Bangalore based Let’sVenture, an online angel fundraising platform for startups founded last year, raised Rs 4 crore ($682,632) last month from a group of 21 investors as part of its first round of funding. What’s interesting about the round was the investors involved. Early stage venture capital firm Accel Partners came on board as the first institutional investor to back the concept. Individual investors who joined Accel in the round included prominent angels such as InMobi founder Naveen Tewari, Eka Software founder Manav Garg, prolific angel investor Sunil Kalra, Google India head Rajan Anandan, Indus Net Technologies founder Abhishek Rungta, and iSpirit co-founder Sharad Sharma.
We chatted with Manish Singhal, one of Let’sVenture’s three founders, on the platform’s model, on why it is different from crowdfunding, and what Accel’s investment means for the future of the platform. Edited excerpts:
You joke that the idea for Let’sVenture wasn’t born in a college dorm or over a mug of beer. So, what’s the backstory?
The germ of the idea came from Shanti (Shanti Mohan, formerly with Hewlett-Packard and founder of Ionic Microsystems) who was working with non-profits before starting LetsVenture. She was helping some of those profits to raise funds and started thinking of a platform to make that easier. I had in the meantime been working in the ecosystem for the past 4 years after selling my own startup (Singhal was part of the core team at Sling Media which was sold to Echostar Corporation). In that course, I began to see that the ecosystem was broken. Why is it that just 200-odd startups get angel funded every year? The three of us started talking about how to fix the problem and it took a few weeks for the model to come together.
People have started referring to you as India’s AngelList. Was that a model you were trying to replicate?
Honestly, when we started up we were not conscious of AngelList. We didn’t really do any comparative market study. The idea for the platform came out our individual passions to fix a pertinent problem in the ecosystem. If you step back and look at the market, there are currently 500-700 active angel investors in India. Compare that with the US market, which has a quarter million active and accredited angels. Potentially, the number of individuals who would qualify as angel investors here would run into thousands. Yet, only 200-odd startups get funded every year.
The existing offline platforms that facilitate angel investing have limited outreach. Entities such as Indian Angel Network (IAN) and Mumbai Angels have 200-250 members and manage to do just about a dozen deals per year. The only way to plug this gap is through an online platform that is able to break down geographic barriers and widen the scope of discovery.
Is there a minimum investment criteria for angels who want to invest through the platform?
Yes. When we onboard an angel investor we ensure that he or she has the ability to commit a Rs 40-50 lakh corpus over a 2-3 year period. Before we onboard angels, we have detailed discussions with them to assess whether they have that kind of corpus and appetite. This is important because startups have a high failure rate. Globally, only 25 per cent of all angel investments return profits. Therefore, angels on the platform need to understand that in order to make profitable returns they must do at least 10-12 deals, committing Rs 5-7 lakh per deal. Over time, many of those deals may fail but some will turn into very successful companies and deliver returns on the entire invested corpus. This is how the venture capital system works as well.
Where are you right now by the numbers?
We now have 420 angel investors from across 16 countries. Apart from angel investors, there are 18 institutional members, which is a mix of venture capital firms, angel networks, incubators and accelerators. More than 800 startups with funding requirements are on the platform.
In terms of deals, we have several in the pipeline. We’ve only announced three so far — Bluegape, Frrole and our own funding. We don’t announce a deal till the money is in the bank. Our target is to do 35-40 deals in the first year of operations.
“Getting Accel on board as an investor is something that I view as critical for the platform. We hope to bring more institutional investors like Accel on board.”
Tell us about your own funding. How did you get Accel Partners on board? How does it help you?
We raised the majority of our own funding on the Let’sVenture platform. We could have raised the entire amount through the platform. But getting Accel on board as an investor is something that I view as critical for the platform. One, it gives us access to their expertise and resources on areas such as due diligence. Two, venture capital firms play a very important role in the ecosystem in terms of follow-on funding. Three, it gives us a certain credibility in the ecosystem. Accel is a very respected brand in the startup space, both here and overseas. We hope to bring more institutional investors like Accel on board.
But doesn’t Accel’s involvement as an investor give it unfair advantage over other venture capital firms using the network?
No. Accel does not get access to any proprietary deal flow information because it is an investor in Let’sVenture. It has a login like any other venture capital firm that is a member on the platform.
How are you different from a crowdfunding platform?
In crowdfunding, anybody can be an investor. There is no accreditation. Also, in crowdfunding the investor does not get equity. He or she gets an incentive or a discount on the product or project that is being funded. On Let’sVenture, you cannot see any information about a startup till you are onboarded as an accredited investor. We are more like a LinkedIn for startups. There are no transactions done through the platform. We only facilitate. The actual transaction takes place offline.
Is there a minimum ticket size that a startups must raise on the platform?
Typically, startups that come to us have a minimum fundraising requirement of Rs 10 lakh. However, we don’t set any specific minimum ticket size.