Youngsters hoping to find investors to fund their start-up ideas like linking the local grocer online or selling vegetables through a smart phone may end up being disappointed. With start-up ideas on a boom, majority of the concepts which the investors are coming across are related to e-commerce. Being mainly run of the mill type, investors in the venture capital segment are not too keen to park their funds in e-commerce start-ups, said experts at ‘Runaway to success’, a mentorship camp organized by Lufthansa and The Indus Entrepreneur (TIE) on Sunday.
“Like start-ups mushrooming in big numbers, there has been a spurt in the number of angel funds also. Such funds invest in a concept on one-time basis to be later taken over by early stage investor and venture capitals. In today’s scenario, start-ups may find an angel investor, but not many in the later stage to carry forward the business,” said experts.
Seemant Shrivastava of Attentio Corporate Services, which is into funding business, says everybody is taking the beaten track. Entrepreneurs are wanting to replicate the success of Amazon or Flipkart in smaller towns. Such ideas may have been relevant around 5-7 years ago. The players who started early have already established themselves with little scope for new entrants now. It has been around a year that the investors have become tight-fisted.
“Chances of start-ups getting angel funds are higher because of the surge in the number of such funds in last three years. As against 500 angel funds over three years ago, there are 10,000 at present. Huge money from smaller towns is also flowing into angel funds,” said Anil Joshi of Unicron India Ventures. “Earlier, there were limited city-specific angle funds like those for Mumbai, Hyderabad and Chennai. In last couple of years, angle funds for cities like Bhubaneswar, Nagpur, Patna, Kochi and many more have emerged,” he said.
“Angel funds have to park smaller amounts and as it is only on a one-time basis, so funding ideas may not be a constraint. However, for the business to grow, funds have to come from early stage inventors or venture capitals which have become rather selective,” he said. Joshi also agreed that there was a general reluctance to investing in e-commerce ideas. Though product-specific e-commerce start-ups still have a better scope than those dealing in a whole range of items, he said.
Harish Taori, managing partner of Singapore-based ThinKuvate, said liquidity is a problem in the industry. With e-commerce ventures being capital intensive, less investment is likely to be attracted. Though investors are also keen to fund tech-based ideas like Internet of things or other smart devices.
In a nutshell
* Glut of ideas on e-commerce
* Majority are similar
* Investors not too keen as there is little scope for new e-commerce player
* Number of angel funds have also grown manifold
* This makes availability of initial capital easyShare This