ease of doing business index by World Bank
indicates the country's business environment including
protection for property rights. Doing business report
published by World Bank gained popularity as world's
most influential policy publication which covers state of
economies based on growth, macroeconomic factors,
regulatory system, the efficacy of the bureaucracy and
business governance etc. The annual quantitative data
published in Doing Business Report has a major thrust on
regulatory constraints affecting domestic small and
medium-size enterprises throughout their life cycle (A
World Bank flagship report, 13ed). The report also covers
regulatory aspects prevalent in the country and process
for establishing a business and operating of it and also
analyzes credit market regulations, asymmetries in
bargaining power such as labor market regulations and
provision of public goods or services such as business or
property registration (Gore, 2015).
The India Paradox
Emerging middle class, cost competitiveness,
large talent pool is making India as one of the growing
economies in the world. India is ranked 134 out of 189
countries in the overall ease of doing business as per the
World Bank's Doing Business Report 2014. Issues like
investment attractiveness, problems in securing land,
power cuts, tough labor laws and lack of governance and
transparency are considered as major constraints in the
India (Ease of doing business in India, 2014) which
makes India's ranking lower than the other BRICS (Brazil,
Russia, India, China and South Africa) members. India's
rank has now moved up 12 places from last year. Mr.
Kaushik Basu, World Bank's Chief Economist and Senior
Vice President said that "A forward movement of 12 spots
in the ease of doing business by an economy of the size of
India is a 'remarkable achievement". He also highlighted
that elevating from 142 to 130 is an indication for the way
things are happening in the country. Two reforms
brought in by the Indian government helped in
improvement in ranking i.e. they are elimination of paid
in minimum capital and a certificate to commence
business operations. Lopez Claros, Director of the Global
Indicators Group, World Bank said that if bottlenecks are
eliminated, ensured of sustenance and continuation of
commitment by the authorities would help India to see
substantial improvement in the future. Figure 1 shows

improvements made by some of the countries on some of
the parameters between 2004 and 2015. For instance, in
India 127 days are required to start a business in 2004
whereas the same can be done in 29 days in the year
2015.
Source: World Bank Report 2016, p.16
Figure 1 : Change in the business regulation
(during 2004 to 2015)
In the south east economies, India recoded huge
jump in the distance frontier score since 2004. For
starting a business in India one of the requirements is
obtaining Permanent Account Number. In the year 2004,
Government of India reduced time period of process for
obtaining permanent account number. Similarly in 2006,
GOI made less cumbersome the process for obtaining a
tax registration number. Online system for value added
tax registration was introduced in 2010. Subsequently, in
2014 the elimination of minimum paid up capital
requirement by government of India has streamlined the
process for starting a business. In recent years various
countries have started taking initiatives to establish
relationships with Indian startups. Advanced and
developed nations are in search of potential markets
especially emerging economies India is an attractive
destination. For instance, Business council of India in
United Kingdom (UKIBC) is hosting startups of India in
UK. Similarly, a market research has been carried by
Swissnex, an agency of Switzerland to identify potential
business opportunities. Global players like Walmart,
Goldman Sachs, and Thomson Reuters are kept an eye on
Indian startups to exploit huge business opportunity
(Saloni Malviya).
FIIB Business Review. Volume 5, Issue 1, January - March 2016
Perspectives
Start-Ups - India Initiatives
The Indian startup ecosystem is changing faster
than Francium (Fr). By 2020 it is expected to have 11500
startups compared to 3100 startups in 2014. Similarly, it
is expected to raise funding US$ 3.5B in the first half of
2015 alone by exceeding the total number of deals done
in 2014. The Indian startup ecosystem is the second
fastest growing and 3rd largest of the world and is indeed
setting a hectic pace (Ravi Narayan, 2015). Assocham
projected that by 2020 India will have more billionaires
and several new millionaires due to the country's start-
ups ecosystem set pace for growth by having active
presence in sectors like e-commerce, financial services
and other technology-driven fields (“Start-ups to add at
least a dozen billionaires”, 2015). Start-up India initiative
called by the Indian Prime Minister Mr. Narendra Modi
has been started and The Department of Industrial Policy
and Promotion (DIPP) initiated to take forward the call
given by the Prime Minister by working closely with
banks in both rural and urban India. As a part of
promoting startups, DIPP is reaching out to educated
youth in urban areas and under privileged section of the
society to facilitate inclusive growth. Nirmala Sitaraman,
Minister of State (Independent Charge) for the Ministry
of Commerce & Industry said Indian youngsters are
coming up with ideas of entrepreneurship quickly
without losing time. Government is facilitating easy start
of a business. She also felt that there is a need for greater
participation of industry to improve Skill based
workforce in India. Small towns are also joining the
bandwagon of startups as valuations of startups are
highly attractive. First generation entrepreneurs, high
net worth individuals and businessmen are forming
angel networks to support the startups. For instance,
towns like Madurai, Kanpur, Hubli, Jaipur and
Chandigarh witnessed startups (Adarsh, 2015). Angel
investors are ready to fund the startup firms. As per
Harshad Lahoti, founder and CEO of ah! Ventures small
towns have wealthy individuals exploring the startups
which are in need of funds. They are inspired by the rise
of startups like Flipkart and Ola and its rising valuations
(Adarsh, 2015). Government of India has come up with
lot of initiatives to develop entrepreneurship especially
startups. They are as follows.
Self-Employment and Talent Utilization
Fund (SETU Fund)
Startup community has welcomed the SETU
fund. Government creates an incubation center to
provide opportunities especially technology areas under
7

