2019 has been a watershed year for domestic capital raised for Indian startups. In the last decade, foreign VCs led the funding market. We had HNIs dabble as angels – but most had made their wealth at MNCs or traditional businesses and didn’t exactly drive future trends. 2019 has shown what we can expect in the coming decade – angel funding is now being driven by startup entrepreneurs & employees.
In every marquee deal this year, space was created for these new-age angels as they carry invaluable experience of actually building startups in India. With the unlocking of their wealth accelerating via secondaries, M&As and IPOs, these folks will most likely become the most sought after angels, and will seed more startups earlier in their journeys.
2020 will witness the proliferation of ESOP Liquidity Programs at Indian unicorns & ‘soonicorns’. The Top-50 startups by market cap are already 8 years old, with thousands of employees with vested ESOPs worth an estimated $4-5 billion. ESOP liquidity events will create hundreds of new angels coming into the ecosystem. These angels with their ‘smart money’ are prime candidates to lead their own Angel Syndicates – which have emerged in 2019 as the default route for angel investments powered by Angel Funds (like that of LV – which is the largest such platform in India with AUM of ~$19 million). These Angel Syndicates will enable greater flows of investment from HNIs who are looking for such Syndicate Leads to signal which startups they should invest in. 2019 also witnessed the maturation of home grown VCs with domestic domiciled AIFs like 3one4, Inventus, 021 Capital, Speciale Invest, IndiaQuotient, IvyCap having raised hundreds of crores, with a majority of capital committed from domestic LPs! Our Family Offices have realised the value of the new age economy being created in India and have wholeheartedly contributed to it. In 2020, we can expect many of the Family Offices who are LPs to start co-investing with VCs, and build in-house teams with the ability to evaluate deals, deploy capital and manage portfolios directly – especially in sectors where they have expertise.
Apart from sovereign capital, this twin deployment of domestic capital – from startup employees with ESOP wealth for seed rounds, and Family Offices with traditional wealth for growth rounds – will create a robust ecosystem of Rupee Capital for Indian entrepreneurship. 2020 promises to be the turning point in the shift of tech wealth creation to Indians and there can’t be a more exciting time to be an Indian investor in the startup ecosystem.
Entrepreneurs, domestic capital and digital infrastructure, with all these ecosystem ingredients taking root firmly, quality companies of size are bound to be created. The next 10 years could see a bull run for Indian startups like never before. As we head into 2020, I’m certain the coming decade will give rise to the first $100 billion Indian startup.