New Delhi: Contrary to the trend of the start-up and unicorn space being dominated by graduates from the Indian Institutes of Management or Indian Institutes of Technology (IIMs or IITs), the overwhelming majority of ‘angels’ who invest in these fledgling companies have never studied in these institutes, analysis of a sample of data on these investors by ThePrint has found.
An analysis of over 7,900 angel investors in India reveals that nearly 79 per cent of them have never studied in IITs or IIMs.
An angel investor is an individual who invests in business usually in exchange for convertible debt or ownership equity. According to a media report, in 2022 there were more than 26,000 such investors in India, some of whom are part of different angel networks like the Indian Angel Network, Chennai Angels, Hyderabad Angels and Mumbai Angels, among others.
Analysis of data on angel investors at YNOS, a platform providing intelligence on start-ups, angel investors and Venture Capitalists (VCs), found that of the 7,950 angel investors listed on the platform, only 1,650 are alumni of IITs and IIMs. The remaining 6,300 are from non-IIT/IIM backgrounds, including 2,786 people (35 per cent) who have studied abroad at either undergraduate or postgraduate level or both.
The other popular institutions yielding a substantial crop of angel investors include Mumbai University (605) and Delhi University (510). The data also includes alumni from University of Madras, Anna University and Savitribai Phule Pune University.
Experts in the field say that the growth in the number of angel investors from diverse educational backgrounds is an evolution that has happened over the years because of more awareness about investing and various platforms available for angel investors in India.
“About a decade ago, people would have needed a kind of pedigree or brand to succeed in the start-up space but that is no longer the case,” said Prashanth Prakash, partner at venture capital (VC) firm Accel. “The diversity among angel investors shows that the space has become a lot more open and expanded to giving opportunities beyond a select group.”
Also Read: Why India’s Unicorn population hit a peak & dropped off in 2022
‘Aam Aadmi Angels’
Experts said that being an angel investor is very different from working in a corporate set up and hence the kind of skills you need are also different, which is why this data is not very unexpected.
“You will find two types of angel investors. There are those who have a corporate background with degrees from IIMs and other B-schools. These people are the ones who give up their corporate jobs and become investors. The other type are those coming from business families who have family wealth to invest. They won’t necessarily have gone to a B-school or studied at an IIT or IIM. Both these kinds are important in the entrepreneurship space because they bring in a different kind of experience with them,” said Sharad Sharma, co-founder, iSPIRT Foundation, a think-tank that works with start-ups.
“The kind of experience you need for a corporate job and for being an entrepreneur is very different, which is why you see such diversity in the profiles,” he added.
According to Dhruv Nath, director at Lead Angels, qualification does not really matter for one to be an angel investor. “A lot of chartered accountants are investors, a lot of MBAs, engineers and doctors are also doing that. In fact, recently I have seen that a lot of individuals from business families, second generation, are becoming investors. So qualification is not really a bar according to me,” he said.
He added that in recent times the idea of being an angel investor has appealed to even those he calls “Aam-Aadmi angel”. “One does not need to be rich to be an angel nowadays. An individual can put in Rs 2-3 lakh and many individuals come together to be a part of an angel network and that is how they can become investors. This is the person I call an Aam-Aadmi angel,” he added.
‘Angel investors work differently in India’
Speaking to ThePrint on condition of anonymity, a former start-up founder now back in the corporate world, questioned the entire idea of angel investors and the way they work in India. He said that it is very different from the way Silicon valley investors work.
“Unlike the Silicon Valley, where angels are those who have built ventures, raised capital and have had exits, many of the so-called investors in India are traditional business owners who have been paying the stock market and want to get in on the start-up action,” he said.
“However, the terms they usually offer founders are very restrictive and one-sided. When we were trying to raise for our e-commerce venture almost a decade ago, an offline retailer offered us Rs 60 lakh for a 60 per cent stake in the company and didn’t even want the founders to take a sustenance salary from the venture. They will usually ask for board seats, majority stake, and veto on key decisions,” he added. “For many of them (investors), it’s like an extension of their core business, and they consider the investment as debt, instead of the risk associated with an equity investment.”
Nath, though, disagreed. “There are all kinds of people in a space, let us not generalise,” he said.
Areas of investment
When it comes to the areas of investment, a majority of the investors — 3,732 — have invested in IT, computing, business support and retail. Within this category, most of them — 2,232 — have invested with computer related start-ups.
For example, in 2022, Lenskart founder Peyush Bansal invested in 15 companies. The focus areas of his investment were artificial intelligence (AI) and assistive technology, among others. Some of his investments, according to YNOS, include internet services platform Proxgy and SaaS-based analytics company inFeedo.
According to experts, the number of angel investors in India is only going to increase with the number of start-ups going up. As per a report, the number of start-ups in India have gone up from 471 in 2016 to 72,933 as of June 2022.
(Edited by Geethalakshmi Ramanathan)
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