Rich people from around the world have invested more than Rs 1,200 cr in Indian startups

The startup culture is growing in India as high networth individuals (HNIs) have invested more than Rs 1,200 crore into venture capital funds focused on helping early-stage entrepreneurs.

These investments have flowed in over the past year into these venture capital funds - Orios Venture Partners, Zodius Capital, Your-Nest Angel, Kalaari Capital and Blume Ventures - which have together raised Rs 4,360 crore, data shared by these funds with the Economic Times reveal.

These funds have the mandate to invest in app-makers, radio taxi companies, food-ordering platforms and healthcare aggregators and such Internet businesses and other startups. In some funds, over 50% of the corpus raised has come in from high networth individuals.

The trend to invest in startups started with top executives and businessmen. "People who are exposed to various asset classes have now begun seeing value in venture funds," says Sunil Goyal, CEO of YourNest Angel Fund.

He said: “Even traditionally wealthy investors are warming up to the idea of investing in startup funds."

These numbers are in line with an ET CXO poll on startup investing published on Monday. Over 60% of the 100-plus CXOs polled by ET said they had already invested a portion of their wealth in startups. Another 25% expressed interest in such investments in the future.

· Low awareness level
"The HNI response to startup funds has been pretty good, but awareness level is still low," says Rehan Yar Khan, founder-partner at Orios Venture Partners. These funds, Khan says, are not yet as popular as real estate or equity funds.
Orios Venture mobilised close to Rs 150 crore from HNIs in its earlier fund, which closed in August 2014. It is now raising Rs 1,200-crore fund and expects to get Rs 300 crore from rich Indian investors.
Zodius Capital recently raised over 45% of its Rs 700-crore fund from rich domestic investors.

· Ticket sizes have grown
Individual ticket sizes have also grown over the past few months with average investment ticket sizes of Rs 10-20 crore. Wealth managers seek larger investments as these funds have a high failure rate. A portfolio of 20 companies may only have 3-4 multi-baggers (yielding returns of over 50 times), the rest being average performers and many turning plain duds.

Wealth managers say funds will have to generate gross returns in excess of 20 per cent to make a meaningful case. "We'll have to wait and see how the first batch of funds delivers in terms of returns. Vintage funds in this segment will set the tone for future investments in startups," said Karthik Reddy, managing partner at Blume Ventures.

(Image: Indiatimes)