StartupTalky

Tag: Startup investing

  • Sector Agnostic Investing: Key Strategies and Trends for Driving Innovation

    This article has been contributed by Mudit Kumar, Active Angel Investor.

    Today’s world that we live in, is rapidly and dynamically evolving. This change is happening so fast that sometimes we don’t even realize this subliminal change is affecting our lives. At the forefront of this change is the dynamic and forward-looking vision of the new-age startup founders, who are driving this change with their innovative vision!

    The spirit and passion to drive this innovation to inculcate in our societal and behavioural patterns are what “startup culture” has been defining in the last couple of years!

    The underlying phenomenon behind this change is “Innovation” and the same has been spreading across the industry & sectors. Certain sectors that are at the forefront of this transformation, and sectors that have been the growth engines that are driving India’s entrepreneurial culture include FinTech, HealthTech, E-Commerce/Q-Commerce, SpaceTech, AgriTech, SaaS, and EdTech among others. The startups in these sectors have redefined their respective industries and captivated the imaginative spirit of both investors and entrepreneurs alike.

    To highlight the way the entire landscape has been shaping up in the last couple of years, startups like “Zomato” have subliminally influenced our behaviour towards the way we eat and consume food. Fintech Startups like “BharatPe”, “PineLabs” and “RazorPay” etc. have influenced the way we do business transactions. “Nykaa” and “Myntra” have changed the way we shop online. And the list is pretty long.

    Therefore, for any investor and entrepreneur success lies in finding the answer to this critical question – “How can any sector/industry be enabled or disrupted by the innovative use of technology!”

    Key Strategies for Sector-Agnostic Investing

    For any sector-agnostic investment, it is imperative to have an in-depth knowledge of these basic strategies:

    Ascertaining the Nuances of the Sector

    Every sector has its nuances – critical factors that determine outcome and productivity! Understanding the core nature of the sector, and the forward and backward integration mechanisms enables determine what will be more optimal – a product or a solution! Moreover, how the execution needs to be done – whether the execution is towards enabling the sector/industry or disrupting it!

    For reference, there is a barrage of wealth-tech startups in the recent past which primarily are banking on the financialization of the Indian economy and the growing affluent class and swelling of HNI/UHNI segments. But the critical aspect for any investor/entrepreneur is how a sustainable and value-driven business solution is being created which not only survives throughout different business cycles but also enables the investor fraternity with better value-added deliverables in a consistent and effective way!

    Innovative Use of Technology

    At the core of developing any business, lies the innovative use of technology. Today startups are using technologies like Artificial Intelligence (AI), ML, IoT, and blockchain to bring an era of digital disruption by integrating these advanced technologies to enable better decision-making, drive growth, achieve better operational efficiency and elevate customer experiences.

    For reference, take a look at how Agri-tech startup “DeHaat” is empowering our farmers through their “DeHaat Farmer App” by using AI-enabled technologies to revolutionize the entire supply chain and production efficiency by providing them 360-degree crop solutions. Niche Generative AI solutions by startups like “Zoho” are revolutionizing the way we communicate (ZohoMail & ZohoChat) and interact.

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    Future Vision for Defining the Category

    Whether an entrepreneur or an early-stage angel investor, both are expected to possess that critical knack of ascertaining – what it takes to define a particular segment! For example, founders of startups like “IdeaForge” and “New Space Research Technology” have defined the entire segment, “Miko” AI Robots can be our Indianized version of Interactive “Alexa”. Deeptech applications in Cybersecurity can be another niche domain to watch out for in time to come.

    Furthermore, it’s just not about the changing sector-agnostic startup landscape, what is more heartening is the trends that are emerging in the last couple of years.

    Here are some notable trends that we are witnessing:

    Increased Focus on Environment and Sustainability

    Startups in Green energy, Deep tech and Clean mobility are at the forefront of this trend. For example, the traditional mobility trend which was earlier defined by “Ola” has scaled up to “Ola Electric” & “BluSmart”! Increased awareness and focus on carbon neutralization has resulted in cleantech startups working on solar, wind and hydrogen solutions to working on niche technologies like biomethanation to solve organic waste management – the list seems to be going on!