this scheme with INR 1000 crore. E-biz portal helps
entrepreneurs and facilitate to start business easily
particularly startups. Budgetary support has been
extended by government of India in the year 2015.
Around 14 approvals are required to start a business
which was brought under one roof to expedite approvals
for starting a business.
Microfinance Unit Development Refinance
(MUDRA) Bank
Many MSME sector companies find it difficult to
get finance especially from banks which are insisting for
large collaterals resulting into business unsustainable.
These difficulties prompted the government to address
has resulted into setting of MUDRA bank by introducing
in 2015 budget.
Atal Innovation Mission (AIM)
Mr. Arun Jaitely, the Finance Minister of India
announced during the budget presentation in the year
2015 that Government is launching the Atal Innovation
Fund (AIM) with a thrust on promoting Innovation. It
provides a platform to academicians, entrepreneurs and
researchers to meet the intended purpose.
Royalty Tax
To encourage usage to technology in their
businesses government of India reduced royalty tax from
25% to 10%.
Startup Network
A startup network has been created by involving
premier higher learning educational institutions like
IIMs, IITs, Indian Institution of Science, research parks
and industry bodies in the country. This network
basically supports young entrepreneurs by offering
services like incubators, accelerators and mentors with
an intention of facilitating growth of new businesses and
sustainability.
Indian Startups - Funding
India's startup ecosystem is propelling for fast
growth of entrepreneurship in the country. India is the
second fastest growing and third largest start up
ecosystem in the world and by having 3100 start ups in
the year 2014 and will reach to 11,500 by 2020. Around
USD 3.5 billion was the estimated fund raise in the first
half of 2015 alone as per the estimates of Microsoft
Ventures and Venture Intelligence (“The Indian start-up”,
2015). Three to four startups are being born every day,
and nearly five billion dollars of funding is being invested
FIIB Business Review. Volume 5, Issue 1, January - March 2016
Perspectives
in 2015 as per Mr. R Chandrashekhar, Nasscom President.
He mentioned this while releasing the report titled
"Start-up India - Momentous Rise of the Indian Start-up
Ecosystem" on the sidelines of Nasscom Product
Conclave 2015 at Bangalore. He further said that
Unicorns were attracted by the valuations over a billion
dollar which were dominated by privately held
companies. It is being felt that there is a need to increase
domestic funding. He also opined that there is a need to
align India's angel framework with global practices
related to tax issues.
Indian startups are having access to funding
from both Venture capital funds and angel investors
which is paving way for big boon to Indian startup
ecosystem. For instance, Olacabs, Flipkart, Hike,
Snapdeal, Shopclues, Freecharge, Inmobi etc. received
various rounds of follow-on financing either from their
existing investors or from new investor(s). As per the
Nasscom report, the funding received during 2010 -14
was USD 3.2 billion while it is estimated to grow by 125%,
from $2.2 Billion in 2014 to $4.9 Billion in the year 2015.
In terms of number of startups received funding was
around 390 start-ups for the year 2015 compared to 179
start-ups in 2014. Venture Capital /Private Equity
funding has increased by 2.2X over 2014, seed stage VC
funding has grown by far-fetched 6.5X (Nasscom Report,
2015). Investors has improved by 2.3 times from 220 to
490 in 2015 due to rise in high net worth individuals and
perceived that among the available investment
alternatives investment in startups is best. Another
notable trend in the funding area is that successful Indian
businessmen have developed the attitude of giving back
to the eco system in the form of spending time and money
on young enthusiastic entrepreneurs. It has been
observed that big barons like Ratan Tata, Azim Premji
making investments in startups. Expectations by
corporations and overseas investors are high and looking
into Indian markets. For instance, Tiger Global, Sequoia
capital, Softbank, Warburg Princus and Alibaba are
prominent investors made deals worth more than
$500mn. At the same time the exit opportunities are
rising as 2015 witnesses more than 65 mergers and
acquisition deals worth around $800mn. It has been
observed that Foreign Direct Investment has gone up in
the Indian startup eco system. $1.9 billion funding from
top deals happened in 2015.
Startups - Role of Angel Investors
Any country's economic growth depends on
entrepreneurial spirit and culture in the country. It is
considered as one of the significant drives for economic
 Perspectives

