When Kallol Borah wrote in last week to introduce his latest venture, HeadStart Ventures, I was a bit confused. Borah also happens to be a co-founder of the HeadStart Network Foundation, a not-for-profit entity which hosts the popular startup showcase event HeadStart. The two, it turns out, are not related and there is some acrimony brewing on that front. But Borah’s new venture, whose primary activity will be to seed startups from a proposed Rs 25 crore angel fund, is inspired (quite literally) by his experiences with the other HeadStart (where he continues as director). Taking lessons from his past experiences, he aims to plug some of the “gaps in the startup and innovation ecosystem” with his angel fund.
Though it will compete with organized angel investor networks such as Mumbai Angels and Indian Angel Network, HeadStart Ventures’ functioning style will be a cross between an incubator and a venture capital firm. Individuals who want to invest in the fund will be required to make a minimum commitment of Rs 50 lakh. Each individual investor will become a limited partner in the fund. While Rs 25 crore is the target corpus for now, the founders have not set a hard cap yet on the final fund size. It will have an investment committee which will vet and close deals. This will be supported by an operations team which will be involved in activities such as workshops and managing mentors and industry partnerships. Borah and his co-founders will man the operations team and probably also be on the investment committee, though he says, “I think we will end up having a different set of people on the committee.”
The investment strategy is to park anywhere between Rs 20 lakh and Rs 2 crore per startup and for now, the focus will be on communications and technology startups. The fund will remain invested in a startup for 2-4 years. Each startup will have a mentor, who will be embedded in the startup after being identified and matched through an 8-day workshop (which begins in early August). “Apart from having relevant experience, mentors should be in a position to spend an hour per startup per day,” says Borah. This is usually the part that fails in any startup mentoring programme. Borah and his colleagues hope to address that problem by creating an incentive-linked mentoring programme. Each mentor will receive cash or stock or both in the startup that he/she mentors. However, this is not new. Bangalore-based Morpheus Venture Partners, for instance, takes a 7-10 per cent stake per company in lieu of mentoring. It has also recently raised a seed fund to invest in startups — read a WSJ-Venture Capital Dispatch post here.
The HeadStart Ventures team has several other value-added services planned for startups. However, much of what it outlines as differentiators — results-oriented mentoring, access to markets, etc. — is already out there in various forms. For instance, there are several successful entrepreneurs who already work closely with young entrepreneurs in these areas either on their own or through organized angel investor networks. HeadStart Ventures’ real value proposition lies in being able to consistently raise seed money in the long term and stay true to its intentions. It will be a tough fight, especially in India, but a worthy one.
