Bengaluru: HNIs and UHNIs Offer Funding Lifeline To Startups Amid Funding Winter
Over 9,000 high net worth individuals (HNIs) and ultra-high net worth individuals (UHNIs) in the tech sector are not only seeking early access to promising ventures but are also becoming lifelines for startups facing funding challenges. According to a report by funding platform LetsVenture, these individuals prefer to invest in pre-seed and Series A rounds, with nearly 2,500 of them participating in seed and pre-series rounds. In total, India is home to approximately 10,000 to 12,000 tech HNIs and UHNIs.
The report also revealed that HNIs and UHNIs with a lower risk appetite distribute their portfolios across multiple assets under management (AUMs), such as corporate FDs, venture debts, asset leasing investments, and alternate investment funds (AIFs). On the other hand, high-risk takers make smaller bets across multiple startups, evaluating each investment deal by deal. Angel networks are the preferred investment vehicle for 50-55% of HNIs and UHNIs, while 45% choose wealth management platforms and only 5% invest through venture capitalists (VCs).
The LetsVenture report found that 70% of CXO HNI/UHNIs prioritize returns on their investments, followed by their desire to mentor startups. Additionally, 75% of businessman/founder-CEO HNIs and UHNIs expressed interest in mentoring startups and contributing to the development of the startup ecosystem. About 55% of businessmen/founders prefer to stay invested for five years and exit the startup at a growth stage. Furthermore, 60% of CXO HNIs and UHNIs and 70% of professionals have an investment horizon of three to five years. The report gathered this data through primary interviews with over 125 HNIs and UHNIs.
Family offices are also actively participating in the startup ecosystem, investing in bridge rounds from pre-Series A to pre-Series B stages. As venture capitalists have been relatively inactive, family offices have stepped in, leveraging their patient approach to investment. However, decision-making within family offices tends to be slower compared to VCs.
While health tech and fintech remain attractive sectors for investors, they are now exploring opportunities in cleantech, deeptech startups, and space tech. According to market intelligence platform Tracxn, Indian tech startups raised $7 billion this year, marking a significant drop of 72% compared to the same period last year when $25 billion was raised. This indicates a more realistic approach among founders, contrasting with the funding euphoria of the previous years.
The LetsVenture report also shed light on the role of lead investors in angel rounds, particularly during crisis periods. Founders have struggled to survive, with many lead investors failing to manage their commitment to their syndicate backers. LetsVenture itself has played a crucial role in the startup ecosystem, raising over $250 million for 650 startups, with a portfolio value exceeding $11 billion.
Shanti Mohan, founder, and CEO of LetsVenture and trica, expressed optimism about India’s startup scene, stating, From an LP perspective, the good news is a strong belief in the India story. Mohan highlighted the maturity of Indian startups, the growth of founders, and their shifting mindset towards building sustainable businesses, all pointing to a maturing startup ecosystem.
In conclusion, HNIs and UHNIs are stepping up to provide a lifeline to Indian startups facing funding challenges in the current environment. With their financial clout and investment preferences, these individuals are not only seeking returns but also actively participating in nurturing and developing the startup ecosystem. As investors continue to explore opportunities beyond traditional sectors, the Indian startup space is expected to remain strong in the coming years.
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