    Inclusivity & Empowerment Towards “Women Entrepreneurship”

    This paradigm shift is evident from the fact that today we have over 8 million Women Entrepreneurs in our startup ecosystem. We have witnessed women entrepreneurs who are the founders of unicorns like Nykaa, Mamaearth, Hosura, GoodGlamm, and Pristyn Care to name a few and this list is growing faster than ever, fostering a more inclusive pursuit towards a diverse ecosystem!

    Growing Diverse Base of Investors

    We have graduated from those days when the entire dependency used to be on PE/VCs to today where we are witnessing the rapidly growing number of Angel investors to active participation from Corporate Family offices to Industrial houses who are not just supporting financially but also mentoring and hand holding these startups providing necessary business insights also.

    This surge in the investor base not only signifies the appetite for investing in these new-age startups but also reflects the deepening faith in the potential of our Indian startups to innovate, create wealth, and create a positive “Impact” on the society at large.

    Incubators and Accelerators

    One of the most holistic and perhaps groundbreaking trends for fostering and creating a better vibrant, sustainable, inclusive, and healthy breed of startups is the partnerships by academia and corporates in the form of incubators and accelerators programs – who not only provide seed monetary support but also mentor and train them through workshops and expose them through potential partners and investors through their “Demo Day”.

    Special mention to esteemed institutions like IITs which are deeply engrossed in creating and nurturing the startup culture among new age of founders by seeding them with innovative thinking. And the result is evident from some of the most successful stories coming out from IIT Madras Incubation Centre (IITMIC) in the form of “AgniKul Cosmos”, “Ather Energy” and “Uniphore” to name a few.

    Concluding Remarks

    There are opportunities galore in today’s startup landscape, but what is important is to critically analyze the “sustainability” and the critical “impact” that the product/solution will have on the sector/industry and the user base and society at large. Unless the ideation is “Value Accretive” on a consistent basis, the merit will get diluted over time.

    Lastly, for any business to create and scale it requires ‘time’ and ‘patience’ with a continued hustle to ‘innovate’ to stay relevant to ever-changing dynamics around. Therefore, whether you are an entrepreneur or an investor – stick to your ‘core’ values and have ‘patience’ to create something bigger and better!

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  • Apoorva Goyal of Insight Partners Reveals How They Invest in and Scale Tech Startups to Global Success

    In our exclusive interview with Mr. Apoorva Goyal, Vice President of Investments at Insight Partners, he shares his inspiring journey from a Marwari family business to leading global tech investments. Mr. Goyal shares his passion for supporting high-growth Indian startups and Insight Partners’ role in scaling tech innovators.

    He also discusses the firm’s focus on SaaS, their investment criteria, and how they guide startups towards successful IPOs. With insights on AI’s impact, cross-border investment trends, and practical advice for entrepreneurs, this conversation provides a valuable look into the evolving world of tech investments.

    StartupTalky: Can you share your journey in brief at Insight Partners and what inspired you to join?

    Mr. Goyal: Born in a ‘Marwari’ family, I grew up living and breathing entrepreneurship. I was introduced early on to the world of sales, products, and profits. Helping my family business with a product launch and managing a few retail stores were some of my responsibilities as a kid. At IIT-Kanpur, I was first introduced to the world of startups. Over the next few years, I had the privilege of working with and supporting several ambitious engineer-founders trying to solve challenging world problems using cutting-edge technology. The experience made it clear to me that I wanted to dedicate the next few decades of my life to the service of founders.

    I joined Insight Partners in 2021, driven by this passion for technology and investment. I have been driving our efforts to invest in leading Indian startups building for the world. I was drawn to Insight’s reputation as a global software investor. It has been investing in high-growth software ScaleUps for almost three decades and this experience has positioned the firm to help founders scale their companies globally. The firm’s hands-on approach and commitment to supporting high-growth technology companies particularly resonated with me. The opportunity to help visionary leaders scale and succeed on a global stage continues to inspire my work here.

    StartupTalky: What sectors do you at Insight Partners focus on, and why do you think they have strong growth potential?

    Mr. Goyal: I am focused on high-growth technology, software, and Internet startup and ScaleUp Indian companies that are driving transformative change in their industries. From the earliest institutional check to scaled growth checks, we meet great software leaders where they are in their growth journey and support them with what they need to be successful.

