Why investing in startups should be a part of your portfolio
Family offices can play an important role with startups and must engage with sufficient knowledge and understanding
When compared to other nations, Indian investors are still not among the significant lot when it comes to investing in new-age businesses, and Indian startups have mostly obtained capital from outside the country. It is critical to recognise wealth accumulation within the country because most investors, including Indian family offices, HNIs, and UHNIs, invest in traditional assets such as equities, real estate, and gold. However, the Indian startup ecosystem would grow significantly if Indian family offices directed a portion of their capital toward financing Indian startups.
The Confederation of Indian Industry held a master class for family offices with the goal of raising awareness about the importance of investing in startups and generating interest among family offices in active participation in startups.
While addressing the participants Mr. Kris Gopalakrishnan, Chairman, CII CIES mentioned that family offices can learn a lot while working with startups because startups create jobs, create wealth, an engine of growth for any economy, and brings innovations to market using resources very efficiently. Furthermore, India needs to increase the domestic funding because today most of the money at later stage funding (Series C and beyond) comes from outside India, which is good that startups are getting funded, but the wealth generated out of that benefits countries outside India and such startups become non-Indian from an ownership perspective. This is another segment where family offices can play a bigger role for the benefits of the growth of the Indian startup segment and ownership can continue to reside here in India with Indian institutions or individuals.
Ms. Poyni Bhatt, CEO, SINE, IIT Mumbai, gave a quick overview of the Indian startup ecosystem, emphasising that the interlinkages or how active the Indian startup ecosystem are best articulated during pandemics. There is a funding vacuum between seed and later-stage financing, and the majority of the capital comes from outside India, so there is a significant opportunity as well as a gap that domestic capital, particularly family offices, can fill. Currently, there are around 140 family offices in India, but their involvement in the Indian startup ecosystem is less than 1%. Hopefully, Indian unicorns and recent startup IPOs will pique their curiosity, and they will begin investing in startups either directly or through Angel Networks or VC Funds.
According to Mr. Ashank Desai, Founder, Mastek Limited, diversified portfolios perform better in terms of returns over a longer period of time, hence family offices should diversify their investments. Who knows, they might wind up investing in Google or Amazon. Furthermore, when family offices invest in the startup space, they open the door to new opportunities for their existing enterprises. There is a great possibility today for family offices to engage in entrepreneurial businesses outside of India because there are angel investee firms that offer such investment.
More than thirty family offices who are the potential investors participated and interacted with subject matter experts during the said masterclass. The masterclass also carried out a panel discussion where sector stalwart like Mr. Ritesh Agarwal, Aroa Ventures & Founder and Group CEO, OYO Hotels & Homes; Mr. Rajat Tandon, President, IVCA; Mr. Mohit Dhawan, Sr. Vice President, Investment Office, Hero Corporate Service Pvt Ltd; Mr. Srinath Ramamurthy, Head - Strategic Partnerships, Financial Services & Investor relations, TVS Automobile Solutions Ltd; Ms. Ganga, Mentor in residence SINE IIT-Bombay discussed in details about the various Investment opportunities and methods for family offices while investing in startups. Later Ms. Gowree Gokhale, Partner, Nishith Desai Associates explained various legal aspects while investing in startups.