Going beyond Angel Investing – Lead Angels
Started by a three-member team originally from IIT-Bombay in 2014 - Lead Angels aims to assist early-stage investing. Its 130+ members are from Delhi, Mumbai, Ahmedabad, Bengaluru & Hyderabad Chapters. To be able to provide support at every stage in the lifecycle of a start-up, the company set up two divisions -- Lead Advisory Services and Lead Angels Management and Professional Services (LAMPS) building a full-stack services offering. In a conversation with Faiz Askari, Sushanto Mitra highlighted trends in this domain.
In the area of entrepreneurship development, the role of venture capital becomes very decisive. For every budding entrepreneur, a venture capital support is the most sought after entity. In our bid to highlight some of the major venture capital related drivers for startups we came across to – Lead Angels.
Started by a three-member team originally from IIT-Bombay in 2014 – Lead Angels aims to assist early-stage investing. Its 130+ members are from Delhi, Mumbai, Ahmedabad, Bengaluru & Hyderabad Chapters. To be able to provide support at every stage in the lifecycle of a startup, the company set up two divisions — Lead Advisory Services and Lead Angels Management and Professional Services (LAMPS) building a full-stack services offering.
The three divisions work synergistically to enable improved portfolio success. The Network provides early-stage funding to startups. Post-investment Lead Advisory assists companies looking to raise growth capital for scaling while LA Management & Professional Services (LAMPS) provides services for compliance/ governance requirements, reporting & review of systems for startups.
In the last five years, the company has reviewed 10,000 applications, showcased over 700 deals and invested in 30+ startups. The portfolio has shown remarkable resilience and success in raising external funding. The portfolio includes marquee startups. The Lead Angels team and angels comprise of alumni from premium institutes, supported by a network of relationships and partnerships in the Indian startup ecosystem.
In an interview with Faiz Askari of SMEStreet, Lead Angels founder and CEO Sushanto Mitra offers an overview of the network’s journey and discusses key differentiating factor at Lead Angels.
What are the key differences between Lead Angels Network and other networks in the country?
Lead Angels Network, when it started looked like any other angel network in India but over time has transformed into something different. By adding an advisory and professional services component, we are able to provide all the necessary elements of support required for a high growth startup to achieve its objectives right from inception up to Series A. This is the main differentiator. The process-driven investment approach and 360° support across all stages for investee companies have provided stellar returns to our investor members and has enabled faster growth for companies backed by a team which has an overall view of the startup given the multi-faceted operations of the company.
All the three operating verticals of Lead Angels are housed in a private limited company where the team owns the majority and a minority is held by investors. This ensures that there is ‘ownership’ of all the operations of the company by the team with advice from investors. This is also very different from other angel networks.
Do you have any sectoral preferences? How was 2019 for the Lead Angels Group?
As a network, we are sector agnostic and have supported founders with a unique offering to potentially large markets. Our focus is on category creators. Recently, FashionTech, Logistics and Automotive Services are some of the new sectors that have been added to our portfolio. We believe that portfolio diversification is critical both in public and private markets.
It was a good year with a lot of new things happening. Firstly Lead Advisory assisted Series A funding of ShopKirana led by Info Edge, Interestingly, and Info Edge led consortium again invested in the company with a USD10 M later in September.
In 2019, three companies from our portfolio raised a pre-series A round which included investments from our angels and other funds and UHNIs.
During the year, 8 companies were funded by the angel network. These included Kaarva, HelloVerify, Transporter City, Hoopy, StyleNook, Noto among others. Three transactions from last year were carried forward into 2020 as is normal in the transaction world.
How has Lead Advisory helped the group as a whole? What are the offerings in this division?
The advisory division helps our portfolio companies and portfolio companies of our partner VCs to raise institutional funds from $1-10 million. This is valuable to our angel investors as this helps their investments to appreciate. It also helps the startups to raise money with less effort. Finally, it also helps the organization as a whole to be more agile and informed about the startup sector which is one of the most dynamic sectors of the economy.
