The Unicorn Investor: Dr Apoorva Ranjan Sharma The investor who's best at placing early-stage bets on companies now worth $1B+

India's startup environment's journey has accelerated at a rapid pace in recent times. Freshly minted unicorns are heralding new markets, even challenging larger, more established MNCs in various sectors. The growth of the business has only accelerated at a sharp pace as the entire business model has seen a push by various government initiatives as well as a bigger pool of investors getting involved. Navigating the dynamic world of Indian startups can be a challenge in itself. That's why having people with a plethora of experience in nurturing a new business from scratch, raising funds, and wading through tough situations is critical for a new entrant. And for India, one of the most sought-after mentors/ investors is Dr. Apoorv Ranjan Sharma.

Sharma was at the very forefront of the Indian startup scene. In an exclusive conversation with Entrepreneur India, Sharma shared that he entered the business back in 2010 when he was elected to helm the Indian Angel Network by the government.

"My journey into this realm of business was accidental. I had a lucrative job abroad but decided to move back to India after marriage. Around 2010, an opportunity came in for me to set up an incubator with the government of India. It kept on growing in 20 years, where you see it now," Sharma said, detailing his first tryst into Venture Capital with India Angel Network. IAN is India's first angel investment network. Apart from funding, the Network also seeks to provide mentorship, and strategic thought leadership and leverage the Network's network for the investee companies.

ABOUT APOORVA

• Among the top 10 angel investors in India

• Over the last two decades; he has curated, incubated & led seed investment of 200+ startups

• His company; Venture Catalysts has recently taken a complete exit from one of its portfolio startups, with stellar 5x-8x returns on investment.

• In a span of 4 years, VCats has seen over 20+ exits • OYO Rooms, Beardo is the biggest success story

• Beardo (acquisition by Marico Ltd), SuprDaily (acquisition by Swiggy) • Innov8 (acquisition by OYO Rooms)

• Fynd (backed by Google & acquisition by Reliance) & 20+ more

Having gained a more thorough understanding of how things could work, Sharma started his own VC firm named Venture Nursery in 2012. However, his big break in the industry came in 2015. "My big break came in 2015 when I partnered up with Anil Jain Anuj Golecha & Gaurav Jain to start Venture Catalysts, which is now one of the largest networks of investors in India. We do about 100 crores in investments every month and have created corporates in 50 Indian cities and half a dozen other countries. The continuous growth engine of ours is on a pathway to create a network of 10,000 investors in a few years," he asserted.

Venture Catalysts is working on continuously educating angel investors in order to realize this aspiration. Sharma said that in India, currently, there are about 6 crore demat accounts but hardly 10,000 angel investors. Out of these 10,000, about 5,000 are with Sharma and Co. He believes the benefits of turning into an angel investor need to be propagated in a more concentrated effort to bump up these numbers.

"Angel investing is not an investment in a true sense if you look at it. It's in an investment asset class, sure, but it should be seen primarily as an extension of support to the young entrepreneur. We are here to help these young entrepreneurs who do not have the experience of building big companies from scratch. Since most of these people have no experience in building a company, we bring them the connections, the money, and the guidance, among other things. Hence, angel investing is more of a help," Sharma added.

Sharma admits that in the entire process, you definitely make capital of your own, but only if your selection is right. Selection is more of a game of identifying the right individuals. The more you are successful there, the more you make money. "Lots of times, I have lost money too. Between 2015 and 2020, I lost money in close to eight startups," Sharma added.

The challenge when talking about losses in investment only comes when you are betting on the wrong horse. Highlighting what could be wrong with first-time entrepreneurs, Sharma highlighted three important distinguishers. "First is if the co-founders are not focused enough. They probably don't have the value of time. Sometimes, there are clashes between the co-founders as well. They are too early in the business. Further, entrepreneurs need to be mentorable. If they are mentorable and flexible in mind, the capacity of persevering tough times while building a business can be cultivated," Sharma said.

Sharma has a clear formula for identifying winners. He always looks for two qualities in aspiring founders who come to him with their business plans. He checks their enterprise development capability and fundraising ability. Other factors are secondary after these, ones that can be developed over time, as per Sharma.

VENTURE CATALYSTS

• Venture Catalysts Group doubled its growth by closing 207 consolidated deals in 2021. It invested in 178 unique startups during the year. With an average size of $100 K - $500K per venture.

