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Angels rush to invest in start-ups

The new gold rush for traditional stock market investors seems to be start-ups.

BS Reporter  |  New Delhi 

On Friday, The Economic Times said in a report, ‘Dalal St has a New Portfolio: Startups’: “Entry of regular stock market investors is fuelling a new frenzy in startup funding in the country.”

The report says: “In 2014-15, Mumbai Angels, a platform for angel investors, screened more than 500 business proposals — the highest it has handled in a year till now. About 10 per cent have received funding as against one or two per cent in the past.”
 
One of the top start-ups to attract Angel investment has been New Delhi-based POPxo, featured by Business Standard in its ‘Start-up Corner’ on April 16. Launched in March last year, the fashion and lifestyle content-creation company has attracted funding from a group of angel investors, including Google India head Rajan Anandan and CaratLane.com’s Mithun Sancheti.
 
Asked why she thought investors were so excited about start-ups, Priyanka Gill, the editor in chief and founder of POPxo, told Business Standard: “Investing in start-ups gives traditional investors exposure to one of the fastest-growing sectors of the Indian economy, and offers a mechanism for portfolio diversification. Many blue-chip companies of tomorrow are being built at the moment, with early-stage funding from investors willing to take short-term risk in exchange for extraordinary rewards in the longer term.”
 
One of the obvious reasons for investing in start-ups is low investment and high returns.
 
The ET report adds: “In less than two years, Oyo Rooms raised three more levels of funding — first, at Rs 6,000 a share, then at Rs 36,000 a share and the last one at Rs 1.10 lakh per share — multiplying the value of Damani’s (Anirudh, Anirudh Damani, “whose father Ashok holds trading rights on major stock exchanges in the country and runs a few proprietary trading books”) stake over 100 times.”
 
There are other examples, too. “Take the case of Purplle.com: the share has gained from Rs 2,000 a share in 2013 to Rs 6,000 a share currently. Zoomcar.com has already received institutional funding from Sequoia Capital at eight or 10 times valuation. Start-up watchers expect businesses like Inventure to gain 30-40 times in value over the next few years,” reads the ET article.
 
But investors have to be careful, too, while investing, because not all start-ups yield bumper results. According to some analysts, only about 10 per cent of start-ups in an investor’s portfolio will provide very high results, while 10 per cent will have to be written off.
 
The important thing is to choose the right idea.

First Published: Fri, May 15 2015. 17:29 IST
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