Where Angels Tread

Wealthy Individuals With an Appetite for Risk Are Increasingly Viewing Startups as a Viable Asset Class
 

- Varsha Meghani

I magine investing Rs 10 lakh in Paytm back in 2010. Vijay Shekhar Sharma’s then freshly launched service merely offered mobile phone recharges. It was only a few years later that he started the digital wallet—a service that has seen a mega-boost in business since the government announced the demonetisation of high-value notes in November. Today, that Rs 10 lakh would be worth around Rs 2 crore.

As lucrative as this may be, startup investing is in equal measure risky. What if you had, instead, invested Rs 10 lakh in Flipkart? Sure, you would have seen outsized returns had you exited when the ecommerce player’s valuation peaked at $15.5 billion in 2015. But it has since lost almost 65 percent of its value, having been marked down by various investors. Or, say, you had put your money in a startup that later folded up, like PepperTap, an on-demand grocery service? You’d have lost every penny.

“Startups are seen as opportunistic investments,” says Vrinda Mahadevia, who heads private wealth management at DSP Merrill Lynch. According to her, since the global financial meltdown of 2008, traditional asset classes like debt, equity and real estate have given “sub-optimal” returns. Simultaneously, the startup space has been abuzz with activity. “People are excited about startups and want to know more,” she says.

Data mined by Nasscom corroborates: There are about 350 active angel investors in India today, a figure that has been growing by a significant 20 percent year-onyear. Alongside marquee investors like Google India chief Rajan Anandan, serial entrepreneur K Ganesh or former Infosys CFO TV Mohandas Pai, India is increasingly seeing less famous but moneyed individuals jump onto the startup bandwagon. This is the HNI (high networth individual) class.