Exits abound for Indian angel investment platforms despite funding slowdown

As venture capital funding slows down in India, early-stage investors find solace in lucrative exits, bolstering the credibility and appeal of the angel investment asset class

Even as the Indian startup ecosystem faces a decline in venture capital funding, a phenomenon dubbed the "funding winter," earlier bets by angel investors are now paying off.

Several angel investment platforms have recorded noteworthy early-stage exits this year. Gurugram-based Inflection Point Ventures (IPV) is a case in point. It has demonstrated an impressive exit performance this year, most recently with its exit from the business-to-business e-commerce startup Koovers in September. IPV realised a 2.1-fold month-on-month return at an internal rate of return (IRR) of 47 per cent within just 22 months of investment. The exit followed Koovers' acquisition by German automotive giant Schaeffler India for over Rs 142 crore.

So far in 2023, IPV has logged 14 exits, 11 of which are already closed with an average IRR of 61 per cent. The remaining three are nearing closure,  Mitesh Shah, co-founder of IPV, told Business Standard. “Comparatively, the previous year marked a total of 12 successful exits. As we navigate through 2023, it's important to note that the year is still ongoing, and we've already closed 11 exits, with 3 more in the final stages of closure so far,” he said.

IPV's portfolio includes successful exits from startups like BluSmart, Otipy, Stage, Kazam, and Buyofuel. The platform generated an IRR of 226 per cent on a partial exit from Buyofuel and 186 per cent IRR on partial exit from Kazam. IPV has also partially exited from companies like peAR, Cercle X, EnsuredIT, LoanKuber, Raaho and Streak during the year, generating an average IRR of 162 per cent. Launched in 2018 by finance and private equity professionals Vinay Bansal, Ankur Mittal, and Mitesh Shah, IPV has so far invested over Rs 600 crore in more than 175 startups. It now has a network of over 8,600 CXOs, HNIs, and professionals as investors.

However, IPV is not alone in offering its investors lucrative exits. India Angel Network (IAN), a pioneering network of angel investors, has also seen several exits this year. Through its IAN Fund I, valued at Rs 375 crore, the platform recently divested partially from Woodenstreet, providing a 10-fold return at an IRR of 105 per cent. This was in addition to a partial exit from electric vehicle startup Zypp, which yielded a 6.5-fold return with an 88 per cent IRR.

Padmaja Ruparel, co-founder, IAN and founding partner, IAN Fund I, expects more such exits to follow.

“We should see some more exits from our Fund I before the end of this fiscal. And we want to return funds back to the investors. We are still bullish on Woodenstreet and hence the partial exit,” she said.

Ruparel also agreed that, with the funding winter, the “foam and froth” has been reduced which, in turn, has allowed investors to focus on good companies. “I believe that good companies will continue to attract new investors. These are companies that are focused on topline and bottom line and not obsessed with valuations,” she added.

In 2022, IAN made as many as 13 exits from its portfolio companies. Against an investment of Rs. 28 crores in these startups, IAN gave cash exits of almost four-times, and investors continued to hold shares worth Rs. 180 crores. It invested in 52 companies last year.

Mumbai-based We Founder Circle (WFC), another early-stage investment platform, has also seen positive results. Established in 2020, WFC has completed 104 deals involving more than 80 startups, including 71 in 2022 alone.

As angel investments in India continue to attract interest, the asset class is poised for further growth. “Exits help provide liquidity in to the asset class and as more wealth gets built from angel investments, it will further add to the credibility of this asset class, thus appealing to a wider investor base,” said Ankur Mittal, co-founder, IPV.