NavIC Grand Challenge Launched by Shri Piyush Goyal, Union minister on 17th May 2022

At the Fourth National Startup Advisory Council Meet held on 17.05.2022 under Hon’ble Minister of Commerce and Industry, Consumer Affairs, Food & Public Distribution, and Textiles Shri Piyush Goyal, the NavIC Grand Challenge (GC) was launched. The GC seeks to mainstream the use of NavIC and establish it as a domestic mapping solution.

iSPIRT has contributed to the development of this Grand Challenge. During the Third NSAC Meet, Sharad Sharma, Co-founder of iSPIRT and a member of the National Startup Advisory Council (NSAC), proposed the concept of prominence to NavIC as a domestic mapping solution.

Later, the iSPIRT Team, led by Captain Amit Garg and our volunteers Sayandeep Purkayastha, Captain George Thomas, and Tanuvi Thakur, presented the concept note and working paper on the GC to DPIIT (Dept for Promotion of Industry and Internal Trade).

Multiple rounds of discussion among the Department for Promotion of Industry and Internal Trade, Indian Space Research Organisation (ISRO), and iSPIRT Foundation brought the final shape to the working paper. All of this culminated in the launch of GC-NavIC on the 17th of May.

What is NavIC?

NavIC or Navigation of Indian Constellation is India’s independent regional satellite navigation system created by DOS/ISRO. Its signals are inter-operable with the civilian signals of the other navigation satellite systems namely GPS, Galileo, Glonass, and BeiDou. NavIC has made in-roads into civilian applications in India like vehicle tracking, power grid synchronization, location-based services (using mobile phones), disaster alert dissemination, etc. Efforts are being made to enable the incorporation of NavlC into drones, the maritime sector, wearable devices, time dissemination, geodesy, etc. The applications are being promoted by the availability of NavlC-enabled off-the-shelf chipsets & devices at competitive rates and by the adoption of NavlC in national and international industry standards.

The GC is a step towards taking NavIC adoption further into the future, i.e. the future of AtmaNirbhar Mapping Solution. The GC brings together the triumvirate of NavIC, Agriculture, and Drones by becoming a big-bang thrust for the Kisan Drones Project as well.

The GC-NavIC

The GC-NavIC has an intersection with GOI’s Project Drone Shakti. It seeks to promote:

The use of drones to solve the problem of agriculture insurance, i.e., the integration of the product to solve cases under the Pradhan Mantri Fassal Bima Yojana, is in line with the Government’s steps to harness technology for agricultural growth;
Building a digital database of agricultural data that will supplement the digitization of land records and crop assessment measures of Drone Shakti;
The use of ISRO’s homegrown NavIC technology in developing drones under the GC will promote the use of NavIC in the commercial drone landscape for remote sensing, imagery, mapping, etc.

The GC has invited innovative solutions that will utilize NavIC-enabled drones to capture data related to farm field topography, process this data, and make it available for use for commercial purposes. Ideas should be such that the product can be deployed across all terrain types in the country. Further, the captured and processed data should be viable and efficient for use within the Pradhan Mantri Fasal Bima Yojana (PMFBY) framework.

A detailed application process (here) calls for a detailed proposal of the tech specs of the participants’ product solution. This will be the basis for 25 participants selected for a presentation of their product before the Experts Panel. 7 selected participants on the basis of an objective and transparent selection criteria will compete in Phase 1 of the GC – the prototype deployment stage. In phase 2, the top 3 participants will compete towards fulfilling the problem statement by deploying their fully functioning product.

Transformative Powers of Challenge Grants

Challenge Grants have transformative powers and scalability opportunities that can serve as an impetus to quality innovation. Treatment Adherence for TB was the first challenge launched under the Grand Challenges in TB Control program. The aim was to devise solutions for improving tuberculosis screening, detection, and treatment outcomes. One of the participants, 99Dots, came up with a novel solution for low-cost monitoring and medication adherence program by using a combination of basic mobile phones and augmented blister packaging to provide real-time medication monitoring at a drastically reduced cost. By 2017-18, 99Dots was used across all districts in India and is now listed as a treatment program on the Government’s Nikshay portal.

The GC-NavIC through its intersection with Project Drone Shakti and the revamped operational guidelines of the PMFBY that emphasize tech-based solutions will help harness technology for agriculture and create opportunities for commercial utilization of NavIC. The recent ban on foreign drones by the Government will move the focus to domestic manufacturing. Encouraging local drones with local technology will increase the AtmaNirbhar potential in the drone and navigation ecosystem and enable Indian Startups to unlock the $5 billion drone market.

Conclusion

The GC-NavIC is touted to deliver three essential outcomes – better regulations in the drone and mapping space, ecosystem development, and channel of public money for private innovation. All three will lead to transformative innovations that will push India into modern agricultural practices and domestic mapping-navigation solutions.

The post is authored by our volunteer fellow, Tanuvi Thakur. She can be reached at [email protected].

19/06/201910/07/2019

#6 Healthstack session at LetsIgnite

We had the chance to conduct a discussion on the National Health Stack during the LetsIgnite event organized by the LetsVenture team on 15th June at the Leela Palace. The audience comprised of early stage healthcare startups along with angel investors and venture capitalists having keen interest in healthcare investments. Some notable attendees included Dr. Ramesh (senior cardiologist, MD Endiya Partners) and Mr. Mohan Kumar (Partners, Norwest Venture Partners).

