We get candid with Ashwin Raguraman, COO , India Innovation Fund. At the fund, he is responsible for initiating deal flows, fundraising, evaluating start-ups for investment and supporting portfolio companies in the technology sector. In his earlier role at NASSCOM, Ashwin played an instrumental role in the creation of the India Innovation Fund.
The need for creation of India Innovation Fund
While it takes time for the big companies to innovate, it is often noticed that there are lot of tech startups that have Intellectual Property (IP) and are innovating. This fund was conceived with the idea to support these early stage startups. The fund was officially started in April 2010, and has invested in 7 early stage startups so far.
Selecting & Nurturing a Startup
The criteria to select a startup are :
- Firms whose businesses are built around technology innovation
- Offerings in the Information and Communication Technology (ICT), Life Science or Medical device sector
- Firms set up in India or with a significant Indian presence
- Firms in the early stage of their existence
IIF looks at early stage startups that have Intellectual Property(IP) that defines their innovation, some initial traction and signs of market acceptance. Even though the startup does not have revenues yet, there must be some demonstrated evidence of market acceptance of the innovative product. Here is how IIF helps the Startups, once they have decided to invest in them :
1. Access to Markets : As the investors in IIF are not just financial investors but strategic investors, they participate in the entire process of selecting, evaluating and funding a startup. So, when a startup gets funding from IIF, its investors also help open doors in large organizations and provide them with contacts that may not be possible otherwise.
2. Mentoring: The investors will get on the board and provide meaningful insights on how to convert a successful technical product into a commercially viable business.
3.Lighthouse Effect: As IIF invests in early stage startups, it provides light house effect in a way for other VCs/ Funding Agencies to know the potential of a given entrepreneur/ early stage startup and mutually help the investor and entrepreneur.
On Funding Amount & Process
We typically invest 1cr-5cr ($250K-$1M) in a start up. For firms requiring more capital, we bring in co-investment syndicates.Some of the prestigious partners in IIF are TCS, Bharti Airtel and Govt. Of India Science & Technology Department.
When IIF decides to invest in a Startup, sometimes it is noticed that the startup founders do not have the knowledge of funding process and have not taken the effort of going through the compliance requirements.[pullquote align=”right”]In simple terms, Innovation is to Create Value. Innovation is to improve on the current state of Art of Technology.[/pullquote]Also, the Startup does not have the Operational Structure required for the funding to take place. Although the funding cycle varies per startup, usually IIF guides the Startup until they have done their financial & legal due diligence before placing the funds.
For Startups who wish to get funded, here are 3 “must-do” things:
1. Do Market Research well. Earlier days, the competition for a startup used to be another big established company – but times have changed fast. Now, it pays well to understand which startups, mid-size companies and bigger ones are the competitors.
2. Understand the Dynamics of the Market you’ve decided to sell the product or service in. Before approaching VC, talk to a few people in the industry and understand the basics and pain points well.
3. Qualify yourself for a funding. A Successful Tech Product does not guarantee a commercially successful company. The product needs to have some initial traction and market acceptance. It gets easier for VC to think of putting their money in, where potential customers are interested too.
Usually, IIF is the first institutional investor in a company. They help the startup to grow from an early stage to a stage with few customers and a recurring revenue stream. The startup would then be in a position, that would help them raise Series – B. Typically, IIF takes a call on continuing to be the investor in the startup, by the time it reaches subsequent rounds of funding, past Series-B.
If you meet all the criteria for India Innovation Fund, please apply here.