Lead Advisory has assisted companies in raising $15 million in the last twelve months. In a short time, it has built relationships with over 100 funds from financial investors across India, Japan and China. Apart from fundraising, the division is also supporting companies in M&A and strategic investments.
What is the profile of a typical angel investor on the Lead Angels platform?
Our typical investors come from a cross-section of corporates, investors, entrepreneurs and other high-net-worth individuals with linkages to premium institutions. The network has accomplished investor members including Venkat Narayan, partner at Aavishkaar Venture Management Services; Sethu Vaidyanathan, Serial Entrepreneur; Amiet Kharbanda, MD – MyBox Technologies; Sanjay Krishna Goyal, CEO – ACL Mobile; Dr Dhruv Nath, Professor – MDI Gurgaon; Rahul Shah, Ex – Investment Director, Aditya Birla PE Advisors; Piyush Mathur, Staff Anesthesiologist/Critical Care Physician, Cleveland Clinic, Cleveland Ohio; Prerna Tandon, SVP – State Street Corporation among others. Many of our members are professionals who wish to invest in and mentor startups. We have collaborations with alumni associations of premier educational institutes such as IITM IITD and IIMC and Mayo College, to enable more professionals to become entrepreneurs or angel investors.
India has the second-largest number of startups in the world after the USA. What is your opinion is a promising startup? What are the qualities you look for while vetting a company for the network?
One of the problems with the Indian ecosystem is the scalability issue. We therefore clearly see the market size and scalability as a key determinant for identifying promising startups. We look at the size of the problem that the founders are trying to solve and whether it is disruptive enough to create a new market for itself. Team capabilities and the mix is another factor in the equation. Here depending on the sector, domain and technology knowledge are the two key factors to establish potential. Lastly, we also look at the scalability of the model and prospects of future funding or acquisition. Given that funding is limited in India and so is M&A, future findability and possibility of future acquisition also get factored into the equation.
What impact do you think the Coronavirus will have on the funding scenario. is the 2020 outlook? Can you tell us about your exits?
The Coronavirus pandemic is a major event no doubt. However, we think the impact is more short term than the long term. In the short term, investors will be risk-averse and at the best look for bargains given the general slowdown. In the longer run, the recovery of the economy over 6-12 months will bring more investors, both individual and institutional, back to the market. Some sectors such as online education, online entertainment, SaaS, workflow automation and eCommerce will see an upswing in both the short and long term due to Coronavirus.
Being sector agnostic, our investments have been across HRtech, fintech, Logistics, shared economy, CPG, this year we have also invested in fashion-tech. Consumer brands are now getting a lot of attention from VCs as they see the scope of rapid growth in under-served markets. Quite a few VCs and micro funds focus only on this sector now.
Fintech and AI remain areas of interest in 2020, as there are many sub-segments and applications which are not covered by existing players apart from new services in payments and accounting. And g and now with the Supreme Court verdict on Cryptocurrencies there is an upswing there as well.
SaaS, Entertainment and Edtech are also areas of high interest among the VC community.
We have intentionally kept our ticket size small to ensure that we hold a very small stake in companies making it easier for subsequent investors to give an exit to our angels. Some of our investments are also opportunistic in companies where there is strong case for a buy-out. Consequently, over the past three years, we have recorded exits through institutional investors and via the strategic route as well sometimes in less than three years. Some companies have merged with others such as at-home beauty services provider Belita which was acquired by Enrich Salon, and Driverskart which was acquired by DriveU. Lead Angels investors hold shares of the merged entity now.
In other cases, investors have given exit options to shareholders such as in ShopKirana which was backed by Info Edge and Japanese firm Akatsuki Entertainment Technology Fund, and Supr Daily which was acquired by Swiggy, and AHA Taxis, which was acquired by eBixCash.