Wondering how to invest in startups in India? You’ve come to the right place.
Stories abound of startup companies in India making it big and, in turn, making their investors extremely wealthy.
Because people in India and entrepreneurs in India have started looking at startups and technology as a medium to make a lot of money.
While this is not the only way to make money investing in startups in India, catching trends early in such an atmosphere is very likely to result in great returns.
Why invest in startups in India?
a). Growth potential
India’s 1.3 billion people are the world’s largest consumer market.
From a little less than $1 billion (Rs 600 crore) in 2000, the Indian startup industry is now approximately $40 billion (Rs 2.5 lakh crore), with an average annual growth rate of around 35% in recent years.
b). A sense of fulfillment
One who invests in the startup company feels a sense of fulfillment. The person who invests understands and feels a sense of ownership in the company.
This is very important for a person who wants to make money. After all, no one makes money by just spending money.
c). Support an idea you believe in
By investing in the startup company, one is supporting an idea that one believes in. Many a time, a person invests in a startup company out of the belief that this company will make something great or cool, which will benefit humankind.
d). To support your circle
Maybe it is a friend or a family member venturing into the world of entrepreneurship. If you have the means, you can show your support by investing in their business.
Platforms for Startup Investing
But startup investing platforms offer a special list of companies you can invest in, and many investors have listed on these sites. Check these platforms.
Wefunder is on a mission to help over 20K founders achieve their goals and get their businesses off the ground.
So far, the platform has funded over 1800 founders with at least $443 million. It has also created over 25,000 jobs.
Currently, there are over 1.4 million investors using the Wefunder platform to find startups to invest in. This is a great way to get a feel of what is happening in the world of startups in India.
Thinking you would need millions of dollars to start using the platform would be wrong.
With Wefunder, you can invest as little as $100 in the startups and small businesses you believe in.
Also inside, you can find all types of businesses to invest in. From brewing, curing cancer in dogs, to vegan marketplaces.
This platform promises three things;
- Access a curated selection of startups
- Invest and learn to diversify like the pros
- Belong to a community of 620,000+ investors
And here is how it works;
1). Access the startup asset class – SeedInvest has lobbied to change the rules so everyday people outside the venture bubble could finally invest in private startups, a historically high-performing asset class.
2). Invest in vetted companies – Only a small selection of companies make it through our due diligence process. SeedInvest is not an open marketplace where anyone can just click and raise.
3). Diversify like a VC – The platform offers lower minimums than traditional angel investments so you can back more companies. When you diversify, you increase your odds of positive returns.
Here are some numbers;
- 620K+ Platform Investors
- $410M+ Raised on the Platform
- $1.5B+ Raised by SeedInvest Portfolio Companies
And they have Angelist India, which is also a deal syndication platform for accredited investors to invest in Indian startups.
The cool thing about this platform is that anyone qualified can invest in startups in India.
For an individual investor, one needs to have net tangible assets of at least INR 2 crore excluding value of his / her principal residence and who:
- has early-stage investment experience, or
- has experience as a serial entrepreneur, or
- is a senior management professional with at least 10 years of experience,
And for the founders, raising capital through AngelList India benefits the portfolio company since the investment received by the portfolio company is exempt from tax under Section 56 of the (Indian) Income-tax Act, 1961 (‘Angel Tax’) which could otherwise apply in certain situations if an investor invests directly into the company.
How to Make Money Investing in Startups
When you invest in startups in India, you enter into an investment contract with the company. Now, there are four types of investment contracts and each comes with different ways you can make money.
1). Debt – When you invest in debt, the startup company usually pays a fixed loan at a set rate of interest for a fixed term.
2). Convertible note – When you invest in a convertible note, you get the security of a direct equity investment in the company, along with a note that gives you the opportunity to earn equity in the company at the end of the term.
3). Stock – When you invest in stocks, you get a stake in the company that entitles you to share in future profits and, in many cases, the ability to buy a portion of the company at a predetermined future price.
4). Dividends – When you invest in a dividend-generating company, you usually get dividends along with shares of the company, and the company gives you the option to buy a portion of the company at a predetermined future price.