prosperity of the country because entrepreneurs membership drawn from different industries and
establish businesses which will create jobs, stimulates engaged in spotting startups at early stage closely
competition and productivity. Entrepreneurship plays a monitor and support them by rendering quality time and
key role for the sustainable economic development of the business connections. Since long back, it was believed
country. Financing to the small and especially to start up that angel investments are meant to cater the needs of
is a challenging task. Banks are not willing to fund small local investments. Many of the investments have not gone
and young firms as it is felt that there is a high risk in beyond the boundaries due to high perceived risk and
funding. Venture capitalists are investing but not at the angel investing can go global if their concerns are
early stage of firm's life but at later stage where risk levels addressed. Venture Intelligence, an investment tracker
are relatively low. Venture Intelligence, a research firm reported that there are 27 seed investments done by
reported that there are 43 angel networks, 111 venture Indian investors in the last three years (Vaitheesvaran,
capital investors and 37 incubators in the country. No 2015). D S Rawat, Secretary General, Assocham said that
longer are the startups relying only on bootstrapping — the valuations of startups are bequeathing scope to many
falling back on savings, fixed assets, and money from doubts but there is no bubble like situation in India. On
friends and family—was the only option. Now many the top of it, angel investor's interest for funding is
other financing options are available at the disposal of expected to continue. Though the market regulator in
business entities (Chadha, 2012 ). India is trying to create friendly regime for startups to
At this juncture, angel investor's investment raise finance from the financial markets, it may take some
considered as a significant source of finance as a seed time to make use of this channel as per the study done by
capital especially at the early stage of the company the Assocham (“Start-ups to add at least a dozen
formation. The word Angel comes from the theater in billionaires”, 2015). Presence of people like Ratan Tata,
New York during early 20th century. Broadway shows Azim Premji and Narayan Murthy etc. are in the angel
were considered to be risky but investors used to investor space has resulted into more pressure to the
produce shows to earn returns and also to showcase their entrepreneurs to remain stay in the business and prove
status (Lange, Leleux, & Surlemont, 2003). Relatively their mettle. They should not be focused more on making
quite a good number of high net worth individuals are easy and quick money.
turning out as angel investors by investing their time and
Table 1 : Educational Qualifications of Angel
money at the initial stage of the startup firms. Angel
investors supported firms developed new technologies, Investors of Selected Networks
products, services and facilitated in creation of jobs in the Particulars IAN Mumbai
Hyder-
Chennai Total
economy (Roach, 2010). abad
Angel investor(s) provide capital for a startup No of members 244 194 56 35 529
business in an exchange of debt or ownership in the Graduates 226 164 45 32 467
business. The other way is angel investors group may be PGs 193 125 318
formed and pool their investment and invest in portfolio PhDs 9 1 2 0 12
of companies. They are often experienced entrepreneurs
Engineering/Science 155 63 29 18 265
who know the intricacies of the business and risks
involved in it. Angel investing is experiencing a Education
fundamental shift due to startup eco system which is Arts/Commerce 65 83 7 10 165
occupying a dominant space in India. Entrepreneurs Business Education 144 98 20 20 282
having idea which is commercially viable can get support Foreign 124 106 33 13 276
from angel investors' network.
Source: G. Sabarinathan 2014
There are two types of angels operating in the
Indian market. One is pure angels and second one is Table 1 shows educational qualifications of
super angels. Those who are doing as a full time activity is members in the angel groups. 226 out of 244 investors
called pure angels and entrepreneurs turned investors are graduates. 9 members hold PhD degrees. Among the
are called as super angels. Chicken and Egg syndrome is three angel networks Mumbai, Hyderabad and Chennai,
prevalent in the market as there it is felt that there is Mumbai has the highest number of members followed by
money in the market, the number of startups is growing. Hyderabad and Chennai. It can be inferred that angel
The Indian Angel network is one of the prominent angel investors are educated and capable of extending support
networks in the world today with around 400 plus to startups.

