Band of Angels Help Indian Start Ups

9 Comments

After the dot-com bust and IT slowdown nearly crushed the startup he co-founded, entrepreneur Alok Mittal realized India’s business environment had a major shortcoming. There was no money for early stage companies. He survived–selling the startup he co-founded, jobsahead.com, to Monster.com for $9 million in 2004—but his five-year roller coaster ride gave him another idea.

With even venture capitalists looking to invest as much as $1 million-$3 million, Indian entrepreneurs badly needed angel investors willing to commit smaller amounts in, and more importantly, provide guidance to, very early stage, pre-revenue companies.

To shore up the gap, together with Saurabh Srivastava and some other people, Mittal informally started Band of Angels, India, modeled on Band of Angels and Angel Capital Association, to provide not just money but also high-quality mentoring to budding entrepreneurs. The group that formally launched this April has 30 investors from a variety of industries and has made three investments.

The only one Mittal will name is Knowcross which makes software for the hospitality industry. The others, he says, are a technology retail chain and a heritage restaurant property that plans to scale up to a chain of high-end restaurants.

GigaOM recently chatted with Alok Mittal, who is also executive director at venture firm Canaan Partners’ India office, about the kinds of companies and the sectors Band of Angels is looking to invest in. Here are some excerpts of that conversation.


— On the minimum investment required by a Band member:

Alok Mittal: There is no real minimum. We are setting an expectation that members will invest about $50,000 a year. Every member doesn’t have to invest in every company. Also, simply some one with $50,000 to spare is not the kind of member we are looking for. We are passionate about entrepreneurship and we want to help build companies as well so we want members with experience and a proven track record.

–On the sectors Band of Angels, India, is looking to invest in:
AM: When we started out, the first set of members was strong in technology. Now only half of the 30 odd members are from the technology space. We always had a broad charter and want to support different kinds of businesses, because ultimately all of us are excited about entrepreneurship. We are looking at the Internet space, telecom technology and embedded domains, media and entertainment, BPO, retail and biotechnology, among others.

–On some proposals they are currently looking at:
AM: We are considering some projects on the Internet side, like e-learning and social networking. These startups need $100,000 to $300,000 and we are well designed to do these smaller investments. We are looking at telecom technology, like billing software, and also at smaller BPO plays but those that have demonstrated success.

–On the Band of Angels members being able to recoup their investments:
AM: This is a very new concept for India where even the venture capital industry is so nascent. Very few companies can really expand with $200,000 from an angel investor. So unless the next stage (venture capital) is available an angel can incur losses. Our success in a sense will depend on how the rest of the ecosystem is developing.

With VC investments increasing in India, this may just be the right time for angel investors, so anyone wanting to approach Band of Angels with an idea read this first and go, get funded.

9 Comments

Subbu

Srikanth, Y Combinator isn’t a fancy word. It’s a VC firm specializing in working with very early stage ideas. If Google, Yahoo, Flickr, del.icio.us, and iPod aren’t fancy names, Y Combinator doesn’t even take a fraction of the fanciness. Not a single meaningful web domain is left to register. So fanciness is a way to create a web presence. Fanciness aside, technical people follow a set of writers and blogs. Y Combinator’s Paul Graham is one of them.

Mittal’s profile is surely impressive. But not all VCs suit for every kind of start-ups and entrepreneurs. If you browse through BoA website and look at their application form, it clearly means they are looking for an existing entity with a history, senior management, product line etc. They expect the entrepreneur to submit a well thought out business plan. But on the other hand a firm like Y Combinator looks for technical depth and/or a working web application. They will help build the business plan. Technical people are notoriously bad in business activities let alone creating a business plan. I am not suggesting whether BoA is good or Y Combinator is good. It’s their money and that is how they’d like to conduct their VC activities. It’s their business decision on how they want alleviate their risk. But the entrepreneur has to decide who works better for him.

Srikanth

subbu, man, in what way does BOA seem like a traditional VC firm? and what the heck is “Y combinator”…what’s with you people and fancy words?..huh …it says that they’re looking for really early stage startups no? and look at mittal’s profile!

Subbu

BoA seems to be a traditional VC house. Any idea if India has a Y Combinator type of VC firm. People with a strong technology background and helping early stage startups?

Startups.in/India

Typo in “$100,000 to $300,00”. You probably meant 300K.

That aside, any idea on the approx. stake they’d claim? Can’t seem to find info on that aspect at their site. One thing that is attractive about BoA is the following statement: “Even if the Band decides not to invest the company will derive value by interacting with the Band members and getting their advise and inputs.” How many angels go to that extent?

Startups.in/India
Nag .B

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