• A $100 million accelerator fund, 9Unicorns showcased stellar growth in 2021 with 101 deals, as compared to 32 deals in 2020 - Aims to invest in 150 startups globally in 2022. Investing $32 m this year, the accelerator fund witnessed 33% uprounds this year

Talking about one such case of identifying winners, Sharma highlighted how easy it was to invest in Oyo's founder Ritesh Agarwal. "He was super prepared and highly passionate about his business. He had databases prepared because he was earlier working with Airbnb during the Commonwealth Games and was managing the backend for all the Airbnbs in Delhi. He had a lot of knowledge about the companies in this domain and had a clear understanding of the gaps in that space. He was thorough on the term sheets etc. Ritesh is a very passionate individual and is also very modest; both things are very hard to get in a person. That's why he is successful, I think," he recounts.

Sharma still holds a small stake in the company. He believes that the length of the engagement between a startup and a VC should be a mutual decision. However, being an angel investor, it is better to be an opportunist. "If you are getting a good return for your investment, it is wise to make an exit. Invest in other companies with the capital you generate from a successful investment. That makes sense," he ascertained. Every company has a story to tell, Sharma said. So when a company pivots through various business turns, he has a strong opinion about sticking by their side for better or for worse.

"We believe in supporting the founders. No matter what the road holds for a company, if the vision of the founder is strong we will continue to align with them. If they fail in their first venture, for the second time if they come to me I'll support them again," he said. He then added that similar would be applicable to the Maverick Co-founder of BharatPe, Ashneer Grover, who was recently ousted from the company.

"Tomorrow if BharatPe's founder [Ashneer Grover] comes with another venture, I'll support him again because I know he is a strong founder. He has built BharatPe, nobody else has that much of a role to play in the company's success. Irrespective of other people's opinion about him, I'll still go into business with him because I believe we need to support those who have the capability of building businesses from scratch, something that he has displayed in his career," he stated.

(L-R) GAURAV JAIN, Co-founder, Venture Catalysts; ANUJ GOLECHA, Co-founder, Venture Catalysts & 9Unicorns; DR APOORVA RANJAN SHARMA, Co-founder, Venture Catalysts & Managing Director, 9Unicorns and ANIL JAIN, Co-founder, Venture Catalysts & 9Unicorns

Sharma is very particular in nurturing the interests of the founders and entrepreneurs he has invested in. He detailed that his VC firm has established a network for all the entrepreneurs engaged with them. His network allows startup founders to interact with other people engaged with Venture Catalysts as well as VCs and vendors for certain jobs. This is not limited to the startups involved with Venture Catalysts but also the people that 9Unicorns, its sister company, has invested in. 9unicorn invests in idea-stage startups whereas VCats invests in startups up to Series A. Both are angel fund licensed and are community-backed AIFs.

The nature of investment is the same for both, and Sharma said that a lot of times both organizations do co-investment. The difference lies in the nature of equity. The size of 9unicorns is about $120 million. For VCats, the investment in 2021 was about $100 million in 2021. Combined, both the VCs are 6 billion dollars in size and have made about 320 investments out of which there are 5 unicorns and about 30 semi unicorns. By 2022, Sharma plans to invest in 250 companies, having made 100 investments already.

He is eyeing specific sectors for investments. "We are currently looking at expanding our presence in Web3, and Metaverse as well as evaluating more SaaS companies for investments. Then we are also looking at making investments in the food sector, which is yet to be disrupted. Here, our aim would be to focus on products only companies primarily," he concluded.

FACT FILE

• Venture Catalysts currently has a portfolio of 4.5 k active angel investors and targets to build 10k active investor community by 2024

• Currently present in 22 cities including Coimbatore, Lucknow, Ahmedabad, Raipur, Kochi, Cuttack, Kolkata, Surat and many other aims to expand in 40 cities in a short span of time.

• By 2024, VCats aim to invest in eight to ten start-ups per month

• 9Unicorn aims to accelerate and invest in 300 start-ups by 2024

• VCats has developed fresh investment products such as Incubate Hub – Corporate Innovation Platform, Corporate Venture Capital (CVC), CXO Angels Network, Family Office Network, Founder's Network. Venture Catalysts has invested in 14 startups since Jan 2020