Sharad Sharma (co-founder, iSPIRT), Dr. Santanu Chatterjee (Founder, Nationwide Primary Care), Dr. Ajay Bakshi (Founder Buddhimed Technologies, ex-India CEO Parkway Pantai) and Arun Prabhu (Partner, Cyril Amarchand Mangaldas) had been invited to lead the session, which was moderated by Anukriti Chaudhari and Priya Karnik, both core volunteers at iSPIRT championing the health stack initiative.

The context was set by an interactive talk by Sharad who began by giving a glimpse of the underlying philosophy of the iSPIRT Foundation – the idea of building public goods as digital technology stacks which can be leveraged by private players to serve Bharat. . Sharad described societal change in India being a Jugalbandi between digital public infrastructure, market participants and policy makers to achieve the same. He mentioned how the India Stack was changing the face of fintech in India and that the Health Stack could do the same for healthcare. The audience was more than startled to hear that a day prior to the session, the number of UPI transaction in India were already one-sixth of what MasterCard had done worldwide. ( UPI has only been around for 33 months! ). Sharad then went on to explain the different layers of the Health Stack comprising National Registries, standardised health information flows, an insurance claims management software built upon a standard Policy Markup Language and a gamifier policy engine. He didn’t miss reminding the audience that the Health Stack was being built to solve for the healthcare needs of ‘Bharat’and not the privileged 30 million Indian families already being well-served by the healthcare conglomerates in urban areas.

With the context in place, Anukriti took over to give a background of the healthcare landscape in India. India struggles with a 1:1600 doctor to patient ratio with more than 60% of doctors and hospitals concentrated in urban regions. To add to that, the public expenditure for healthcare is just 3.9% of our annual GDP (compared to 18% in the US) and it’s not surprising that most deaths in public healthcare facilities happen because of poor quality of care. Health insurance penetration barely touches 20% with OOP expenditure dominating the healthcare spending in India. With a huge underserved population, the need of the hour is to leap-frog to scalable solutions that can reach the masses instead of incremental linear growth solutions to address the Indian healthcare challenges. The different layers of Health Stack make it much easier for innovators (both public and private) to develop radical solutions.. While funding in healthcare startups has increased over the last 5 years, it still significantly lags behind areas like fintech, e-commerce, ed-tech, etc. Moreover, the bulk of healthtech investments have been focused on the consumer tech sector. Anukriti ended her views with a futuristic optimism regarding the innovations that Health Stack could open, to make healthcare truly affordable, accessible and high quality.

We were fortunate to have Dr. Santanu and Dr. Bakshi give insights about the Health Stack with their on-ground experiences in healthcare spanning over decades. Dr. Santanu mentioned that for primary care, the national registry of care providers was very fundamental to ascertain ‘which stakeholder provides what’ given that almost every provider is somewhere involved in primary care. On top of that, he stressed about the need for Artificial Intelligence backed clinical support systems that seamlessly integrate with the doctor’s workflow. This is of particular relevance for rural healthcare settings wherein, despite various efforts, there aren’t enough doctors to setup shops in villages . A standardized health information layer, along with data transfer mechanisms, could be the driving force for this. He was, however, wary of how well standard insurance schemes would work for primary care as the insurance business model falls apart given that almost everyone needs access to primary care at some point or the other. Priya resonated with his views and further suggested that for ‘Bharat’, micro insurance policies could be the key mechanism to drive insurance adoption at the consumer level. Such a system could potentially be facilitated by a claims engine platform build upon a standard policy markup language to ‘almost-automate’ (auto-adjudicate) the claims addressal process.

Dr. Bakshi contended that for a stable society, healthcare and education are a must, as the former secures our ‘today’ while the latter secures our ‘tomorrow’. Having worked as the CEO of three major hospital chains in India, he accepted (without an iota of political correctness) that as a nation, we have failed miserably in providing either. Healthcare is a social good and nowhere in the world has it been solved by private players alone (given the way private incentives are aligned). The public sector in India hasn’t stepped up which is the reason that private players dominate the quality healthcare delivery which could lead us (or is perhaps already leading) to following the footsteps of the US. This is an alarming trend because in the short and medium term, India cannot afford to outsource the entire healthcare delivery to private players. Dr. Bakshi remarked that to set things on the correct track, the Health Stack is a very important initiative and congratulated the iSPIRT team for working ardently to make it happen. He however suggested all stakeholders to be privy of the fact that while fintech transactions are linear (involving the payer and the recipient), a healthcare ‘transaction’ involves multiple aspects like the doctor’s opinion, investigation, drugs, nurses, ward boys and many other layers. This underlying multidimensionality would make it difficult to replicate an India Stack kind of model for the healthcare setting. At the core of the healthcare transaction lies the ‘doctor-patient’ interaction and it is imperative to come but with some common accepted standards to translate the healthcare lingo into ‘ones and zeroes’. He lauded the health information flows of the Health Stack for being a step in the right direction and mentioned that in his individual capacity, he is also trying to solve for the same via his newly launched startup Buddhimed Technologies.

