NEW DELHI: A small but growing clutch of angel investors from India is picking bets in the lucrative startup market in the US lured by the promise of seeding high technology ventures that can offer disproportionate returns.
Some of these investors — enthused by the big returns earned from pre-IPO secondary bids in big-name startups like Pinterest and Dropbox — are laying out fresh bets ranging from $25,000 to $150,000 in ventures focused on specialised sectors such as drone logistics, analytics, automation software, industrial and construction technology.
“In the US we are a lot more open to companies that are going after a larger play,” said Anuj Munot.
‘Deeply Satisfying Returns’
“It’s a market that doesn’t punish you that much for slow growth, as India does. There’s a lot more patience,” said Munot, whose investments in social media platform Pinterest and cloud storage and collaboration company Dropbox earned what he termed as “deeply satisfying” returns.
Mumbai-based investor Anirudh Damani, who too has backed a slew of American startups, said the trick, once the initial investment is made, is to “try and maintain the cheque size over the next two rounds, or increase it, depending on the company.” “The learning from investing in the US has been on how to be a follow-on investor,” he said.
Munot, Damani and Abhijeet Birewar, another India-based angel investor, utilise a combination of existing investment platforms such as Micro-Ventures and Israel-based OurCrowd, or leverage existing networks of their own to make angel investments in the US.
These angel investors now count in their portfolios some of America’s most watched startups such as Palantir Technologies, the secretive data mining company cofounded by Peter Thiel, space transport company SpaceX, founded by Elon Musk, and Virgin Hyperloop One, the transportation technology company. Angel investments such as these now count for anywhere between a quarter to almost the entirety of their overall portfolio, they said.
Thirty-six-year-old Damani’s US-based investments are made from his family office Artha India Ventures, which has a strong focus on the renewables sector, but was also one of the early investors in SoftBank-backed hospitality chain Oyo. The Austin College alum also operates a $30 million early-stage fund, which invests across the hospitality, travel, fintech, data analytics, big data, ecommerce, artificial intelligence and SaaS (software as a service) sectors.
“Majority of my investments are outside of India. In the domain in which I primarily invest — industrial technology — the quality of IP (intellectual property) coming out of the US is possibly the most cutting edge in the world. If you look at the pure sciences, the ecosystem there is extremely well established,” said Birewar, who also credits the deep secondary market in countries like the US or Israel as a big incentive for angel investors.
“Even for a modestly successful company, there are enough buyers. That makes markets such as US and Israel far more attractive,” said Birewar, who is the managing director of specialty chemicals company Sustainable Sciences, and an alum of Iowa State University.
India-based angels have also backed up and coming ventures such as app analytics platform App Annie, drone logistics network Matternet, automation software company Puppet and construction technology startup Icon, among others.
But it is not always smooth sailing as both Munot and Damani can attest to.
The two Mumbai-based angel investors were part of a select list of people who had participated in ride-hailing major Lyft’s funding round in June 2018, prior to its IPO.
But the San Francisco-headquartered Lyft saw its stock price plunging soon after the IPO, hitting a low of $37.07 in October, down from its debut price of $72.
Given the norm of a six-month lock-in period, Damani and Munot were only able to exit their positions once the share price had already started tumbling.
And then there have been misses as well. Damani had the opportunity to invest in Uber and Airbnb, but decided to walk away, a decision he puts down to the sobering Lyft experience.
“I think it was how the Lyft investment panned out. There was a time when we felt that the IPO was going to be delayed. Later, when the stock went up initially, we weren’t able to sell, or hedge our position at the time,” Damani said.
They do warn against making quick exits though. “It’s not about earning a quick buck, and moving onto the next investment… And don’t get too excited by the big names. Uniqueness, scalability and solid financials are still the metrics to swear by,” Munot said.