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Thursday, August 5, 2021

Why ‘founder-first investment firm’ 9Unicorns is focusing on startups from Tier II, III, and IV cities

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Dr Apoorva Ranjan Sharma, who founded incubator Venture Catalysts in 2016 to support and mentor idea-stage startups, decided to launch investment firm 9Unicorns in 2019. 

With Rs 500 crore in total disbursement, the firm has so far invested Rs 100 crore in over 60 startups. A good chunk of the investments is made in startups beyond metro cities as Apoorva feels “startups from Tier II, III, and IV cities have sustainable business models and innovative ideas”. 

Giving an example, he says Silvassa-based food product startup My Fitness was making Rs 5 crore in monthly revenues before 9Unicorns invested in them, while Bengaluru-based Janani created a product that could help in child conception.

In an exclusive interaction with YourStory, Apoorva reveals why 9Unicorns is bullish on non-metro and idea stage startups and speaks about the VC firm’s funding philosophy. 

Edited excerpts from the interview:

YourStory (YS): Why did 9Unicorns  select to put money into thought and pre-seed stage startups?

Apoorva Ranjan Sharma (ARS): Thought-stage startups are normally our focus as a result of India has an enormous potential to supply extra unicorns. Presently, India has change into a 100-unicorn economic system and round 300 startups are within the soonicorn stage. Numerous entrepreneurs who’ve labored within the house have offered their startups to those unicorns and gone on to begin different companies. This implies India is flush with potential.

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Tier II and III cities are producing a lot of concepts. Earlier, 80 p.c of the offers used to return from metro cities, however now 30-40 p.c of deal flows are coming from past the metros. We see there is a chance to create an accelerator fund within the thought stage to focus on these first-generation entrepreneurs and serial entrepreneurs. We normally give Rs 1-1.5 crore to first-time entrepreneurs whereas skilled ones get between Rs 2-3 crore for funding. 

These startups want help — not simply cash but in addition mentorship. We have now been lucky sufficient to get loads of offers from Ahmedabad, Raipur, Rai Bareilly, and others. I simply bought a deal from Silvassa, referred to as My Health; they’ve change into the market chief within the peanut butter house. Enterprise Catalysts has additionally change into so huge that they make about 10-15 investments monthly. 

Dr Apoorva Ranjan Sharma (proper, sitting) together with his 9Unicorns staff

YS: What’s the distinction between entrepreneurs from small cities versus these from larger cities?

ARS: Entrepreneurs from small cities have actually good enterprise sense. For instance, My Health is doing Rs 5 crore in income each month and didn’t even elevate capital but. After we invested in them, their backside line was additionally superb. Beardo, which got here to us from Ahmedabad, had one other nice enterprise mannequin. They don’t seem to be simply fascinated by this concept of a startup. To not say that entrepreneurs coming from metro cities don’t have good enterprise sense or fashions. However corporations past these areas are non-tech in addition to good enterprise concepts. 

YS: What do you search for in a startup earlier than investing?

ARS: We’re completely a founder-first funding agency. We take a look at a founder’s enterprise sense, capital-raising capacity, and enterprise fashions. The thought can also be necessary but when a founder has all these qualities, then there’s a good likelihood the agency may very well be in enterprise for a very long time.  

Startups on the thought stage need assistance with hiring good expertise. They want steering on technique for one yr. In addition they want help to boost the following spherical of capital and strategic investments. For Janani, we bought Apollo Hospitals as an investor. However not each startup is on the lookout for all the pieces. It differs from agency to agency. They’re additionally fairly good sufficient to determine many issues on their very own. 

YS: When do you attempt to get an exit from pre-seed stage corporations?

ARS: Usually, this era is one to 3 years. Typically, even 5 years, as a result of idea-stage traders get a number of exit gives when institutional traders be a part of. However some offers get good returns and also you lose cash on some. Some startups additionally die in a few years. In 9Unicorns, we have now round 10 offers which have subsequently raised one other spherical. 

YS: How has the pandemic modified the methods during which startups function?

ARS: This pandemic has been actually good for startups. Numerous US-based enterprise capitalists are investing in India. We’re getting wonderful offers within the thought and seed stage. Many individuals have additionally left their jobs to begin a enterprise; many have come again to India and began working right here. 

YS: How has the startup ecosystem modified because you began Enterprise Catalysts in 2016?

ARS: The Indian ecosystem once I began had solely 500-1,000 angel traders. At this time we’re round 20,000 angel traders. The ecosystem has grown so much. We added round 15 unicorns this yr and there’s a potential of including 100 unicorns, that are unfold throughout at the least 20 cities. 

Startups are attempting to resolve Indian ache factors fairly than being clones of American or Chinese language corporations. Unit economics and enterprise fashions are a lot better and at the least 10 p.c Indian startups are focusing on world markets. 

Edited by Teja Lele Desai

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