With two stalwarts of healthcare sitting beside her, Anukriti grabbed the opportunity to put forth the controversial concept of ‘doctors being averse to technology’ which could possibly be a hindrance for Health Stack to take off. Dr. Santanu and Dr. Bakshi were quick to correct her with the simple example of doctors using highly technical machines in providing treatments. They coherently stated that doctors hated Information Technology as it was forced upon them and suggested that IT professionals could do a better job by understanding the workflows and practical issues of doctors and then develop technologies accordingly. This is an important takeaway – as various technologies are conceptualized and built, doctors should be made active participants in the co-creation process.

The idea of a common public infrastructure for healthcare definitely caught the attention of both investors and startup founders. But amidst the euphoria emerged expected murmurs over privacy issues. That was when Arun Prabhu, the lawyer-in-chief for the session, took the lead. He reiterated Dr. Bakshi’s point of the doctor-patient relationship being at the core of the healthcare transactions. Such a relationship is built upon an element of trust, with personal health data being a very sensitive information for an individual. Thus, whatever framework is built for collating and sharing health information, it needs to be breach proof. Arun cited the Justice Srikrishna report to invoke the idea of consent and fiduciaries – a system wherein individuals exercise their right to autonomy with respect to their personal data not by means of ownership (which in itself is an ambiguous term), nor by regimes of negligence or liability but by the concept of a coherent consent mechanism spread across different stakeholders of the healthcare value chain. Moreover, the consent system should be straight-forward and not expressed via lengthy fifty page documents which would make it meaningless, especially for the India 2 and India 3 population. Lastly, he mentioned that just like physical and tangible assets have certain boundaries, even data privacy can have certain realistic limitations. If an information point cannot be specifically identified or associated with a particular individual but can have various societal benefits, it should be made accessible to relevant and responsible stakeholders. Thus, while it is imperative to protect individual health data privacy, there should be a mechanism to access aggregated anonymized health data. There is tremendous value in aggregating large volumes of such data which can be used for purposes like regional analysis of disease outbreaks, development of artificial intelligence based algorithms or for clinical research. Priya added that such a system was inherent in the Health Stack via the Population Health Analytics Engine and the framework for democratisation of aggregate data.

Overall, the session amalgamated various schools of thought by bringing together practitioners, CEOs, CIOs, lawyers, startups and investors on one common discussion platform. This was perhaps an example of the much-needed Jugalbandi that Sharad had mentioned about. A public good is conceptually ‘by the stakeholders, for the stakeholders and of the stakeholders’. This necessitates its active co-creation instead of isolated development. Needless to say, multi-way dialogue is the DNA of such a process. Staying true to that philosophy, we look forward to conducting many such interactive sessions in the future.

Ravish Ratnam is part of the LetsVenture Team – a platform for angel investing and startup fundraising.

He can be reached on [email protected]

19/02/201919/02/2019

Clipping The Wings Of Angel Tax

2000 startups. 100 meetings. 25 articles. 7 years. 3 WhatsApp groups. 2 whitepapers.

1 unwavering ask:

No More Angel Tax.

This evening, when we first got to see the circular from DPIIT/CBDT that formalized key recommendations suggested with respect to Angel Tax or section 56(2)(viib), we admit our minds went blank for a moment. After all, this one document represents the tireless, collaborative efforts of iSPIRT, the entrepreneurial community of India and ecosystem partners like IVCA, Local Circles, IAN, TiE, 3one4 Capital, Blume Ventures etc., and the proactive support from the government. It has been one relentless outreach initiative that has seen us become a permanent fixture at Udyog Bhavan and North Block (I even checked with the guards regarding the possibility of a season pass). My colleagues Sharad Sharma, TV Mohandas Pai, and partners such as Siddharth Pai, Nikunj Bubna, Sreejith Moolayil, Monika, Ashish Chaturvedi and Sachin Taporia deserve a big shout out for their diligent efforts at connecting with various ecosystem partners and initiating a regular cadence of dialogue with the government.

The key takeaways from the circular are as below –

Blanket exemption for up to INR 25Cr of capital raised by DIPP registered startups from any sources
Amendment in the definition of startups in terms of tenure from 7 to 10 years
Increase in the revenue threshold for the definition of startups from INR 25Cr to INR 100 Cr
Breaking the barrier for listed company investments by excluding high-traded listed companies and their subsidiaries, with a net-worth above INR 100Cr or a Turnover of 250 cr, from section 56(2)(viib)’s ambit

Each of these points is a major win for the startup community. If one looks at the data from the LocalCircles startup survey in January 2019, nearly 96% of startups that had received notices regarding angel tax, had raised below the permissible limit of INR 10cr. Expansion of this limit to INR 25cr is a huge boost and instantaneously removes thousands of startups from the reach of angel tax. There is an effort here to critically analyse, define and differentiate genuine startups from shell corporations. It includes measures such as increase in the revenue and tenure threshold that will not only help startups with respect to the challenges posed by angel tax but also open up eligibility for benefits under Startup India schemes and policies. We have been talking about the need to encourage and protect domestic investments and the government has paid heed to our concerns by introducing accredited investor norms and by breaking the barrier for listed company investments.

Initiated in 2012 by the UPA government, Section 56(2)(viib) or the “angel tax” section has been a relentless shadow on the entrepreneurial ecosystem. It taxed as income any investment received at a premium by an Indian startup. This provision saw many entrepreneurs clash with the tax officials about the true value of their business and pitted unstoppable entrepreneurial zeal against the immovable tax department.

