It has been nearly 10 years since Auxano started investing in early stage opportunities. Auxano means growth, and our focus has been on emerging mega trends: companies that can become category creators, market creators or market leaders.
Where it began
When we made our first investment in 2016, options for early stage investing were very limited. You had an idea, raised capital from friends and family, and started. The opportunity was usually pre-revenue, but those closest to the founder backed the young entrepreneur because the idea was often a disruption.
The genesis of the e-commerce and quick commerce we see in India in 2026 was floated in Gurgaon back in 2016. That was a category creator. Many things we take for granted today, which have moved from “nice to have” to “need to have”, had their seeds sown a decade ago.
How early stage capital evolved
A startup needs capital at every stage of its life.
- Bootstrapped: The first capital comes from the founder.
- Angels: With a proof of concept, founders turned to friends and family. These investors came to be called angels.
- Angel networks and accelerators: With ₹50,000, ₹1 lakh or ₹2 lakhs, one could now invest. Pools of investors formed, and every city had its own angel network.
- Venture funds: SEBI brought in norms, and the first venture funds were formed in early 2012.
SEBI also recognised different fund types: Category 1, Category 1 (Angel), Category 2 and Category 3. In Category 1, 2 and 3 funds, the fund manager decides which opportunities to back, not the investors. In Category 1 Angel funds and angel networks, investors can pick and choose.
The reality of early stage investing
This is where things get interesting. Early investors have seen one investment go up 20x, 30x or 40x, while many others went to zero. This gave rise to the power law of investing: one investment can return the entire capital you put in.
Compare this with public markets:
- Public markets: You can get in and out at the press of a button, and the money is in your bank.
- Early stage investing: There is no such flexibility. Outcomes can be binary: either the company shuts down, or it goes to the next level and creates a new product, process or service.
Indian investors have traditionally put money into physical assets like land, gold and fixed deposits. The pool of investors backing disruptive founders is still limited, even though that capital is needed for the very long term.
The mindset that holds founders back
Early stage companies can pivot several times in their lifetime. Yet investors often ask:
- How soon will my money come back?
- What is the return of capital and the return on capital?
- Can you predict it? Can you give me timelines?
This mindset does not help the founder. On one side, the founder wants to take the product or service to the next level. On the other, the investor wants predictability. Unless there is patient capital, capital that sits tight and keeps adding through the investment journey, the investment cannot fructify.
What we tell investors at Auxano
We say it upfront: please don’t come to us without at least a five-year investing horizon.
- During those five years, we have seen at least two or three pivots. It could be fewer or more.
- Be ready for the possibility that the capital can become zero.
- Don’t invest money you need immediately, or money that cannot see a drawdown.
Individual investors typically want liquidity. That is why institutions, large family offices and larger funds have been the ones to stay put and double down on early stage founders until they shed the early stage tag and grow into larger enterprises.
Why this is the right time
Over the last three to four years, we have seen many enterprises from this ecosystem list on the Indian stock markets. That is a strong indicator that we should keep investing in Indian early stage founders and keep providing capital, so the ecosystem is there for the next set of entrepreneurs.
Capital, or even a line of sight to capital, also does something else. It helps founders take risks.
- At Auxano, we have backed founders who did not succeed in their first venture. Having learned what not to do, they went on to build great products and services, and our investors received both return of capital and return on capital.
- Founders who have had successful exits are now seeding new-age entrepreneurs, sharing the insights and lessons from their own journeys.
This giving back is a great sign for the Indian ecosystem.
The call to action
Many Indian investors have already opened their purses to public market enterprises and opportunities. It is time to extend that to the startup ecosystem.
Allocate about 5% of your investible surplus to the Indian startup ecosystem.
- Come in with patient capital and a five-year view.
- Accept that some investments may go to zero, and that one may make up for the rest.
- Back founders, including those on their second attempt.
The seeds sown a decade ago have become the products and services we depend on today. The next decade’s category creators are being built right now, and they need investors who are willing to stay the course.
Author,
Brijesh Damodaran
