How Venture Catalysts democratized the start-up ecosystem in times of pandemic?

The world around us is in a phase of continuous transition, there is no double thought that nothing can be interpreted as final. In the context of the business world, in 2016, India was ranked 130e among the 189 countries indexed for the “ease of doing business” by the World Bank, 2016.

In late 2019, just before the global pandemic caused unprecedented disruption across all segments of business ecosystems, Venture Catalysts was the only Indian company to be named among the world’s top 10 active angel and seed-stage investors by the American business intelligence platform Crunchbase.

The world of incubators and the start-up ecosystem

Venture Catalysts is currently India’s leading integrated incubator operating with investment portfolios of around $150,000 to $1.5 million in early stage start-ups with the potential to create a significant value proposition over a period of time. . In venture capital parlance, it invests in pre-seed, seed and pre-Series A rounds and also continues to support its portfolio in subsequent rounds.

They have made 207 investments in 178 unique start-ups in 2021. He has had over 60 rounds of cash and markups to date with multiplier rates of up to 197X, and his combined portfolio valued at over $5 billion. Some of the biggest companies in its portfolio include BharatPe, Zingbus, HomeCapital, Beardo, SuprDaily, Fynd, Innov8, PeeSafe, IGP.com, Coutloot, and BlowHorn, among others.

According to the ecosystem, the angel investment landscape was restrictive when Dr. Apoorv Ranjan Sharma, the founder of Venture Catalysts, launched in the early 2000s, with few players and angel investors. They controlled like a premium club, with a limited number of members. Therefore, an urgent need has been felt to democratize the ecosystem of start-ups. Aligning with this idea, they have succeeded in democratizing the start-up ecosystem, with a network of more than 5000 angels in 35 odd cities in India, especially in Tier II and Tier III cities.

Early in its inception phase, the founding team of Venture Catalysts realized that more than two-thirds of start-ups were based in major Indian cities like Delhi, Hyderabad, Bangalore, Mumbai and Chennai, while Capital investment opportunities were greater in Tier II, Tier III cities and beyond.

By coming up with a model to think outside the box and set up facilitation centers in smaller towns with developing infrastructure capacities like Surat, Raipur, Dehradun, Kanpur and Lucknow, they started educating interested people ( with investment and risk-taking capabilities) on the high return opportunities available in seed investments for a favorable trajectory.

Locally elevated individual forays have always had a significant impact on the birth and dynamic behavioral development of the entrepreneurial ecosystem (EE). The characteristics and limits of any regional ecosystem are concomitant with the adaptive means of companies operating in the environment.

The role of business accelerators therefore requires a critical understanding within this contextual discussion. Engaging and open EA guided by actor-players nurtures innovation, entrepreneurship and local system dynamics and this is where Venture Catalysts launched.

Democratizing the start-up ecosystem in times of pandemic

Structured, planned and pan-regional cooperation ensured a sustainability component in the start-up through the pre-incubation process. Democratization would therefore create an opportunity for improved performance, adopting support and, therefore, stimulating competition among venture capitalists in the market by improvising the valuation of start-ups.

To our knowledge, given the necessary role of innovation and productive entrepreneurship in economic growth, successful start-ups are considered indispensable to a country’s economy. Companies that show high growth rates and manage to sustain that growth are especially valuable. When this happens, a country reaps many socio-economic benefits from its efforts, such as jobs and marketable innovations. For this reason, newly founded companies have attracted a lot of attention to discern the factors behind their emergence and the magic of their survival.

Angel investor groups routinely realize cleanup opportunities in Tier II, III cities and beyond. Democratization has created an ecosystem for more investors to explore this high yielding asset class. The transition of moving from major cities is an indicative sign for local start-ups to grab the available mileage points. They can plan their start-ups from their own cities and take advantage of low talent and operating costs compared to their metro peers, realizing profitable returns in a faster turnaround time.

Progression of the start-up ecosystem under the challenges

The volatility, uncertainty, complexity and ambiguity due to a relatively emerging and evolving entrepreneurial start-up ecosystem in Tier II, III cities and beyond are fraught with imminent risks. The most obvious can be understood in the context of the formation of new angel investors from these places. The need to clearly describe the risk associated with investments is crucial as uninformed angel investors can be consumed by dissatisfaction within themselves and as a result, the image of the company can be seriously damaged.

Venture Catalysts has collective decision-making embodied in its investment committee, with a mix of former VCs, ex-hedge fund owners, guys who left big start-ups, and people with a banking background. of investment. They assess over 700 transactions per month, 8,400 start-ups per year.

Venture Catalysts invests in 100-150 start-ups per year, with less than 2% of start-ups making money. At the idea stage, they are mainly interested in the capabilities of the founders, the attractiveness of the sectors and their ideas, among others. For the seed stage and the pre-series, A, the product-market fit becomes very important. But at the end of the day, founders are always a key criteria for any VC.

Executive pension plan

The proliferation of incubators and accelerators in Tier II, III cities and beyond is unprecedented. According to reports, the chances of getting funded are increased threefold for a startup after being part of an incubator or accelerator. India mirrors the trend that has unfolded in the world’s largest start-up nation, the United States. Nearly 63% of angel investors in the United States are based outside major cities, according to a study by the Angel Capital Association in America. Angel investors, the report points out, provide 90% of outside funding to start-ups – around $25 billion. 70,000 businesses per year.

Venture Catalysts finds itself in the thick of it, with a mammoth investment figure of over Rs. 500 crores alone and crossed the $1.2 billion mark in cumulative value for all portfolio companies. The ability to foresee a future arriving at the democratization of a closed start-up ecosystem has fueled the company’s thought process and for this, the team led by Dr. Sharma is worth mentioning. Venture Catalysts has a sub-10% mortality rate in its portfolio Today, they have taken pole position in start-up investment and incubation, democratizing the start-up ecosystem.


Written by Professor (Dr) Manoj Joshi.
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