All of us from the policy team at iSPIRT have been at the forefront of this issue since 2015 when we began petitioning the government to exclude startups from section 56(2)(viib) as taxing investments from Indian sources would cripple the startup ecosystem. We laud the government for appreciating the urgency of the situation and prioritizing this issue.

We first had an inkling of things to come at the February 4th, 2019 meeting held by DPIIT. It was unprecedented as it saw a direct dialogue between government and entrepreneurs wherein both sides could better understand the issues facing each other – how section 56(2)(viib) was hampering founder confidence and how it is a needed tool in the government’s arsenal for combatting the circulation of unaccounted funds.

After this, a smaller working group was constituted on February 9th, to review the proposals made by DPIIT to address this issue, in consultation with the CBDT and the startup ecosystem. iSPIRT were part of both meetings and contributed actively to the discussion.

We can now heave a sigh of relief as we have finally achieved to a large extent what we had set out to do. We finally have a solution that ensures genuine startups will have no reason to fear this income tax provision and the CBDT can continue to use it against those attempting to subvert the law.

This could not have been possible without the help of well-wishers in government departments like Mr Nrpendra Misra, Mr Sanjeev Sanyal, Mr Suresh Prabhu, Mr Ramesh Abhishek, Mr Anil Chaturvedi, Mr Rajesh Kumar Bhoot, Mr Anil Agarwal, who patiently met the iSPIRT policy team and helped develop a feasible solution.

At long last, domestic pools of capital will no longer be disadvantaged as compared to foreign sources. At long last, Indian entrepreneurs will no longer have to fear the questioning of the valuations of their businesses and taxation of capital raised.

Who knows, someday we might have a movie on this. On a more serious note, it is a step that will go down in the chronicles of India’s startup story. This puts the startup engine back on track. More importantly, it shows what can be achieved when citizens and the government get together.

By Nakul Saxena and Siddharth Pai, Policy Experts – iSPIRT

21/12/201821/12/2018

White Paper On Section 56(2)(viib) And Section 68 And Its Impact on Startups In India

Angel Tax (Section 56(2)(viib)) has become a cause celebre in Indian startup circles due to its broad-reaching ramifications on all startups raising capital.

This paper traces the origin of this section, it’s analysis, impact, how it adversely affects startups. Special mention is also made of the seldom covered Section 68 and it’s used in conjunction with Section 56(2)(viib). The paper also proposes recommendations to ensure that genuine companies are not aggrieved by this while the original intent of the section is preserved.

White Paper On Angel Tax – Section 56 (2)(viib) And Section 68 (Click to open in a new window) from ProductNation.in

For any support or query, please write to us at [email protected]

12/02/201813/02/2018

The History and Future of Angel Tax

“I propose a series of measures to deter the generation and use of unaccounted money. To this end, I propose:

Increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value.”

When ex-Finance Minister Pranab Mukherjee introduced angel tax in 2012, it created an uproar in the fledgeling startup and angel investor community. While the purpose of this section was to reduce money laundering by imposing the hefty tax rate of 30.9 percent, it had several inadvertent consequences.

There were several cases of money laundering by Jaganmohan Reddy that were caught by the Enforcement Directorate, who revealed that people had “paid bribes to Reddy in the form of investments at exorbitant premiums in his various companies to the tune of Rs 779.50 crores apart from making payment of Rs 57 crores to him in the guise of secondary purchase of shares and donation of Rs 7 crores to the YSR Foundation”.

To prevent such abuses of the law, the government clamped down and stated that any unjustified share premium given by a private company would be taxed as income in their hands. But to catch one culprit, they threw the book at many innocents. The relevant law known as section 56(2)(viib) of the Income Tax Act came to be known as the angel tax section. Many startups which are private companies and had issued shares at a premium to angel investors ended up facing notices from the tax authorities under this section. This premium is treated as income in their hands, classified as “income from other sources” and taxed at the maximum marginal rate of tax.

The ‘Startup India’ initiative changed all that. Under the stewardship of the Honourable Prime Minister, startups became a focus area. As per the ten points in the Action Plan, if a startup was registered post- April 1, 2016, then the angel tax was not applicable to the startups. The move had helped startups operating in that area, but a problem still existed for startups that were incorporated before 2016. In fact, in December 2017, many startups received notices and orders for the Financial Year 2013-14. A few entrepreneurs who faced income tax notice hassles launched an e-petition called Change.org in January 2018 so that the government could take some concrete action in Budget 2018.

iSPIRT has taken up the matter with MoF and DIPP on the same. We had made some representations to MoF specifically before the budget. In the budget, the Finance Minister made a statement on continued assistance to the Angel Ecosystem. Due to rigorous efforts that went into sharing of information by these startups, we have recently seen MoF making the welcome announcement.

As per the latest announcement, angel tax would not be applicable on startups which are incorporated before 2016, fulfil the criteria under Startup India Policy and have been granted angel funding up to Rs10 crores. It is believed that at least 300 startups will get a breather from angel tax. The government is also likely to establish a separate committee for the recognition of startups that meet these criteria.

In a further relief to startups, the Finance Secretary Hasmukh Adhia also announced that income tax officers would not take precipitate action and will proceed only after the first set of appeals decided in appellate cases. The exact phrase they used was “no coercive action”, which helped many startups heave a collective sigh of relief. All pending appeals by March 31, 2018, will be quickly addressed.

