In a bid to understand the entire process of reaching out to a VC and how to arrange funds, Diksha P Gupta from Open Source For You spoke to Sushanto Mitra, founder and CEO, Lead Angels, an alumni-focused angel network, and discussed several issues that hamper young entrepreneurs. Read on…
Q What are the areas in which start-ups need help and how does Lead Angels pitch in?
A. Before I answer that, I would like to share a bit about our origin. In the year 2000, I had set up a consulting firm, helping the early-stage companies to raise money. I continued doing that till 2007, when I joined IIT Bombay as the CEO of its business incubator called SINE. It was a very interesting stint as I was coming across very early-stage ideas and incubating them. But the fact remains that in academic institutions, even though there are very bright people, the exposure to business is very limited. Unfortunately, even today, most of these academic institutions are not able to interact with the outside world; therefore, the world beyond the campus walls doesnt get to know what exciting ideas are brewing inside. Students only get a hang of the real world when they move out, which is why a lot of alumni of various institutions want to give back to their institutes. They want to invest in interesting ideas with the aim of giving back in some way and also because they are more comfortable in their own alma mater.
There is a level of credibility and comfort already established when it comes to the alumni. So that is the origin of Lead Angels. We are an alumni-focused angel network, with which alumni from the IITs and the IIMs are associated, to invest in companies emerging from these institutions. Of course, there is nothing exclusive about either the investee companies or the investors. We are not saying that the IITs and the IIMs enjoy an exclusivity with us; in fact, a majority of our members are not from these institutes. But yes, these institutes are our focus. We have our meetings in the IITs and IIMs, and we are involved with their entrepreneurship development cells or incubators. The simple logic is that investors are not interested in merely investing in the name of any institute, although that can be an advantage sometimes. An investor is more focused on interesting ideas.
Investees also do not want to restrict themselves to just the alumni. Angel investing is not just about funding it is about mentoring, offering knowledge value-addition and about connections as well. For the start-ups, business exposure is as important as funds, to grow the business. So, we just dont arrange funds, we arrange for support in terms of mentorship, guidance and business exposure.
Q How many start-ups have you funded so far?
A. We have completed the investment process in two start-ups, as of now There are two more companies that we are in the advanced stages of funding. A couple of them are in the pipeline. Getting funds and appropriate mentorship for any start-up takes time. We had set up Lead Angels in July 2013. Our first angel meeting happened in October 2013 in Mumbai. It takes time to build a sizable network of like-minded people that can help in investing in the companies. Right now, we have 70 investors on board as members, across Delhi, Mumbai and Ahmedabad.
Q So, are you focusing only on tech start-ups?
A. No, not necessarily. As an investor, one doesnt want to be limited to any particular sector. One wants to invest in anything and everything that makes a profit. Of course, I wont deny that tech and tech-enabled businesses are a major attraction, because they are scalable. But we are not restricting ourselves or our investors to any domain. We are evaluating everythingfrom concept fast food restaurants to the healthcare sector. We cannot deny that today IT is an integral part of everything we want to do.
Q As you mentioned, IT is an integral part of any business these days. Do you help the start-ups develop their IT infrastructure?
A. Before I answer that, let me share with you who our members are. They include people who have built successful businesses over a period of time like Faisal Farooqui of Mouthshut.com, Alok Kejriwal of Games To Win, etc. Some of the members are from traditional industries, like one of the founders of Lawrence and Mayo. There are also members working in private equity and venture capital firms, in their individual capacities. They bring the skills of what they do as investors to the network. So this network helps in evaluating the companies and when the investment is made, one of us becomes a board member or observer of the start-up to support and mentor the company, depending on what its critical requirements are.
Also, many of the investors in the network are in a position to bring business to the start-ups. Lets not forget that for a start-up, getting that first order is the most important thing. So if we have a start-up that is into warehouse management, and one of our members is associated with a courier company that has a warehouse, it becomes easy for the start-up to get its first trial. The fact remains that nobody wants to give business to a start-up, but members do take such steps, helping the start-ups get their first order.
From the technology front, many of the members come with technical qualifications and experience. They can also help on technology if required. Since it is a group of experts in the business, they certainly know how to mentor and manage start-ups in more ways than one. We also have partnerships with multiple incubators like IIIT-Hyderabad, IIT-Delhi, IIT-Bombay and several such institutions. So, if a start-up requires some technical support or even interns, we can arrange all of that. Essentially we aim to provide support to the start-ups at various levels.
Q Amongst the tech start-ups that you have worked with, so far, do you see open source technology flourishing?
A. Yes. In fact, one of the start-ups that we are looking at, which happens to be from Delhi, is using open source components to build a fairly complex product. I think that as the IT availability increases as a result of cloud and mobile technologies, it is creating a level playing field between start-ups and large companies. For example, the two competitors of this start-up are Fortune 100 companies. Their product would be similar to what this start-up is making. In fact, what these kids are creating is a faster product using open source technology and because it is going to be provided as a service, it will be easily and affordably available at any point in time. I am not claiming that they will beat the biggies, but my point is that they will be operating in the same market.
This start-up has built only two critical components on its own, and for the rest, it is using open source. It already has clients like banks and financial institutions, which means that critical domains like banking are open to using open source technologies. I think open source offers a certain level of democracy against large software and hardware product companies. The future is certainly going towards open source, leading to a fair balance in the technology market.
Q Are non-tech start-ups also going for open source technologies in a big way?
A. Yes, there are start-ups operating in different domains that use open source technologies in one way or the other. The fact is that young start-ups cannot afford expensive proprietary software. More importantly, they get a good choice with open source technology, so they happily resort to it. For instance, we are a financial services start-up but we use open source technology for our emailing system. And we keep looking for open source alternatives wherever they can be deployed.
Q So, how does a start-up reach out to you?
A. It actually works both ways. They can reach out to us and we also do keep looking for interesting start-ups. They can come to our website where they can contact us. In our angel meetings, we have something called the idea pitch apart from the three formal presentations that we have every month. Here people can come and pitch their ideas and take feedback from the investors present at the meeting. If we like an idea, we invite them back to make a formal presentation. We also attend events related to start-ups where we have interactions with them and keep looking for interesting ideas. As I mentioned earlier, we have partnerships with incubators and student entrepreneurship development cells. So all these, put together, bridge the gap between us and the start-ups.