Angel Investing To Witness a Tectonic Shift Angel investing as a concept is growing and becoming widely popular
By Vinay Bansal •
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Pandemic forced businesses to revisit their business models and find ways to become relevant in the new regime. After the initial shock, the economies world-over showed strong recoveries and 2021 has been the best year for the Indian startup ecosystem where we saw more startups becoming Unicorn in last one year than all the other years put together. 2021 was also the year when Indian startups like Zomato, Nykaa, etc., got publicly listed thereby reaffirming the strong interest of both public and private investors in the Indian startup ecosystem.
As the impact of COVID-19 has somehow begun to settle, we have seen new challenges/opportunities emerge. As economies are beginning to bloom again, we are yet to define the new normal. The hybrid model of working is becoming popular and will gain further acceptance in 2022. With a lot of changes in the conventional operating model, we have seen Software-as-a-Service (SaaS) startups coming to the rescue. Many startups have launched their operations in edtech, healthtech, fintech, consumer, and data privacy domains with digital being a common theme across.
Though some investors were fearful about the pandemic, many came out fearless. They started investing more in the startups, leveraging the opportunity of finding good startups at fair valuations. This phase was even more significant for the investors as it educated them with an additional parameter to evaluate the startups: sustaining in adverse conditions, like the pandemic. This parameter will continue to be a part of due diligence for all startups being evaluated in 2022.
Angel investing has played a pivotal role in bolstering the startup ecosystem in India and its strength has driven real economic value for the country, creating over 5.5 lakh jobs already. With the total deal size of $28.1 billion in the first three quarters of 2021 compared with $10 billion in 2020, the Indian startup ecosystem has showed both resilience and attractiveness. 2021 also saw 1,091 deals with an average deal size of $25.7 million compared with 809 deals with an average deal size of $12.4 million in 2020. These numbers are a direct outcome of increasing number of Indians gravitating towards digital transactions. Seeing this jump in numbers, investors are quite hopeful with 2022, expecting the momentum to continue.
Blurring the boundaries between the physical and digital world, startups have used AI/ML, IoT to explore new use cases. 2022 will also see quite a few Web3 startups in the ecosystem.
Amid the coronavirus outbreak, angel investors have focused on consistent growth of their portfolio companies, helping them solve key issues in the business and scrutinizing their sales forecasts, hiring plans, and revenue generation initiatives. With entrepreneurs being more aware of raising funds from key angel investing platforms, the influx of deals has increased tremendously. Also, to maintain a healthy return ratio, angel investors are advised to diversify their portfolios, hence making them open to receiving more requests from various domains.
We expect hiring challenges, especially for good tech resources, to magnify in 2022 but we are confident that strong founders will find solutions to work around these problems as well. IPV will continue to work very closely with their portfolio companies to meet these new challenges and also build strong business models so that they can benefit from the expanding opportunities.
Overall, angel investing as a concept is growing and becoming widely popular. With this tectonic shift in the startup ecosystem, the investors are working alongside innovative and creative founders, helping them achieve success, and benefiting from their exponential growth, in terms of return on investment in the capital as well as experience.