FIIB Business Review. Volume 5, Issue 1, January - March 2016 9

 Perspectives

Table 2 : Year Wise Distribution of Angel Table 4 : Top Indian Cities having Funded
Investment Startups 2015 YTD
All Total 4
Years IAN MA TCA HA Sl. No. Cities Number of Deals
Angels Networks
1999 1 0 0 0 0 0 1 Pune 16
2000 3 0 0 0 0 0 2 Hyderabad 21
2004 4 0 0 0 0 0 3 Chennai 26
2005 11 0 0 0 0 0 4 Mumbai 63
2006 21 6 1 0 0 7 5 Bangalore 109
2007 13 1 2 1 0 4 6 Delhi – NCR 110
2008 22 7 9 0 0 16 Source: Compiled from E. Amberber, 2015
2009 28 3 6 3 0 12
Funding by angel investors is happing
2010 34 3 12 1 0 16
aggressively in India as shown in Table 4. Delhi NCR
2011 49 4 9 1 1 15 region and Bangalore are in the top position among all
2012 87 13 14 4 3 34 the cities listed above.
2013 47 14 10 3 3 30
Total 320 51 63 13 7 140 Table 5 : Total Startup Investments by Location
Source: G. Sabarinathan, 2014 as of 2015 (USD)
Angel investments have been increasing year on Sl. No. Cities Deal Size (Billion USD)
year except during 2001 to 2003 when there were no
investments. From 2006 onwards angel investments 1 Delhi – NCR region 2.3
started picking up and in 2012 the total numbers of all 2 Bangalore 1.2
angel investments were high during the period 1999 to 3 Mumbai 1.1
2013. The increase in the angel investments is due to 4 Chennai 100-110 million USD
greater awareness and its benefits enjoyed by the angel 5 Pune 80-90 million USD
investors.
Source: NASSCOM, 2015

Table 3 : Year wise Angel Deals in Value and Different cities are attracting angel investors to
Volume fund the startups. In the year 2015, Pune attracted lowest
Deal Value investments of 80-90 million USD compared to Delhi –
Sl. No. Years Deal Volume
($ Millions) NCR region which attracted investment worth 2.3 billion
1 2011 58 117 USD followed by Bangalore, Mumbai and Chennai.
2 2012 101 243
The total number of angel investors sector wise
has been shown in Table 6. Of all the sectors, Information
3 2013 69 261
Technology has attracted 43.56% of angel investor(s)
4 2014 109 283 among all the 16 sectors where angel investors and
5 2015 196 436 networks having presence in India followed by services
Source: Compiled from K. Krishnamurthy, 2015; & NASSCOM, 2015 industry (18.04%), financial services (17.53%), Internet
(17.01%). It can be inferred that majority of angel
The year wise angel investments value and investors are attracted to non-manufacturing industries,
volume had been indicated in Table 3. Except in 2013 which might be due to perceived high growth in these
there has been an increasing trend in the deal value in sectors.
terms of millions USD. However, the deals volume has
been increasing. It has increased more than 3 times in the
last five years.

