Zomato’s initial public offering which has just been concluded (IPO) subscribe to 38.25 times. Established in 2008, the food delivery company became a household name for years. The IPO is to raise Rs 9,375 Crore. Unlike most companies that hit the IPO market, Zomato had not produced profits. But it didn’t matter to investors and they gave a big thumb until the offer was.
It includes 10 top private internet companies to be registered, according to the AllianCebernstein 2020 report. If investing in the start-up excites you, despite its weak finance, hoping that the company will eventually make money by disrupting the existing market, then there is a way to do it. You can invest before these companies go public.
Bridge the gap between investors and startup
The Angel Investment Platform and Alternative Investment Fund (AIF), registered with a market regulator Sebi, are two broad lines to invest in startup. Your choice depends on how much money you are willing to use and how early the company’s life cycle you want to invest.
Angel network works on a smaller, relative scale. They are basically platforms where startups collect money from investors. “We made a match,” said Shanti Mohan, founder, Letsvenure, an angel investment network platform. Mohan said that the platform had investors from 55 countries were willing to fundup. When a startup reached Letsventure to raise money, the platform examined the proposal, conducting a comprehensive background examination of the founders and assessing business viability. Then, call the starting tone. Mohan said the platform was at least 10 pitch calls a week. Founders who are eager to provide detailed presentations to prospective investors and try to convince them about their business ideas. If investors like that idea, they make money.
For those who want to invest in a more established startup or rely on fund managers to conduct a thorough test, AIF is a way to go. Hunting professional fund managers for companies that are looking for capital to grow. But unlike mutual funds investing in companies listed where all company information is in the public domain, Startup is not registered. Therefore, Sebi has improved minimum investment in AIF at Rs 1 Crore. In addition to the initial startup, different AIF can also invest in private equity (investing in a distant stage in the initial cycle cycle when profitability may have been achieved), small & medium enterprises, alternative reality strategies, and so on.
“Individual Networth Height (HNI) does not want to be personally involved in vetting examination. They are not consistent investors in the eco-up system, but they do not want to miss opportunities. This investor prefers to invest in AIF,” said Rohan Paranjpey, executive director – Alternative investment at Waterfield Advisors, a multi-family office office. Paranajpey, who was previously used to work in Blume Ventures – a company that specializes in initial business investment – now advises the client’s family office advisor WATERField on start-up investment.
The angel investment network, on the other hand, calls for smaller investment amount because they focus on initial funding. Mohan said investors on the platform got an investment starting from Rs 2-2.5 lakh. But one startup finally raised at least around Rs 3-5 Crore in one round, often from the investor consortium.
Full startup with risk
If the success of IPO Zomato sounds tempted to look for the next start-up, Mohan rang the alarm bell. “You should not invest in the initial request, when heading to IPO. It might not happen for some time. Partly because for years, the beginner company will, usually, showing losses before showing exponential growth,” he said. Private investors came for growth, said Mohan, while public investors invested in profitability.
Padmaja Ruparel, Co-Founder of Indian Angel Network, said that this is a high-risk investment and high-return. “Startup has no history; they only have future projections. There is no data, there are no analyst reports unlike the registered companies. There are art and science to evaluate whether these companies will do well in the future. It is very important for investors To invest in startup because this asset grade gives a kicker to a portfolio. However, high return investment also brings high risk and the only way to reduce the failure rate is to build a multipong risk mitigation strategy, “Rupael said. Kunal Bajaj, Head of the Capital Market, Blume Ventures said that most of the return of start-up investment came from a handful of companies. The majority of companies in investor portfolios are bound to medium or failure. “Don’t be surprised if you invest in only two companies, and both companies fail,” he said.
That is why Sebi only mandates only qualified investors to invest in the risk of “angel funds” which are relatively higher (the stage is very early). Under the Broad Venture Fund AIF category can launch this special fund that invests in the company early. Only individual investors who have a net tangible asset of at least Rs 2 Crores and have direct experience with a professional startup or professional experience of senior levels can invest in such “angel funds”. However, there are no such limits on various angel network platforms. The AIF angel registered Sebi arrived at the minimum investment ticket size of Rs 25 Lakh.
Should you invest in startup?
Munish Randev, founder and CEO, Cervin Family Office & Advisors say that if you suddenly think of investing in startup, after seeing the IPO in a rush of Zomato, “then avoid investing for fear of getting out.” He said that IPOs like Zomato were unusual; This is a loss making company. Bets are in futuristic events. He said that if you want to invest in a startup towards the IPO, it is best to choose to choose AIF Pre-IPO. “Such funds invest in companies will go for IPO in the near future; there must be sure,” he added.
To be sure, you don’t need to wait for an IPO to sell your shares in start-up. The Angel and AIF network platform also suggested that investors take their money from the table if they want to maintain profits. “In addition to bringing closer initial founders and investors, the venture capital fund manager and an angel investment platform as we also startup mentors and work with them. This allows us to have a better understanding of the company and also provide outgoing calls to our investors, “Rupael said.
It doesn’t make start-up invest less risky. Retail investors must stay away. Only those who have inner bags, high-risk appetite must consider startup investment. This club, said Paranajpey, is a small world. “You need to consistently put money on the table to be able to see a good proposal. You must be an active investor. Only by sitting on side lines, you cannot be present in circles,” he said.
Who just raised the stake.