    I am particularly excited about the SaaS sector (esp. Indian companies building for global markets) due to its scalability, predictable recurring revenue models, and strong market demand. The shift towards digital transformation, remote work, and cloud migration has accelerated SaaS adoption. Continuous innovation and integration capabilities enhance its appeal. SaaS offers significant revenue opportunities from both large enterprises and SMBs globally. This combination of strong growth potential, robust returns, and the dynamic nature of the SaaS market makes it a highly appealing sector for me.

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    StartupTalky: How do you choose which high-growth companies to invest in?

    Mr. Goyal: As a firm, we meticulously evaluate companies with visionary leadership, innovative products, and scalable business models. Key factors include market potential, product-market fit, and financial health. We conduct extensive due diligence, including market research, customer interviews, and financial analysis. Our in-house experts provide deep operational expertise to help identify companies poised for growth. This thorough evaluation enables us to invest in companies with the potential for sustainable success and industry leadership, and then we leverage this deep dive to be ready to support them from day 1.

    StartupTalky: How do you help startups from their early stages to prepare for an IPO? How does Insight Partners support the growth of tech startups beyond just financial investment?

    Mr. Goyal: We support founders as they set their strategy from an early stage and give them a global perspective on success and how to get there. We have a dedicated team called Onsite, comprising of 140+ in-house experts across multiple domains. The team provides deep operational expertise, access to expansive networks, and targeted solutions to help high-growth portfolio companies scale faster and more effectively. Onsite’s targeted Centers of Excellence (COEs) and operational experts in marketing, sales, product, pricing, people, and more are equipped to address the unique needs of these companies and foster business excellence as they grow.

    Furthermore, our expansive network of 800+ investments provides valuable peer networking opportunities. Founders have the chance to learn from their collective experiences and connect with individuals who have been in their shoes and understand the unique challenges of scaling a company. Our goal is to position startups for a successful IPO and long-term success by leveraging our extensive experience and resources.

    StartupTalky: Could you share a success story of a startup you have worked with at Insight Partners that particularly stands out to you?

    Mr. Goyal: A notable success story would be M2P. We partnered with them in early 2022, providing capital and strategic support. Our collaboration helped streamline operations, refine their product offerings, and expand market reach. We helped them drive and execute a successful M&A strategy, helping them better serve their customers with a wider breadth of product offerings.

    This partnership culminated in M2P establishing itself as a market leader in a relatively short period and being recognized amongst the fastest growing Fintechs in Asia Pacific by the Financial Times for the last 2 years. M2P’s journey from a startup to a scaled fintech leader exemplifies how our targeted solutions, operational expertise, and expansive networks drive transformative growth and industry leadership.

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    StartupTalky: What are the typical challenges you face when investing in new markets, and how do you handle them?

    Mr. Goyal: Investing in new markets involves navigating regulatory differences, cultural nuances, and market maturity. We address these challenges by conducting thorough market research and building strong local partnerships. Insight’s belief that great software companies can originate from anywhere drives our global investment strategy. We leverage our expansive network and the Onsite team’s expertise to understand and navigate local ecosystems. This approach allows us to mitigate risks and seize growth opportunities, helping our portfolio companies scale effectively in new markets.

    StartupTalky: How do you expect AI to impact finance and software, and what effects do you think this will have on investors?

    Mr. Goyal: Insight Partners has long fostered AI innovation, investing over $4.5 billion in AI/ML companies and helping our portfolio companies leverage AI to transform core business functions and identify efficient scaling opportunities.

    We strongly feel that AI is set to revolutionize finance and software by enhancing efficiency, accuracy, and innovation. In finance, AI can automate complex processes, provide deeper insights through predictive analytics, and improve risk management.

    For software, AI enables the development of intelligent applications offering personalized user experiences and innovative solutions. Investors will increasingly continue to focus on companies that are leveraging AI to create competitive advantages. This includes startups pioneering AI applications, as they will likely drive substantial growth and industry disruption.

    We believe the widespread adoption of AI will lead to new revenue streams and markets, making it a critical area for investment. Moreover, AI’s ability to transform core business functions like product development, marketing, sales, and customer experience ensures that companies integrating AI effectively are well-positioned for future success.

