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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.

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