FIIB Business Review. Volume 5, Issue 1, January - March 2016

 Perspectives

Table 6 : Indian Angel Network's Angel collateral requirement. Risk and rewards should match
Investors Number: Sector Wise to attract investors. As business angels focus more on the
No of Angel Investors: 'jockey' than on the 'horse' (Harrison & Mason, 2002), we
Sl. No. Sectors can assume that business angels can be the real
Sector Wise in IAN
1 Agriculture 9 2.32%
entrepreneurs' best choice. Most active angel investors
in India are bullish as ever and are raising more funds
2 E-Commerce 20 5.15%
than ever before which has resulted into more active
3 Education 42 10.82% presence of angel investor and networks in India. Angel
4 Financial Services 68 17.53% investor financing option is becoming first choice for
5 Gaming 10 2.58% staring the business as venture capitalists and private
6 HealthCare 36 9.28% equity are shifting their focus on big deals and funding
7 Hospitality 27 6.96%
the businesses at later stage not at the initial stages. This
shift of VC creates gap leading to demand of funds by
8 Information 169 43.56%
startups where in angel investor(s) can provide funds
Technology which are small in nature (Chimun Kumar Nath, 2010).
9 Internet 66 17.01% Indian Angel Network is actively supporting close to 16
10 Lifestyle 31 7.99% different sectors in the Indian context. Of all the sectors
11 Manufacturing 51 13.14% Information Technology attracted around 42% of angel
12 Mobile 38 9.79%
investors, followed by services, financial services and
internet. The active presence of India's business tycoons
13 Retail 37 9.54%
like Ratan Tata, Azim Premji, Narayanmurthy etc. as angel
14 Semiconductor 2 0.52% investors has boosted the confidence of angel investors
15 Service 70 18.04% funding to startups. For instance, Ratan Tata started
16 Social-Impact 46 11.86% investments in 2014 and so far has funded around 21
Total Investors 388 companies including two US based and a China based
firm. Ratan Tata has become an influential investor in
Source: Indian Angel Network, Retrieved from
http://indianangelnetwork.com/individual- members startups after stepping down from an active role in the
Tata Group and his areas of interest include e-commerce,
Conclusion social/impact, eHealth, and clean-tech among other
In India startup businesses have picked up in the sectors. The active presence of angel investors would
recent past. There were 3100 startups in the year 2014 certainly add fuel to the growth of Indian startups.
and projections are that it will go to 11,500 by the year
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ANNEXURES
Annexure - 1 : Selected Indian Angel Network's Annexures Portfolios
Indian Angel
Companies Names Nature of Business Principle Angel Investors
Network's Portfolios
E-Commerce Fourseven Silver jewellery online Sumit Dhingra, Rajiv Mehta
Education Rank Junction Exam ranking and preparation platform Jayant Chopde, Ravi Kiran
Financial Services Assured Risk Cover Insurance for catastrophic events such as Saurabh Srivastava, David G Best, Hank Uberoi, Julian Childs
hurricanes
Gaming Hashcube Built a replicable framework for casual games Rehan Y. Khan, Piyush Shah, Hemant Kanakai, Rajan Anandan,
Sunil Kalra, Sharad Sharma
HealthCare Tattva Spa A luxury spa chain Tushar Singh
Hospitality Jiyo Natural Food & Beverage service Rajesh Rai, Sumit Dhingra, Rajiv Mehta, Revathy Ashok
Information PropheSee PropheSee Ajay P Lavakare
Technology
Internet DesignBids Hire interior designers and architects Arihant Jain, Ambarish Raghuvanshi
Lifestyle Lonali Ethical apparel

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 Perspectives

Indian Angel
Companies Names Nature of Business Principle Angel Investors
Network's Portfolios
Nithya Reinvent and re-launch Sri Lanka's ancient
craft of handloom
Manufacturing LoudCell Fuel tracking and management platform for Vishal Lalani, Ajai Chowdhry, Priyank S. Garg, Pradeep Gupta,
power generators Harish Seth
Mobile Orahi Carpooling app
Retail FreshWorldx Fruits and vegetables at your doorstep Nagaraja Parkasam, Prasad V. Palisetty, Sharad Junghare,
Sadeesh Raghavan
Semiconductor Si Semiconductors Develop mixed signal IC based products Hemant Kanakia
Service Quifers Internet enabled logistic solutions Vikas Agarwal, Sanjeev Kakar, Vishal Khare
Social-Impact GoCoop Online social marketplace to buy and source Ravindra Krishnappa, Venkat Raju, Avinash Vashistha,
authentic handcrafted products Nagaraja Parkasam

Source: Indian Angel Network. Retrieved from http://indianangelnetwork.com/individual- members

