ANGELS HOLD STEADY AMID FUNDING WINTER

Angel investors bet on early stage start-ups, crack the unicorn code, defying funding slowdown.

- Rukmini Rao

“YEH SAB DOGLAPAN HAIN” (all these are double standards) or “Zara saral tareeke sey samjhayiye” (please explain in a simpler language) — dialogues such as these from business reality show Shark Tank India have been as popular as those from some blockbuster movies, resulting in countless memes. But what it has also done is to give a sneak peek into the process of raising money for business/business ideas and the concept of angel investment itself, which till sometime ago was a business jargon.

Angel investment today has turned out to be a glamorous asset class that individuals, not just the ultra wealthy, have their sights on.

The Indian start-up ecosystem, which saw easy money flow till 2021, has been in a funding lull since the last 12-18 months. According to a recent report by global consulting giant PwC, Indian start-up funding stood at $24 billion in 2022, compared with $35 billion in 2021, a 33% decline year-on-year. Early stage deals, however, bucked the trend, accounting for over 60% in volume in both years. Early stage funding was 12% of total funding in 2022, against 7% in 2021, the report says.

Since early 2000, Indian angel investors have been playing a key role in these early stage deals, which are a result of equity dilution at seed or preseed stage. And despite private equity and venture capital money becoming sparser, seed-stage investments have been consistent in the last eight quarters even in the face of adverse macroeconomic conditions (See graphic: Angel share in seed-stage deals).