If you are a startup and need further guidance on angel tax, you should follow the steps below:

Register at DIPP for a startup even if you were incorporated before 2016 and currently are still a startup as defined by DIPP by logging onto this site and filling up the form at https://www.startupindia.gov.in/registration.php.
If you are a startup as per DIPP definition, then get your DIPP certification. All startups which may have raised funding post-April 2016 and are registered with DIPP will not have angel tax applicable to them.
If you are a startup which has received income tax notices for years before 2016 and is still eligible to register as a startup, then please register yourself with DIPP. You can share the registration certificate and relevant notifications with the assessing income tax officer to get an exemption from angel tax.
If you are a startup which has received income tax notices for years after 2016, then please repeat step 2 mentioned above and then appeal against the order. It is important that due process is followed so that the redressal measures taken by the tax authorities can come into effect.

These startups do not have to pay 20% of the tax order at the time of appeal as this has been a one-time exception granted till 31st March 2018 to avoid hurting the sentiments of the startup ecosystem. You can share the order with iSPIRT.

Also, pursuant to our meeting with MoF, we have been assured that the income tax officers in the various jurisdictions have been directed to exercise leniency on this till the new taxation regime for angel and venture capital investors comes into place, as announced by the Finance minister in his budget speech. The officers are aware of the hardships that startups now face and are doing their best to mitigate this within the ambit of the current law.

DIPP and MoF are also in the process of allowing a waiver to the earlier startups facing the angel tax issue, provided the investment made is under Rs 10 crores and subject to an Inter-Ministry board approving the same. This should happen in the next 5-10 days.

We will encourage all startups which have received notices and orders under Section 56 to follow the above steps to chart their way across the new announcements.

Please forward your orders to [email protected] enabling us to use these orders to take a strategic view to policy to help with this issue in the long term.

Start up India.

Stand up India.

This post is co-authored by Nakul Saxena and Siddarth Pai, Policy Expert Council Members, iSPIRT Foundation

01/03/201701/03/2017

From Bootstrapped to Angeled : Is it your idea or product ?

You’ve shaped up your business idea to flag off. You have a pool of talent believing in that idea and lined up with working prototype with feedback. Now, it’s time for funding to take your idea to concept to design to product to a successful business.

Depending on the idea, startup projects can be particularly expensive and often incur new, unforeseen costs. That is particularly true of technological ideas, which are currently in vogue but require exploratory costs (to pay experts to determine if the idea is feasible) and initial product development costs. Even if a team proves the idea is feasible, they often need to build a working model or prototype to prove that to investors, which can sometimes add thousands of dollars to startup expenses.

The vital idea behind bootstrapping in commercial means is to borrow as minimal finance as possible. In two words, you only rely on either on your own budget and savings, on some crowdfunded amount or simply on loans from friends and family. This scenario urges you to borrow insignificant amounts of money and thus keep interest costs minimal. But as the market dynamics populates further, the wider entrepreneurial community starts delivering differing views.

Guy Kawasaki has proclaimed that “you should always be a boot-strapper… too much money is worse than too little” but goes onto to suggest “if you do get offered venture capital, take it, but don’t spend it”.

Most people focus all their time and attention on building their idea, and forget that even the coolest product or service is worthless if people don’t use it. Creating a successful product or service requires two things:

A solid implementation of the idea.
People that use it.

For the best chance of success, you need to identify the smallest core of your idea that has value to your potential users, build only that, and release it. This “minimum viable product” or MVP serves as the ultimate idea testing ground. It lets you build a relatively inexpensive version of your idea, test it with real users, and measure adoption.

Investors see a lot of ideas, which is why they won’t sign an NDA (your idea is not original, no matter what you think). But if you have a team that has delivered products in the past, worked through adversity, and has a failure or two to learn from, then the investor can see a group of people who will protect his investment, and has demonstrated the skills to do so.

So No. An idea will not get you funded.

To be investible, a start-up needs to have a good product-market fit and the potential to scale up quickly to a large market. It needs to be defensible with intellectual property or some other competitive advantage. And it needs to have a credible team in place, people who investors will believe can execute. And there needs to be some kind of proof, also called validation, also called traction.

Building an early prototype also helps you attract tech talent, because it gives people something to look at and play with, and it communicates your idea in a more “tangible” form. Then you can shop it around to potential technical co-founders to get them excited about your vision. If you have the means to actually build a working prototype, so much the better!

Most Angel Investors (and VCs) won’t pay much attention these days without some other sign of traction, especially because the financial and technical barriers to entry are getting lower and lower.

Additionally, the current market size doesn’t matter. The market size in 10 years is what really matters. You want to be in a small but rapidly growing market. You can change everything in your start-up except the market. So spend a lot of time up front to make sure you’ve thought through your market. “Having value” and “being fundable” are two completely different things.

Two of the most valuable things that the investor community seems to have been seeing from close quarters are: customer feedback and data from pilot research, which can enable them ask questions that lead to product breakthroughs. Angel Investors would need to know how your idea has improved to a bit more than a fledged product wireframe, so that their willingness to invest into those ideas via money, and social reach can increase to ensure that the success of your product is further defines by cutting-edge product development process.

