Guardian angels: VCs now fund founders’ bets in other startups
Sequoia and other VC firms help experienced entrepreneurs make angel investment in new ventures
support from an outside network of entrepreneurs with experience in managing a startup is invaluable.
Accord i n g to First Cheque’s Bhagia, investors are looking for two types of ‘edge’ in making their decisions at that level. “When a company is starting out, there’s not a lot you can judge it on. Angels know the founders as they were batchmates or employees at a firm, which is one edge. The other edge is market understanding. As angels are already running a business, they are closer to users and can see trends before they become mainstream,” Bhagia said.
The network which VCs are trying tap into through these angels can be classified under three ‘Cs’ — colleges, cities, and companies. Connecting with a CXO-level figure at unicorns like Flipkart or Byju’s, or other successful startups, can help VCs get information about departure of executives looking to launch a new venture. VCs can use the insights to decide if they want to back their new ventures.
For instance, Farooq Adam is one of the venture partners at First Cheque. He is the cofounder of online-to-offline startup Fynd, which was acquired by Reliance Industries earlier this year. When former Fynd executive Shakeef Khan co-founded clothing brand Disrupt, Adam and First Cheque came in as early backers.
“By adding other angels, we are able to do deals of Rs 50 lakh to Rs 70 lakh compared to Rs 15 lakh to Rs 20 lakh earlier. And First Cheque also makes investments more structured and helps take care of the paperwork, which can be a hassle,” Adam said.
People outside Sequoia’s portfolio firms are also a part of its network of scouts-angels. “The market has matured. Founders busy building their firms are seen as role models, and new crop of entrepreneurs is approaching them for capital and advice. The former are mentoring the new crop,” said Mohit Bhatnagar, managing director of Sequoia Capital India. He is overseeing the Scout initiative. “That’s why Scout makes sense, as it helps the ecosystem get built out by those who have invaluable experiences to share.”