Info-tech

New investors bat for stronger entrepreneur networks

Annapurani V Chennai | Updated on June 25, 2020 Published on June 25, 2020

New investors are consciously looking to invest in firms that can sustain beyond Covid-19. iStockphoto marrio31

Covid-19 has played havoc with the nascent Indian start-up ecosystem. Over the past couple of months, the funding that has gone into start-ups has dried up and firms have begun to see a decline in revenues. A recent Nasscom report titled ‘Reviving the Indian start-up engine during Covid-19’ showed that nearly 40 per cent start-ups have temporarily halted their operations or are in the process of closing down their business.

That being the case, new investors are consciously looking to invest in firms that can sustain beyond Covid-19. They are looking to fund start-ups in sectors that are showing green shoots during the crisis and ideas that are workable once the world goes back to normal.

These investment strategies apart, they are also keenly working towards creating resource pools and networks that will help founders of start-ups navigate through a crisis such as this pandemic, better.

Creating resource pools

For instance, She Capital, an early-stage fund that invests in women-led businesses, is building a resource network that will provide information about all the loans available for women entrepreneurs in the ecosystem.

“Each entrepreneur has different needs,” said Anisha Singh, its founding partner, adding, “So we are talking about which network is doing what, so that they can reach out to whichever specific network they want and be able to talk to them.” The fund is looking to launch this initiative by the end of this month.

“All entrepreneurs have realised that the challenges are different, but we are all going through the same phase and similar struggles,” Singh noted. “At this point, the only thing that is guiding us through is reaching out to each other and being able to look at support networks,” she added.

She Capital made its first investment in December last year, in snack food start-up Samosa Singh, data from Venture Intelligence, a firm that tracks private companies’ investments, financials and valuations, showed. Singh said the fund is also putting together a library of learning modules to help women founders understand start-up ecosystem concepts such as the difference between an accelerator and an incubator, at what stage founders can seek venture debt, and how does one value their company, among others.

Increased investor-founder interaction

Over the last three to four months, most investors have been closely focussing on their investee companies and helping them see through the crisis.

Vinod Shankar, co-founder, Java Capital, an investment syndicate that funds start-ups in the pre-seed and seed stages, said that because of the pace at which consumers and businesses are getting affected due to the crisis, more investor-founder interaction is happening now, compared to the past.

According to the Nasscom report, to deal with the cash crunch, nearly 34 per cent start-ups have been reaching out for funding from existing investors, and 22 per cent from new ones. Experts said that apart from funding, investors have also been helping entrepreneurs understand consumer behaviour, build new partnerships, and find prospective clients, among others.

Case in point, Sauce.vc, an early-stage venture capital fund, over the past couple of months, has been providing its investee companies with insights on the changing consumer behaviour based on the feedback they receive from their consumer panel of about 400 consumers from across the country.

The fund has also been helping them with perspectives from industry experts in India and abroad to understand long-term market reactions. Sauce.vc primarily invests in consumer brands and made its first investment in March last year, Venture Intelligence data showed. It has funded nine companies since, including fresh food store Gobbly and plug-and-play e-commerce platform Near.Store.

“The best thing which I see is to create a community which is strong and positive between founders themselves,” said Sauce.vc founder Manu Chandra. “There’s a lot you can learn from other start-ups, because they’re all sort of walking the same journey. You don’t need to reinvent the wheel or commit the same errors. And somewhere, we as a fund facilitate that because we get the learnings from all of these start-ups and pass it on to whoever we invest in,” he added.

Published on June 25, 2020
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