Following guidance is thus seems to have gained ground and immovable traction for all the aspiring entrepreneurs who are progressing from a Bootstrapping channels to Angeled funding:

Be value-driven rather than fund-driven
Be independent of technologies that make you lose control over your idea
Make the customer a base for your product than profit
Base your ideas on supply and demand and not on the money it can attract

Once again, this isn’t a strict definition, but the seed round is normally used to fund the initial stage of your company where you’re finding product/market fit, and the following rounds are meant to help with scaling. That said, the road from concept to readiness (aka product MVP) is long and winding. Entrepreneurs’ single greatest challenge in this sphere of activity is balancing bursting creativity with structured, method-driven decision making.

08/06/201308/06/2013

How to Become a Super Associate

Being an Associate in a Venture Capital firm is a dead-end job*, that you can’t leap without entrepreneurial experience. And, entrepreneurs hate you for your pesky, clueless mails. Here’s hoping to help you out – and help ourselves.

Dear Associate / Analyst,

I know I took a big stab at you [1] and went public with it. I know you are trying to do your job, but the way you are going about it right now sucks big time. If you are wasting the time of an entrepreneur – and especially one in my fold and care [2] – well, you can expect more coming your way.

That said, I know its pointless to be critical instead of being helpful. So here are some tips to be awesome at what you do:

1. Introduce yourself with your title

You represent the firm, but what you do there will set expectations right with the entrepreneurs. Most Firms have a lousy habit of not even updating their current website and partner list, so an Introduction that says “Hi, I am So-and-so, an Associate with XYZ firm and I work closely with Partner Mr. X on Deals related to a,b,c sectors” would make it a better intro.

2. Be Clear

Please do not make claims about funding and all – Try very very hard not to set false hopes. We know the power you have is only to get names in a pipeline. Not even the principals have power to make that claim [3], so be very clear why you are reaching out to a startup – “To get the startup in your list of startups to watch” aka the dealflow pipeline. Entrepreneurs are racing against all the odds set against them, letting them know that this is a relationship building excercise, not a funding excercise, will also give them the opportunity to prioritize accordingly.

3. Think twice, thrice before asking teams to work on a document

I have met startups who sit and slog making market projections and research – well, thats kinda your job, isnt it? – and in trying to make business plans with five year projections.

Hint: the startup still doesn’t have a product, they don’t have a customer and they don’t know who might pay for it. That’s a hell of a lot of variables, and what you are asking them to produce is nothing short of writing fiction. Let us do more realism and less fiction, please?

4. Be hands on.

And by that we mean, be useful. If you love tech, what we really really lack in India (and globally) are guys who can look at a product and give feedback. If you sign up, give the product a try, recommend it to a few users, get them to try and send the team an email with genuine usability, functionality and customer feedback, guess what? its two birds in one stone – you don’t have to ask questions about who uses the product anymore because tada! you yourself know, and you also get on the good side of startups and the advisors / accelerators who are helping them.

5. Can you get them customers?

If you are talking to a startup that has its beta / product launched, can you push it internally within your team and your portfolio and get them to adopt it? You might have to build a system where your portfolio entrepreneurs get a single point/vote in the companies you are looking at (Tell them Y Combinator does stuff like that, internally to sell it) – which helps in two ways;

a) You get an entrepreneur’s perspective that can really help startups and

b) if they are solving a real problem, they might get paying customers.

6. Add Meaningful Value.

You know that there are only four defined roles in a VC firm, and you are at a dead end job if you are not an entrepreneur because its not easy becoming a partner, climbing up the associate route. You know what will put you up there? Proving that you can work with entrepreneurs and can be the second mind (head). So be selfish. I have been blown away by the value add some of the associates and principals like Anshoo of Lightspeed, Anand Daniel of Accel do for companies (in India) – so much so that I ask teams to talk to them. See, how it works?

All of this gets you on the good books of entrepreneurs, startups and folks like me. If you are an awesome associate/analyst, I’d love to meet you sometime and lets do this work together. We are all on the same side of the table. [4]

Do Entrepreneurs really Care? Here’s a requote of a quote from Kris Nair’s blogpost [5], of Sampad from Instamojo [6]:

I hardly see an investor saying that:

Hey, I used your product and it’s awesome / awful / sucked etc and I think you can do this or that from his/her experience which can help the founder achieve little bit more on reach, retention or revenue metric of the company.

You know where to start to build moat – almost always it starts with what most others wouldn’t care doing or looking at. Be an awesome associate – don’t suck.

————————————————————————————————
[1] http://www.vijayanand.name/2013/06/darn-the-associates/
[2] http://www.thestartupcentre.com
[3] http://www.vijayanand.name/2013/05/ask-vijay-what-goes-on-inside-a-vc-firm/
[4] http://www.vijayanand.name/2013/05/the-same-side-of-the-table/
[5] http://krisnair.com/post/34818850722/vc-associates
[6] http://www.instamojo.com/

06/04/201306/04/2013

The Business of Accelerators

Accelerators are in the business of creating Startups – or atleast taking the first bet. Its a startup of startups; Which means, everything they talk about as risk, in venture capital nicely gets bundled up and will get put on the head of what is the accelerator.

