Are Funding Platforms Really Adding Any Ding To The Funding Ecosystem?

Beyond Fund and PR Value, Are Angel Funding Platforms Adding Any ‘Ding’ To The Funding Ecosystem?

The angel investing scene in India has picked up very well. Just last year, there was 3X angel investments (as compared to the year before).Do The Ding!
What’s propelling these angel investments?
The primary reason is of course, the rise of angels and the fact that startup space has gone mainstream with quite a few success stories to look up to which makes angel investing a better bet than other investment options.

Beyond Fund and PR Value, Are Angel Funding Platforms Adding Any ‘Ding’ To The Funding Ecosystem?

One of the questions we often hear is the rise of angel funding platforms in the country and whether they are adding a seriously differentiated value in the entire chain.
We look at 2014-15 data and here is a quick breakup: Out of all the angel funding deals that happened in the financial year, less than 10% happened via the funding platforms. But that’s okay – because most of the platforms are very new.
But the real truth is that even out of those that happened (rather, announced) on funding platforms, less than 30% deals actually happened on these platforms.
Here is how it works: some of the funding platforms tend to waive off their commission fee to have startups and investors show (and announce) the deal as part of the platform! This really means nothing beyond the PR value; and as with anything startups, helps with better valuation of the platform as it creates more leads/buzz.

Is India A DIY Country?

As part of running, we decided not to launch the platform and instead mimic the real-life interactions. Here is what we found out – most of the funding platforms are actually overly hyped iBanking services!
These aren’t platforms – primarily because most of the startups and investors need hand-holding and manual intervention (even in mutual communication) and most of these funding platforms are services play with a very little disruption element.
Plus, there isn’t a lot of information hoarding that’s happening in India. Smart founders are connected to investors much before they start to look for funding – so the demand-supply gap while it exists, will NEVER be skewed towards a single entity.
So is it even worth the effort? The so-called Angel Platforms of today like LetsVenture* in India are very operations driven – most of them spending almost the whole cycle of fundraising calling up and coordinating with HNIs and angels. So how are they differentiated from Mumbai Angels or IANs of yore – unfortunately not very much (most of the platforms are actually syndicate-groups which is far from being called a platform).

Do We Even Need An Angel (Pure-Play) Platform?

Our qualified view is that there definitely is a need. However, it requires a fresh approach than following the herd which has been shown by the present incumbents. While LetsVenture began with a nice fresh outlook to the problem, the lure of closing deals has made them forget the platform it could have been*. Unfortunate events internally have also hampered them a lot.
We do need the next set of angels to come on to a great platform. But not one whose only function is facilitating investments. Such platforms will inevitably be commoditized out. The real value addition is in integration upstream where qualified and curated leads come into systems – thereby making new (and existing) angels discover new startups easier AND invest easier.
Let us know your thoughts!
[Written by Pratyush Prasanna And Ashish Sinha.]
*We love/respect LetsVenture for what they are doing/have done. We have used their name to purely represent a lot of what other platforms are doing in this space and not to demean their effort.

1 comment
  1. Interesting points guys, but as you say, this is something the ecosystem needs. Plus, it’s early days to really say that platforms in general are not adding any value. I know the teams of Globevestor & and both of them are trying to make fundamental improvements to the angel investing experience.
    What I would love to see from these platforms?
    1. Personalised curation: Right now, platforms tend to do just curation. Saying hey, this is a shiny new startup, invest in it. That solves the money problem for sure but would be awesome if startups and angels connect on domain expertise & focus as well.
    2. Trust, at scale: Right now, all platforms are bootstrapping trust though the personal trust of the founders. This will clearly need to scale beyond just that. Network effects will happen eventually but the path to that level will be rocky or slow. Maybe both.

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