Startup Street: India’s Unicorn Founders Are Now Funding Others To Reach The Top
Founders to angel investors, Razorpay’s buyback and Paytm’s startup fund on Startup Street this week.
This week on Startup Street, we take a look at the first generation of unicorn founders who are now funding other founders to reach the same heights. A payments solution startup rewards its employees to exhibit its strong growth trajectory. And Paytm sets aside a bumper amount to invest in startups.
Here’s what went on:
From First-Generation Founders To Angel Investors
They caught the startup boom early. They gave India their first wave of startup unicorns—those with a valuation of more than $1 billion. Some of them became famous, others remained relatively unknown.
But now these startup founders, armed with experience and funds, have turned into serial angel investors.
The number of startup founders with more than three investments in their personal capacity have gone up to more than 55 in 2019 from 45 last year, a report by industry body Nasscom and Zinnov showed. The total number of startups that are now funded by other startup founders has now gone up to more than 220.
Leading the pack are Flipkart founders Sachin and Binny Bansal. Since quitting Flipkart after Walmart’s $16-billion takeover, the Bansal duo have been aggressively investing in the startup space in their personal capacity. While Binny has made 34 investments to date, Sachin has funded 18 ventures, according to Crunchbase data.
The duo is not alone. Among other prominent startup founders that have become angel investors are Snapdeal’s Kunal Bahl, Paytm’s Vijay Shekhar Sharma, Freshworks’ Girish Mathrubootham and Slideshare’s Amit Ranjan.
Bahl has made some big investments in accounting service provider Khatabook, logistics firm Shadowfax Technologies and most recently digital banking initiative Digifin. Vijay Shekhar, on the other hand, has invested in fitness and health startup GOQii, and was part of the angel round for digital publisher The Ken.
Ola Cabs founder Bhavish Aggarwal, too, has made six startup investments—the most recent in electric motorcycle maker Tork.
The reason for startups to get other startup founders on board as investors is not unfounded. “Entrepreneurs turned investors are bringing more maturity to the startup ecosystem,” Nasscom’s report said. “Having had a stint as a prior entrepreneur they are more capable mentors for the first timers than the other angels.”
Besides, the report said having prior exposure to the startup ecosystem can reduce failure rates and help produce more successful exits. “This automatically makes them a preferred choice for different roles.”
And a similar trend is being witnessed the other way round. Even investors, having witnessed the action from the sidelines for years, are now becoming entrepreneurs.
Over 20 startups between 2014 and 2019 have been founded by former full-time investors, Nasscom’s report showed. Although, this is just a microtrend right now, there are various advantages for investor-turned-entrepreneurs. They tend to have easier access to the funding network, better fiscal discipline and broader business perspectives, the report said.
Razorpay Offers Second ESOP Buyback
Payments provider Razorpay has announced that it will offer to buyback employee stock options from existing and former staff—its second within a year.
“All existing and former employees who hold vested stocks will be eligible to sell up to 30 percent of their vested ESOP shares of the company,” Razorpay said in a media statement. “Sequoia India and Ribbit Capital, two of Razorpay’s key investors will be the buyers at a premium.”
More than 400 employees are eligible to participate in the buyback programme. The goal, Razorpay said, is to motivate employees to continue to create value for stakeholders and themselves.
The startup had announced its first buyback in November 2018 where more than 250 employees enjoyed a 50 percent premium for their ESOPs.
Razorpay said this exhibits the “towering” growth of the company and its product. “Most organisations in India or even in the Silicon Valley wait at least five to six years and several rounds of funding before venturing into their secondary ESOP Buyback. Razorpay has been able to implement this sooner than many others due to the fast paced growth of its team.”
The startup said its revenue has grown 500 percent in the last one year, while it has been growing 35 percent every month. It expects revenue to multiply five times by the end of 2020-21.
Paytm Plans Rs 500-Crore Investment In Tech Startups
Paytm plans to invest Rs 500 crore in early-stage startups that build complementary technologies augmenting the digital ecosystem.
The company will focus on artificial intelligence-based technology and big data solutions for new innovations that can generate large scale employment. “The company has set aside Rs 500 crore to invest in early-stage companies that build complementary technologies augmenting the digital ecosystem,” it said in a statement.
The company said it expects to employ technology across the growing internet to become the dominant player in artificial intelligence. “We are well aligned with our country’s mission to ensure the benefits of the digital revolution reach the last mile. We partner with startups who have capabilities that augment the digital ecosystem for the next wave of growth.”
“These investments are also an indication that Paytm believes India’s entrepreneur ecosystem is innovative and is growing well,” Paytm Deputy Chief Financial Officer Vikas Garg said.
The company typically invests Rs 200-250 crore every year in intellectual properties or companies building complementary technologies which include firms like Insider, Nearbuy, Loginext, Ticket New, Hungerbox, Nightstay, QRQL, and RecruiterGrid.