Going back to the basics, Now depending on which accelerator you are involved with, there might be two or three key milestones that they would provide as value:

Spit Polish your Pitch in a matter of weeks and put you in front of a lot of Investors and hope one of you becomes a hit (Usually this model also involves accelerating a lot of companies in one go)

Have an Alumni or a Brand that can give you early traction, and mentors who can give you an overview (working with a startup to dig deep will take a few weeks usually)

The hands-on accelerators that will work with a handful of startups, but will dig deep, have a few dedicate personnel whose job would be to help you eliminate market risk (have a product, but there is no market) and also help with Go-To-Market strategy, setting up a board, advisory etc. Thats really a deep dive model and most accelerators wont touch that route with a ten foot pole – we at the Startup Centre, however love doing that kind of stuff.

Depending on what level of support you are getting, the duration of the programme will vary, but you get an idea. All of them, in someway will put some money in, quite honestly that would be the easiest (valuation of the company is the lowest and shares are cheaper comparatively – it makes sense to do it).

Thats the Pledge, if you can call it.

The Accelerator Model, no matter how sexy it may sound is a very very complicated and fragile model. It throws the firm in the side of the entrepreneur than the VC. The VC gets rather hefty (or sizeable) management fees of the funds they manage (usually 1-2% of what they manage divided over 7-10years) and the managed fund sizes are usually in the three digit millions, so that usually covers for operations. Accelerators on the other hand, even if they have a fund, owing to the nature of making small bets, the fund size would be small and the management fee, so to speak, usually covers the legality in managing the fund. Nothing more – Yes there is hefty legal fees involved in auditors, lawyers and stuff when you manage a fund.

And the accelerator has the cost of infrastructure (if its provided), the man power, operational costs, and travel where they go around meeting companies. All of this comes from a very very thin shoe string budget in most cases.

That’d be the turn.

Now, are they making a sacrifice and killing themselves over a cause. Not at all. But however, the upswing for an accelerator is in that small amounts of equity that they are taking in. If you are a banker by any chance and can do a little bit of excel sheet math, you will realize that the Approx 10% that is taken (out of which usually 70 – 80% belongs to whoever brought in the capital also called LPs), is very small and if the venture goes through two rounds of funding or so, will quickly become a 1-2% play (which is the “carry” that the accelerator makes – sameway a VC fund makes money)

Which means, in order for the accelerator to say make a million in a company (and it usually takes about 3-4 years to think about any reasonable exit, in most cases way more) the company has to be valued, literally, at a billion. The chances of building a billion dollar company? Well, the US has 20 companies that are listed and 40 companies that are privately held, who are billion dollar companies in the last 20 years. close to 30,000 companies get funded in the US per year, so you can see the odds.

What you get is a fantastic community. You work shoulder to shoulder with entrepreneurs and pushing them to be their utmost best, because quite literally you make money only when they do. Some accelerators – if they are short termed, will go the mass model way (put 30 – 40 companies in a batch), raise the valuation by 1x or 2x and want to dump it on someone else and go to the next batch. They make less money, but over volume, they make more.

Not sure, if that is a model that is exciting for us, personally. I’d rather be associated with one or two companies that stand out, and perhaps stand the test of time – solving real problems.

Honestly though, if anyone were to ask me if starting an accelerator was a good Idea, its not. Its hard work, but if you love working with entrepreneurs, this is the best place to be. Its a lot of community building, lot of hard work, with not much money to hire talent – a lot of lonely hours, but along the way you also have the possibility of building a few amazing companies.

That’s the Prestige.

PS: Most wont make it.

09/01/2013

Angel Office Hours in Mumbai

After our 1st session of #AngelOfficeHours in Bangalore, Our next Angel Investor Office Hours will be in Mumbai on 22nd January 2013 at the Mumbai Angels office at 111, Industrial Area, Hindustan Minerals Compound, Next to Chroma Store, Cinemax Lane, Sion East, Mumbai 400022.

Seasoned Angel Investors Anil Joshi and Ajeet Khurana of Mumbai will offer 8 Startups a chance to pitch to them. Startups will get candid feedback on their funding options, and can ask for actionable advice on their business plan.

Timing: 3 PM to 5 PM. Each startup will get 30 minutes with either Anil or Ajeet.

Please fill this form to sign up: http://goo.gl/0HM6a

*coordinated by Pranay Srinivasan of eVitaran

22/12/201222/12/2012

Announcing the angel investor office hours in Bangalore (soon in Mumbai and Delhi as well)

How to hack your seed round in India, got 63 emails, comments and twitter messages asking me to take the post to its next logical step.

The 3 biggest issues entrepreneurs raised were:

1. They dont have the email addresses of these angel investors. Even if they did send them an email, responses were slow or went into a “black hole”.

2. The angel networks in particular have a fairly arduous process to filter, select and decide on new companies.

3. Many angel investors were not proactive in telling them what areas (sectors) they were interested in funding, so entrepreneurs could tailor their pitch to be more specific and target the right person.

I am extremely pleased to announce that in Bangalore (soon in Mumbai and Delhi as well), we will have a few of the top angel investors from IAN (working on Mumbai Angels and others as well, stay tuned) who are committing to office hours each week to meet entrepreneurs and provide them quick feedback on their funding options.

From January 2013, five of the most prolific IAN investors, Venkat Raju, Manav Garg, Nagaraj Prakasam, Sharad Sharma and Sundi Natrajan will hold monthly office hours in 2 locations – the Microsoft office at Lavelle Road and Eka Software offices in Outer Ring Road.