    StartupTalky: Are there any specific tools or technologies you use in your business operations?

    Mr. Goyal: We leverage several advanced tools and technologies to enhance our operations and are continuously evolving as a firm. We use CRM systems to manage relationships and streamline communication alongside data analytics platforms to help with market analysis and performance tracking. As a firm, we also use several collaboration tools and workflow automation tools to improve firm productivity and effectively monitor portfolio performance. These technologies enable us to operate efficiently, make data-driven decisions, and maintain a competitive edge, allowing us to provide effective support to our portfolio companies.

    StartupTalky: If an Indian startup wants to receive investment from Insight Partners, what steps should they take to initiate the process?

    Mr. Goyal: We are very accessible as a firm and encourage Indian startups to directly reach out via email or LinkedIn. We strive to respond quickly and are always eager to learn more about companies that fit our broad investment criteria. We love to dig deeper into the overall business plan highlighting market opportunity, innovative product technology, current traction, and overall growth strategy. We also share a ton of our valuable insights and data on our website as we want to not only have long-term relationships with founders, but we want to ensure all entrepreneurs have access to some of the brilliant minds within Insight Partners even before we are able to partner together!

    Mr. Goyal: Entrepreneurs should watch for trends like the rise of AI and machine learning, increased focus on cybersecurity solutions, and the growing global adoption of SaaS solutions. Cross-border collaborations and investments are on the rise, with global investors keen on the Indian tech ecosystem. Digital transformation across sectors, including healthcare, education, and finance, presents significant opportunities for innovative technology solutions.

    StartupTalky: If you were giving advice to business owners looking to grow their business, what would it be?

    Mr. Goyal: My advice to business owners is to build a strong, cohesive team and foster a culture of innovation and adaptability. Understand your market deeply and stay close to your customers to ensure your product meets their needs. Continuously iterate based on feedback and market changes. Invest in scalable processes and technology. Seek mentorship and leverage networks for advice and opportunities. Maintain a clear vision and long-term goals while being flexible in your approach. 

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  • Gaining Startup Insights: Investor’s Take on Investing in Startups and Key Criteria

    This article has been contributed by Mohit Ralhan, Chief Executive Officer, TIW Capital.

    India has become the third largest startup ecosystem in the world with more than 90,000 startups coming up in the last ten years and yet, the entrepreneurship revolution in India has just begun. This decade is likely to witness a significant expansion of the startup ecosystem in India fuelled by venture capital investors, who have already invested more than US$ 120 billion over the last 10 years. The electronics boom of the 1970s in the USA was bankrolled by venture capital investors and the criticality of channeling private savings to Indian startups will be similarly critical. Venture capital has to play the role of catalyst not only with its capital but also with its strategic and operating expertise.

    Founding Team: The Topmost Criterion for VCs

    The topmost criterion for VCs to invest in startups is the founding team. This is quite a subjective assessment of the founder’s personality, capability, and skills where VCs draw from their years of investment experience. Often VCs give more weightage to this assessment of the founding team in comparison to the why and how of the underlying businesses. The key skills of the founding team should be aligned with the long-term business case of the startups and the roles, responsibilities, and shareholding structure should be very clear among them with everyone being on the same page. A founding team is preferred over a single entrepreneur, but it is not mandatory.

    Clarity of Strategy

    Another key criterion is the clarity of strategy. While strategies may change, and then often change along the way, the initial thought process of the founding team indicates the likely success or failure of the startup. There should be an excellent understanding of the market gaps and the client/consumer problems which the startup is attempting to solve. The ability to get into the shoes of the end-user and lay out the benefits of their products/services from the end-user perspective is extremely important. Many a time, a superior technical product fails in the market, because of the misalignment with the end user’s behavioral aspects and cost-benefit fit.

    Target Market and Revenue Potential

    The startups also need to figure out and demonstrate that the market segment they are targeting is large enough for them to potentially earn significant revenues. There should be a sound logic behind expected demand drivers and price points. The pricing of products/services is quite a complex part since it continues to undergo multiple changes. It is the least understood part as well and in the business plans, it’s often shown as something which goes up linearly. The startups should be well prepared to do an in-depth discussion on sales and pricing strategy with potential investors, indicating in detail why and how much will the end user pay for their products/services.

