Angel platform IPV offers retail investors a play in startup funding space

Today Angel platform IPV has close to 7,000 investors, over 4,000 of whom actively invest in the Indian startup ecosystem. These investors, largely Indian diaspora, come from 48 countries

Why should investments in the fast growing Indian startup ecosystem be the prerogative of a handful of global venture capitalists and private equity players? Why can't a normal Indian professional who earns a decent income be able to participate in this growth story? Also, how does one ensure these retail investors not only get access to the best founders but also maximise their investments? Or how can professionals with good networks and expertise share their insights with the founder ecosystem?

These and many such questions were what made Vinay Bansal, Ankur Mittal, and Mitesh Shah create India’s largest angel investing platform. Today the platform has an angel strength of close to 7,000 with more than 4,000 as active investors who invest regularly in the Indian startup ecosystem. These investors, largely Indian diaspora, come from 48 countries and in the recent times several non-Indian professionals have also used IPV platform to invest. IPV has invested so far Rs 400 crore across over 125 deals.
 

Asked if the platform will cap the number of investors, Ankur Mittal, co-founder and COO, IPV shared there is no need to have one. “Today most of our investors come from tier-1 cities or overseas, but in the next few years, we will also start getting into the tier-3 and 4 towns which have a lot of capital. We also getting a lot of queries from the new generation of family-run businesses to invest. A lot of family offices are starting to join our platform, so I don't see any ceiling today on the number at which IPV can grow,” explains Mittal.

Mittal also believes that angel investing if done well can be a good and low risk investment opportunity. “There are two things that IPV believes are of significance, upfront due diligence, and stronger post investment support. Angel investment really has the potential to become a very good viable asset class over the next 10 to 15 years and then continue forward. And that is the opportunity we want to bring to more people.” Added Mittal.

Vinay Bansal, founder and CEO, IPV says that the vision of IPV is to democratize angel investment. He believes that any professional who is even at their early stage in career should be able to take one or two investments in startups. “India today has a total of 70-80 million taxpayers, including individual and corporate. And if we have just about 6,000-7,000 investors, the headroom for growth is immense,” said Bansal.

What makes IPV different from several other angel platforms, apart from the number of investors?  Mittal says the cheque size each investor gives to make a direct investment to get place on the cap table is still the lowest. “one can invest a minimum of Rs 2.5 lakh per startup per investor, which is still the lowest compared to any other platform. Investors can also give smaller cheque sizes too but we do not recommend that as it impacts the returns they get,” added Mittal.
 

But IPV wants to go beyond the usual HNI as an investor class and is evaluating alternative models to see how a larger segment of professionals can get into investing in startups. “For instance, a lot of my employees also want to invest but can’t. One reason is the net worth, the other is that some simply cannot sign off a Rs 2.5 lakh cheque. But then here is an investment class that is being kept away. So can we create a model which adheres to the existing laws but still allows these people to invest. I think we may in the process solve this problem for many,” he added.

But IPV is clear about one thing--it does not want to build hype on the returns or get people who do not understand their responsibility as well.

One interesting number that Bansal shared is that though the base of investors at IPV is close to 7,000 it is only 4,000 that invest regularly. How do they make sure this number goes up? “The answer to that is exits. IPV as a platform is focused on generating exits for our investors. Rather, we make sure that some form of liquidity is generated for investors because that is their biggest concern as well," Bansal says.

"On average, people have at least doubled their money every year for the last 4-5 years, which means if somebody put up Rs 2.5 lakh four years back with us, that has gone at least by the 5x. That's the kind of return that has happened. But if you look at the spectrum, we have had exit like 80x in Bharatpe, we have had an exit of 8x to 9x in a company and recently exited a company that gave us 26x and we also have a few companies that did not give anything. But altogether we have had an IRR of 100 per cent every year,” explains Bansal.
 

Both Bansal and Mittal are not too concerned with the global slowing down of investments or even the way stock markets have reacted, “Our investor group are professionals and CXO level people, so our cash flows are constant. We will remain disciplined and focused. In 2020 when investors held back we got immense opportunity to invest and we cut many cheques. Our strategy will be to focus and be disciplined,” said Bansal.

Mittal says the focus will be on due diligence. “We may be cutting more checks than last year or the year before that. But behind that we have also strengthened our team. Two years back we had a team of 15, today we have a team of over 100. As an investor you will always find us cautious even though you will see the deal flow higher,” he added.

Physis Capital

Earlier this year IPV also launched Physis Capital, which will invest in pre-series A to series B. Physis Capital which received Sebi approval a few weeks ago, is raising $50 million with a green shoe option of $25 million. The trio, Bansal, Mittal and Shah continue to be partners in this as well. 

“The cheque size of the initial investment ranges from $2-5 million. And if it is a pre series A or series A or we are coming back in then it can go up to $5-$6 million as well,” said Mittal, who is partner at Physis Capital.

The success of the IPV platform and the need to be invested in companies for longer time is what propelled the founder of IPV to launch Physis Capital. 

“We come in at an early stage in a startup, we saw that as our investee firms grew they would need larger pool of capital, but then that came in from either a VC or a PE player, and we do not participate in those rounds, at least to keep our equity intact, but then we start becoming smaller in terms of the percentage holding, which then impacts our ability to stay longer and give better returns or long term returns to existing investors,” explained Mittal.

The fund also allows them to participate in a wider network of startups. “The other piece was that you know, there are companies which could not come to us earlier because their capital requirements are higher and now they're raising series B or C and we like those companies as well as than we would like to partner in their growth and therefore play there as well.”