Investor's Lens on the Startup Ecosystem ~ Part 3

Dec 04, 2021

The following is part 3 of a series- where we will have Mr. Brijesh Damodaran, Founding Partner of Auxano Capital, sharing his views on the startup ecosystem from an investor's lens.. Read more to find out !

In the earlier part , we shared the interest among the investors across the landscape in the startup eco-system & here we shared what is the responsibility of the ecosystem to ensure that the interest of the investors is not only maintained but also grows. 

In this note, let’s understand why investing in the Indian eco-system and its entrepreneurs is an asset class which can be a part of the investible corpus of the investors .

The generation earlier to the current one had grown up to asset classes , which primarily meant investing in Fixed Income instruments and Real Estate – the safe option . You invest in Fixed Deposits or Bonds or debentures issued by the banks , primarily Public Sector. If you were open to take risks you could look at the Fixed Deposits of Private Sector companies , which typically had a higher interest rate. 

Cut to today, and we have investors today , who invest across instruments as in crypto currencies, peer-to-peer lending , besides the usual culprits . 

Mutual funds as an instrument for investment has also caught the attention of the investors . WFH ( – this has now become a noun / verb – in the same lines as Xerox ) has given a boost to the financialization of the investments . The count of Demat accounts which was opened in 2020, has seen no respite. The equity markets have seen the indicies only going one way – up and north . The LIC IPO will also contribute to more numbers of Demat account opening . 

And in all this , the Indian startup eco-system has seen a boost. The number of Unicorns which happened in 2021 ( as of Nov’21) is 38, across industries and sectors . This is validation enough to consider investing in this asset class . And to add to it , the largest and biggest IPO of 2021, was of an start-up . More validation . 

As an investor, to this space, you can invest individually into an entity or you could be a part of a group of investors and invest in the start up. 

Another way of investing is investing through a SEBI Registered Alternative Investment Fund ( AIF ). 

With as small a commitment of Rs. 25 lacs, an investor can deploy this corpus over a time frame of upto 36 months ( based on the timelines in which investments will be carried out by the fund) . And through this manner, the investor can be a part of multiple investments . 

Moreover, as a fund, the investor can also : 

  • Ensure Due – Diligence before the investment covering, legal, secretarial and financial matters 
  • Get regular updates from the fund 
  • Have access with funds co-investors , and so on 

Investing and supporting the Indian entrepreneurs in this journey , will also ensure that the investible surplus are deployed in the Indian eco-system , fruitfully. 

In the next part of the blog, will share the different types of fund and how you can participate in this growth story . 

Disclaimer: The contents of this note is not an investment advise . This is only an informative and educative note

Author(s) :
Brijesh Damodaran