    Path to Survival and Profitability

    While startups are not expected to become profitable immediately, it is important for investors to understand the path to survival and profitability. The initial business plan to achieve breakeven is most often delayed by several quarters and that’s when the resilience of both the founding team and business model gets tested. Even so, investors do want to understand the initial strategy of achieving breakeven and the factors which can bring sustainable profitability.

    Fitment and Expertise

    VC firms also evaluate external factors which also include the fitment of the startup within their existing investment portfolio. They also look at their own expertise and network in the industry segment where the startup is operating. VCs typically need to play an active role in scaling the business through their own network and it is also beneficial for the startups to partner with such VCs who can guide and assist them operationally as well.

    Operational Assistance

    While founders will typically have excellent domain expertise, without which VC firms will not invest anyways, often, they need assistance in keeping the internal house in order. VCs should be able to draw upon their experience and help startups in improving capital and labor productivity. Apart from business strategy, startups can seek assistance and guidance from VC firms in setting up HR systems, performance management systems, organizational hierarchies, internal technology, financial systems, sales & marketing effectiveness, and strategic cost management. The partnership becomes extremely strong and generates excellent outcomes when the domain expertise of founders is combined with the operational experience of VC firms.

    The current investment environment has turned somewhat cautious, and the startups may need to spend more time in their fund-raising endeavors. Still, the early-stage companies, where a bottom-up case can be made, are likely to fare relatively better. High-tech startups are likely to attract substantial funding, while startups that have previously earned funding from optimistic shareholders in 2021 and 2022 will likely face additional difficulties and require a stronger business case to attract funding in the coming quarters. Deep tech startups working on AI, blockchain, biotech, robotics, and quantum computing are also a key focus area for investors. The current cautiousness is temporary since the VC firms have a dry powder of more than USD 18 billion and as the global macroeconomic uncertainty eases, the pace of startup investments will strongly surpass previous peaks.

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  • Risks and Rewards of Startup Investing

    Startups have taken over the business world since the turn of the millennium. The plethora of them that mushroomed across the world have been successful in finding solutions to the slightest of human inconveniences. The startup culture in fact has completely pressed a reset button over the traditional business environment that prevailed. This change has been reflected in the nuances of investments as well.

    Investing in startups is becoming a common affair just like how people used to invest in public markets. Although it is becoming usual, there is absolutely no doubt in the fact that it is a risky walk on the rope. For a startup investment to be successful, it has to pay off well for the investor. At this stage, where only a few startups make excellent profits, it is of utmost importance to be careful while making such investments so as to not lose one’s entire investment at one go.

    The truth is that hardly 10% of startups generally make it to their Initial Public Offering (IPO). Hence the risk associated with it is immensely high as either the investor will become wealthy with returns amounting up to a thousand times the investment or it can be a complete loss. This article will look at some of the risks and rewards of startup investing.

    Rewards of Startup Investing

    Risks of Startup Investing

    How to Invest in Startups in India?

    Rewards of Startup Investing

    In today’s time, when the startup industry is booming, investing in startups can turn out to be a lucrative opportunity. The following are some of the rewards of investing in startups:

    Value of Growth Capital Investment Deals India from 2016 to 2021
    Value of Growth Capital Investment Deals India from 2016 to 2021

    Dynamic Portfolio

    Investing in startups is an excellent way to diversify portfolios to include assets that are of high risk and have higher rewards. Trends of investors show that they invest in multiple startups personally or through a venture capitalist firm to practice diversification. For example, Jeff Bezos has made personal investments and is also actively investing through his venture capitalist firm, Bezos Expeditions in various startups.

    Patterns of investments of those who have earned profits through the process show that they invest in multiple startups rather than investing all the money in a single startup. By diversifying investment, the investor can make multiple profits from various asset classes. It also ensures that one does not sink all of the available capital for a single investment opportunity. Diversifying investments also increases the probability of getting better returns.

    Outsized Returns

    It is true that startup investments are highly risky. But it also means that if the startup ends up doing exceptionally well, it is also highly rewarding. When compared to any other form of investment, an early investment in an innovative startup is the most rewarding one with returns exceeding several times the investment. For example, Peter Thiel was an early private investor of Facebook who invested $500,000 into the firm. Eight years after its launch Facebook offered its IPO after its valuation climbed over $100 billion. Soon after the IPO, Peter Thiel made more than $1 billion.

