How do I invest in startups? How much does it take to invest?
Investing in private Indian startups
I had always wanted invest in startups, its sort of an activity that helps me develop some skin in the game being an aspiring Venture Capitalist.
Very early on in 2018 I came across a crowdfunding equity platform called Republic.co and ever since I had always been fascinated about how startups raise funds, how a term sheet looks like and what are the different facets of startup investing.
I was sure that I want to try out startup investing because it will provide me with some real practical learning which I wouldn’t get by just reading about something and not applying it.
After trying to invest in startups through Republic.co which offers its investors to start investing as low as $100, very soon I realized that none of my payment methods would work. So I tried a bunch of times and came across different issues and stopped trying.
When I started looking for alternative startup investing platforms, I came across TykeInvest and GripInvest.
TykeInvest is a platform which allows any retail individual Indian to invest in private startups with as low as INR 5000 ticket size. But most of the campaigns are set to raise around INR15000.
When I read more about GripInvest I started to understand that its not a startup investing platform, rather its a lease financing startup where you can invest in a special purpose vehicle which will raise funds to buy assets that are then leased out to a company or a group of companies that are listed during the campaign. This is something completely different, you can checkout GlideInvest if you want to earn fixed income with low risk. The platform offers anywhere between 22% IRR but post the tax that gets cut at the source which is the special purpose vehicle, the returns are not very significant.
So I soon understood that GripInvest is not something that I was looking for.
But TykeInvest was.
I had been checking out Tyke and their campaigns for last 4 months, to be honest the kind of startups that come there are of mixed bag, there are some very good startups where as there are even startups that are very early or pre revenue that might have a very high chance of never getting back your investment. But that’s how startup investing works.
The way startup investing works is that Investors invest in minimum of 50-100 companies over time to be able to have a bunch of homeruns(startups with (10X to even 500X). If you get a couple of startups which hit a homerun then you would recover most of what you had invested and also additional returns. 20% of them would return a decent 2X-5X returns and the rest would give you sub par or even 0 returns.
Startup investing is not as fancy as it looks. You cant expect to invest in 2-3 deals and expect them to give you 100X returns, that’s not how it works. Its about getting those potential unicorns, the so called hot deals in your portfolio. So to do that you need to diversify your investments so that you can have a good number of portfolio startups.
Coming to how I invested in my first startup deal, its through TykeInvest. They have a lot of campaigns running and new once get added every fortnight or a couple of weeks. So till date I had analyzed 8 startups and invested only in 1. There are a lot of things that I take into consideration when I invest in a startup.
More on that later for some other day. Where I will share about which startup I had invested in and what my thesis is.
Cool folks I hope you had got to understand how startup investing works and how you as a retain individual investor can start investing in private startups and be a part of their growth story.
Cheers 🍻
Between, these are all my views and not an investment advice, do your own research before taking any decision.
I will see you in the next one🖖
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