Analysing the Current Venture Capital Investment in South India – From an Investor's Perspective What does 2018 have in store for investors and startups in South India.
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With the South of India having seen an exponential rise in the number of startups and new ventures focussed on actually solving societal issues, the investment climate here definitely needs analysis and attention. With PM Narendra Modi encouraging active participation from the asses towards building India's smart cities, the environment for investment in the south is apparently conducive.
Another notable aspect at this juncture is the fact that a large number of women mentors, in addition to investing, are actively taking the lead with respect to helping ventures via angel, equity, and debt capital investments. In this regard, Entrepreneur India personally interacted with Revathy Ashok who is not only associated with the Indian Angel Network but is also Chief Executive Officer and Managing Trustee at Bangalore Political Action Committee (B.PAC) which works at improving urban governance in the city by engaging both elected representatives as well as citizens.
Revathy offered precise insights on the investment scenario in South India.
First things first, Investment does not start and end with Money
An aspect that Revathy considers close to heart is mentoring of startups that she invests in.
"I owe it as an investor to mentor the companies that I invest in," states Ashok nonchalantly. She adds that it is her duty to guide entrepreneurs who have good ideas and models but without 100% scalability. Ashok shared experiences of having met entrepreneurs whose models and ideas were impressive but needed guidance and tweaking so that these could be incorporated within the system to solve problems.
"The entrepreneurial ecosystem in India is now maturing," adds Ashok.
Current investment climate in the south of India – From a venture capitalist's perspective
With startups today being viewed (by investors) as drivers of change in the Indian economy, it only becomes natural for investors to do a wholesome analysis of the conditions that actually influence investment decisions.
In this regard, Ashok believes that the investment scenario and trends in South India are quite robust, with the investors exercising comparatively more caution and risk-averse when it comes to finding the right ventures. Nonetheless, with Bangalore today being promoted as the startup capital, there is the right amount of institutional capital available.
"Generally, in the south, investors put in hard-earned money acquired through earlier job stints at various MNCs. There are also first-time entrepreneurs. Hence, they are comparatively cautious than their North Indian counterparts who possess the old money cushion that drives bigger bets and larger risks," states Ashok.
However, another factor to be remembered is that the angel capital aspects viz individual investments are comparatively less when compared to markets such as Mumbai and Delhi.
"Profile of investors in cities in Bangalore indicates that they have been in good corporate positions having drawn handsome salaries. These are the same people who turn entrepreneurs and investors in a bid to give back to society," informs Ashok.
She re-iterates the fact that the working professionals-turned entrepreneurs prefer taking calculated risks rather than resort to jumping in directly to bigger bets. This is applicable to angel investments.
Nonetheless, as far as venture capital is concerned, Ashok believes that South Indian markets such as Bangalore are in the forefront.
"When we consider Bangalore, entrepreneurs have relocated to the city from places like Mumbai just to be a part of the "ecosystem' which is infectious," observes Ashok.
The "infectious' entrepreneurial ecosystem of Bangalore
Ashok was generous enough to dwell on the specifics of the entrepreneurial ecosystem of Bangalore which she describes as "infectious'. She states that it is the energy, networking, and learning opportunity in the startup ecosystem that gets entrepreneurs motivated despite the city's internal issues.
"There are a whole lot of mentors willing to mentor people. We do not get to see this commonly in other markets."
Analysing the tier-2 investment scene
With today's startups, even in non-IT sectors such as textiles, and manufacturing; adapting robust technology-driven models, the sixty four-thousand dollar question is obviously about whether these can attract quality investments (and mentoring)similar to that of their tier-1 peers.
"I think the discovery process of the technology-driven tier-2 startups is still on in the southern markets," states Ashok. The key here is entrepreneurs' ability to build brands and sell their dreams appropriately to attract venture capital (VC).
"I would love to mentor tier-2 startups," declares Ashok.
The currently investment-sectors in the south
With respect to investors overseeing creation of new brands, sectors such as apparels, textiles, herbal cosmetics, beauty products, food products, traditional games, and more represent hot opportunities for VCs to drive creation of brands.
"Again belief in the idea and selling it to the capitalists is the key," reminds Ashok.