    On another note, if a person had invested in Facebook on the first day of it in the public market, their share would have been quadrupled by now. In order to assess the probability of getting better returns through startup investing, it is highly important to keep yourself updated about the nuances of venture returns.

    Networking Opportunity

    Startup investment is a great way of building new connections with other investors, founders and stakeholders. It will help in understanding more about the details of investments keeping one along with the latest updates. An investor would probably want to invest in multiple asset classes as the very idea of investing goes by the tagline “Don’t Put All Your Eggs in One Basket”. The networking opportunity provided by every startup investment is thus, a gateway for excellent networking opportunities which can later lead to further investment opportunities.

    Positive Impact on Employment

    Every startup investment that one makes is the beginning of a business which has the potential to change the lives of people. Hence investing in a successful startup indirectly has a positive effect on employment rates. Every small investment made in a startup also benefits the local population thus, reaping not just financial benefits for the investor but also economic benefits for society.

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    Risks of Startup Investing

    There is no doubt in the fact that startup investing is a great opportunity for earning profits. However, the investment may not always turn out to be successful. The following are some of the risks of investing in startups:

    Startup Failure Rate by Time in Business
    Startup Failure Rate by Time in Business

    Unforeseen Complications

    One of the biggest risks of startup investing is the unforeseen complications that might occur in the market. Every startup materialises into a full-fledged business if the ideas are innovative and everything is executed perfectly as planned. Yet, there are chances that things might not work the way it was predicted. The economy is tricky and unpredictable and can come up with hurdles of various intensities.

    In order to ensure that an investor does not run down the path of bankruptcy by investing in a startup, it is vital to make a prudential decision on how much fund should go into each investment. It is always a good idea to have a backup plan in case things do not work out in the planned way. Having a sound understanding of the startups will also help in understanding the reasons why the business crashed.

    Fraudulent Practices

    There is always a chance that people get cheated every time there is money involved. Startup investments are no different. Investing in startups that you don’t know much about can be a dangerous thing. Study deeply about the founders, their backgrounds and their plans. Investing is not a blind isolated act. Be aware of the details of the company that you are investing in, and watch their progress closely for any signs of malpractices or misconduct.

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    Uncertainty of ROI

    The risk factor associated with startup investing is exceptionally high considering the fact that 90% of startups fail within five years of their inception. It also means that the return on investments is also not guaranteed. The risk associated with ROI does not stop there. Sometimes risks are posed due to liquidity issues wherein it takes a longer time than expected to earn a profit. In some cases, it can also be that despite making a profit there won’t be much money left after deducting expenses incurred.

    Liquidity Issue

    Another major risk in startup investing is the issue of liquidity. When you are investing in a startup, it means your money is going to be bound for a very long time. Even if you start regretting your investment, you will not be able to sell it anytime soon.

    Conclusion

    The very idea of startup investing is a high-risk, high-reward phenomenon. Whether it is going to be rewarding or not is going to depend on a lot of factors including the novelty of business ideas, execution of the plan, customer satisfaction, target achievement, receiving of subsequent funds etc. The one thing that investors can do to be on the safer side is to do thorough research on where the money is being invested and be updated with regard to every minute progress of the firm. Another way to ensure the investor does not lose a lot is not to invest all of the capital in a single startup.

    The entire exercise of startup investment has a far-fledged impact on society rather than just the monetary ones. It can change the fate of a family and even society in itself. Hence, doing deep research and investing prudentially can go a long way.

    FAQs

    How do startup investors make money?

    Startup investors make money on the basis of the equity percentage they got in exchange for their investment in the startup.

    Can a normal person invest in startups?

    Yes, a normal person can invest in startups. One just needs to have the minimum amount of funds available for investing through a private equity fund, VC, or debt financing. Many Angel Investment platforms like IPV even allow people to invest in startups with a minimum investment of as less as 2.5 lakhs INR.

    What is the number one reason startups fail?

    One of the most prominent reason startups fails is because they run out of cash. Money is the most crucial aspect for any startup to keep growing so when a startup fails to raise new capital at the right time, it leads to its downfall.