Entrepreneurs in India’s nascent but fast growing startup ecosystem are realizing that getting an early investor who appreciates their idea is increasingly becoming difficult. Sometimes it’s even tougher than finding their first paying customer.
While there are active angel networks in the country, the early money and guidance is never enough for startups attempting to get the best deals on funding and access to newer markets.
Globevestor, an equity crowdfunding site launched in February this year, aims to change that by helping investors in the U.S. connect with entrepreneurs looking to raise money in the emerging markets — very similar to how a Funderclub or an AngelList would work, except that it’s cross-border and the focus is only on the developing world.
“Our investment thesis revolves around a strong focus on India and other emerging markets – we want to work with startups that are primarily based in those countries or who are tackling problems local to those markets,” Raju P.N., co-founder of Globevestor said in an interview. The other founder is Ankur Shrivastava, an IIT engineer turned management consultant.
Globevestor is backed by Boost VC, Bill Draper and Tim Draper among several investors.
“We have begun working with a few exciting early-stage Indian startups (like Zoom, Flinto, Blowhorn) that are or will soon be in the process of raising money. We have mandates to help raise nearly $500,000 for 5 startups over the next 3 months through our platform and will be co-investing alongside investors like Empire Angels, Tim Draper and GSF,” added Raju.
Once accredited, investors are allowed to browse through startup pitches online that are pre-screened, and participate in focused investing rounds that generates separate funds for each startup. The investments can start with as little as $1k in pre-screened startups.
For its part, Globevestor is already seeing interest from some of the big-name Silicon Valley investors such as Tim Draper who believe the platform will have a long-term impact on the Indian startup ecosystem over next decade. More importantly, investors such as Draper say the platform will help them invest in startups based in India, something they would normally avoid given the country’s existing complex venture investing rules.
“Indian entrepreneurs have been suffering recently because global investors have discovered India’s inefficient (somewhat corrupt) government and poor incentive systems. Globevestor can offer hope in cutting through red tape and even the playing field,” Draper said in an interview.
To be sure, the idea of building an online platform that allows hassle-free, cross-border investment opportunities for startups and investors is nothing new. While OurCrowd connects entrepreneurs in Israel with potential accredited investors in the U.S., Seedrs enables a similar platform for the ecosystem across Europe.
In India, Let’sVenture is another online platform for angel investing that’s beginning to gain traction by disrupting existing angel groups through a much more transparent and convenient online platform.
India has an existing and quite active network of angel investors. For instance, in the last two years the Indian Angel Network (IAN) has invested around a million dollars a month in almost 30 companies, which makes over a deal a month. IAN Incubator’s 50 companies have either become revenue earning or raised seed funding within 6 to 9 months of incubation, according to the network.
But existing angel investors in the country still leave a huge gap to be filled for Indian startups looking for funders who have risk appetite demonstrated in the Silicon Valley.
Graham Gullans, the founder of New York-based angel group Empire Angels, says there’s huge risk appetite to find companies with business models that mirror large successes in the developed world.
“The startup landscape in India has grown precipitously in the past two years, making it attractive for capital that wants to access a large market ripe for innovation,” Gullans said.
Earlier this week, Globevestor became a member of the Angel Capital Association, making it the fifth accredited platform member after AngelList, SeedInvest, FundersCub and DreamFunded.
The opportunity is huge for facilitating cross-border early stage investments into merging markets, especially considering the international diaspora controlling nearly $2 trillion in wealth and over $600 billion in savings in the U.S. alone. According to recent reports by the World Bank, the International Finance Corporation (IFC) and infoDev, this could be a $30 billion opportunity by 2025.
The opportunity gets even bigger since most of the VC funds are focused on late-stage investments and a large majority of them get most of their money from limited partners in the US and other developed countries.
“We want to focus on early-stage investments and allowing small/mid-wealth accredited investors the opportunity to invest in India’s growth story (by writing checks as small as $1000),” Raju said.
There are about 9 million accredited investors in the US and only about 250,000 of them do active angel investing, according to Globevestor.
“There is, therefore, an immense potential for online venture capital and equity crowdfunding if barriers to investing are removed for those 8 million+ accredited investors (a decent number of whom are Indian diaspora) who do not currently invest in startups,” Raju added.
Despite its obvious advantages, online angel investing does come with several limitations and it cannot substitute high level of due diligence that potential investors conduct through one-on-one meetings.
“Online equity fundraising platforms should not replace direct dialogue with the founders with early stage funds, they should merely serve as a guide to finding the hottest and best companies and globevestor has achieved this for emerging markets,” Gullans said.