Annexure - 2 : Major Angel Investors in India

Angel Investors Major Angel Investor Investments in
S. No. Startups Invested In
Name Different Industries/ Sectors
1 Anand Ladsariya Location Based Services, Customer Support Tools, Traffline, Exclusively.in, Aurality, Dexl, Speakwell, Framebench, Serial
Content Discovery and Web Design Innovation, Asiatic, Morpheus Tritya, Mobiquest, Algorhythm
2 Anand Mahindra Mobile App, Farm & Car Services and Food-tech Dishco, Indian Accent, Epic TV
3 Anupam Mittal Clean Technology, Consumer Internet, Mobile, Tushky.com, Olacabs, PrettySecrets, Sapience, Druva Software, Zepo,
Healthcare and SaaS Peelworks, Taxspanner, Cafe Zoe, Interactive Avenues
4 Rajan Anandan Internet, Mobile and Saas based startups StepOut, Capillary Technologies, Sourceeasy, 24/7 Techies,Targeting
Mantra, Instamojo, CultureAlley, Social Cops,MissMalini.com,
Socialblood.org, Mobilewalla, POPxo.com
5 Rajesh Sawhney Consumer Internet, Performance Analysis Tools and Autowale, LittleEyeLabs (Acquired by Facebook), MobStac,
Online Jewellery Pipa Bella, PosterGully
6 Ratan Tata E-commerce, Consumer Internet, Furniture and Zivame, Snapdeal, Urban Ladder, Paytm, CarDekho
Automobile
7 Rehan Yar Khan Data integration platform and Consumer Internet Cherish Maternity, Myshaadi.in, Ola, Pipemonk
8 Sachin Bansal Technology Ather, TouchTalent, Roposo, NewsInShorts, MadRat Games, Spoonjoy
9 Sandeep Goenka Consumer Internet, Big Data and SaaS Fab Bag, Wishberry, Aureus Analytics, POSist
10 Sanjay Mehta Clean Technology, Consumer Internet, OYO Rooms, PrettySecrets, Klip.in, Talview, Unbxd, OrangeScape,
Enterprise Software and HealthCare Consure Medical, FabAlley, EcoSense Sustainable Solutions, Poncho.in
11 Sharad Sharma Consumer Internet, Mobile and SaaS Frrole, Mobilewalla, HashCube, Druva Software, Kwench Library
Solution, Vayavya Labs, Unbxd, Consure Medical, Aurus Network
Infotech Pvt. Ltd
12 Sunil Kalra Agnostic TargetingMantra, Instamojo, CultureAlley, Aurality, AdPushup, Frrole,
Mobilewalla, Druva, Jigsee, Innoveda, Airwoot, HashCube, Sapience,
Wishberry, Crayon Data
13 TV Mohandas Pai Consumer Internet, Furniture and Automobile Kaaryah, Pepperfry, YourStory, Zoomcar
14 Yuvraj Singh Sports, Healthcare, Private Airline, Transportation SportyBeans, Cartiasan, Healthians, JetSetGo, Moovo
and Moving Service
15 Zishaan Hayath Ecommerce, Travel, Mobile, Real Estate and Education Olacabs, AdPushup, Housing.com, SquadRun, Shopsense

Source: Compiled from Itika Sharma Punit. (Feb 15, 2016), Snigdha Sengupta (05 March, 2016) and Pooja Sareen. (August 18, 2014)

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 Perspectives

Author Profile
Dr. S. V. Ramana Rao is a Professor in Finance at Siva Sivani Institute of Management. He is a Post Graduate in Management and obtained PhD from Centre for
Economic and Social Studies (CESS). Prior to joining Siva Sivani Institute of Management, he worked both in India and abroad. He has presented number of papers in
various National and International Conferences including cases. His areas of interest include Corporate Finance, Capital Markets, Investment Management,
International Finance and Financial Derivatives. His articles have been published in various national and international Journals. Dr. Rao has also conducted training
program to executives and managers of corporations like NTPC, SCCL etc. He is also a resource person to various FDPs. He can be reached at ramanarao@ssim.ac.in.

Mr. Lohith kumar holds MBA in Finance. He specializes in Monetary and Capital Markets. He has 10 years of work experience including 4.5 years in industry. His
research and teaching interests are Corporate Finance, Investment Management, Financial Modeling and Mergers and Acquisitions. He has published research
articles in national and international journals. He has also conducted Faculty Development Programs on financial modeling and acted as a resource person for
training programs conducted at CDPL. He has attended workshops conducted by premier institutions like ISB IIT McKinsey's etc. Currently, he is pursuing Ph.D. He
can be reached at lohithkumar@ssim.ac.in

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