Update: Anil Joshi of Mumbai Angels has also agreed to host office hours in both Bangalore and Mumbai once a month.

Each session will be for 30 minutes per entrepreneur and a max of 4 entrepreneurs will be given time on a first-come-first-serve basis every month. Only one session per entrepreneur per year will be allowed.

Second, after each investment led by these investors they will write a quick note to tell us more about why they decided to invest. This will tell us more about what their thesis was, the trends they were betting on and other relevant details.

Finally each of these investors will share their investment thesis for 2013 and the sectors or areas they have expertise in or are passionate about. For example, Sharad’s an expert in Internet and advertising, whereas Sundi is passionate about education.

I am very excited that they are committing to these office hours. As entrepreneurs we will get a chance to interact with them and get their initial feedback so we can fine tune our plans and strategies to maximize our funding chances.

I do have one request: We’d like a volunteer to help program manage this effort. You should be willing to commit about 1-2 hours per week. If you are interested, please send an email to: mukund at thrisha dot com.

If you are a seed investor and you’d love to join this program, do send me an email as well.

P.S. A few folks have been asking me about other cities, such as Chennai, Hyderabad, Pune, etc. I wont be able to commit to these investors coming to those cities, but will try and get a few more local investors from those cities to hold office hours.

23/08/201208/10/2012

Who are the “early adopter” Venture Capitalists in India

Like you, I assumed that all VC’s are risk takers. I mean as an asset class if you have to provide the highest returns over the long term, I would suspect you have to take big risks to get big returns. The average Indian bank has been giving around 8% annual returns on FD (source), real estate returns about 13%, and gold loan providers will give you close to 15% I am told. So, VC as an investment class should offer higher returns given how ill-liquid they are and how risky they tend to be.

So, how do you really measure if a VC is an early adopter versus a late adopter? (lets keep it simple and only put them into 2 categories).

My thinking is the only way you can do that is to look at their investments (portfolio companies) and find out the categories of companies they invested in. Then find out if any other VC’s invested in another company in that category after the “first” VC did. There are other ways to do that, like ask entrepreneurs who responded the fastest when they were looking for funds, but those dont evaluate who puts their money where their mouth is.

Why is this question useful to answer?

For entrepreneurs who are innovating in a new area, this list of early adopters will help you determine who you should go to first versus who should you expect will fund a possible competitor.

Lets define our methodology and assumptions:

1. We will look at all their websites and make a list of the Indian VC portfolio. Fortunately we have that list of over 50 VC’s in India.

Flaw: Many dont update their website as frequently so there may be a 20% (or higher) error, but I have tried to be comprehensive.

2. We will then categorize their investment into 5 buckets – Media and content, eCommerce, Business to Business, Mobile and other (Education, Healthcare, etc). This is important so we know not only which VC’s are early adopters but we can also try to find that out by sector.

3. Then we will look at the announcement dates of their funded companies from press releases, Unpluggd, YourStory, ET and VCCircle. We will give them 2 points for every investment done in a sector before any other VC did.

Flaw: Most (I suspect over 50%) of companies report their funding 3-6 months after they have raised the money, so this will be a large flaw, but lets do the analysis anyway.

4. Finally look at stage of investment. If a VC puts money in the series A, I would give them two points in the early adopter bucket. If, however they participated in series B or later, they get one point in the late adopter bucket.

First let me give you the results (not in any order other than early adopters vs. late adopters).

Early adopters VC’s.

Accel (eCommerce, B2B) – 78 points
Indo US Venture Partners (B2B) – 56 points
Saif partners (Mobile, eCommerce), but they are late adopters in B2B – 49 points
Venture East (B2B) – 45 points
Sequoia (Media) – 46 points
Seedfund (Scored enough, but dont have a clear winning category) 42 points

In the middle

Blume ventures – 40 points
Nexus Venture partners – 36 points
Helion – 36 points
Ojas ventures – 34 points

Later adopter VC’s – all scored less than 30

Bessemer Venture Partners
DFJ
Cannan partners
India Innovation fund
Inventus Capital
Footprint ventures
IDG ventures
India Internet Fund
Lightspeed partners (but have done well in Education)
Norwest
Sherpalo

What I hope this list will do?

1. Make Indian VC’s think about being innovation catalysts rather than ambulance chasers. I understand you have a responsibility to provide returns, but you also have a responsibility to grow the Indian startup ecosystem. Might I suggest a 5-10% of your portfolio towards risky, “first time this is going to happen” investments?

2. Make Indian company founders announce their funding. Unlike the US, here entrepreneurs are loathe to do so. I can understand the competitive pressures, but not doing any announcement is just lame.

3. Educate Indian entrepreneurs on their target VC list. Depending on the opportunity you are trying to pursue, please target the right VC firm. The only thing you have (and dont have) on your side is time. Use it judiciously.

P.S. I have confidence in the methodology but I would be the first to admit its neither comprehensive nor scientific. If you are an eager MBA / Engineer / analyst and would like to help make this methodology and analysis more robust, I’d love your help. You can take all the credit. In fact, I can convince many publications to give you credit for the work if you desire and if you keep it updated every 3-6 months.

P.P.S. If you are a VC and not in the early adopter list, or you are not happy with the analysis I’d also welcome your associate’s help in making this analysis robust.