IBS TIMES 216TH ISSUE

TEAM IBS TIMES Vikram Leo Singh (Editor in Chief) Neha Thampi (Senior Editor Magazine) Puja Bhowmick (Senior Editor Website) Priyanka Tiwari Shreya Jariwala Utkarsh Ranjan Vidushi Bisani Nithin Abraham Sandra Maria Babu Simi Gopalakrishnan Harshada Mahindrakar Preethika Sampath

Designed By: Vikram Leo Singh Neha Thampi Puja Bhowmick

EDITOR’S LETTER Dear Readers, We would wish to take this chance to thank current editorial team for their ongoing commitment to the standards to which the magazine aspires, in this 116th issue our cover story "Wings of Start-up" gives inspiration of how to converts an idea into a start-up. We examine different aspects through which a start-up passes to become successful.

And also, there’s a bonus article which includes inside industry view on how COVID-19 hit I.T sector.

In this month’s issue, the twelve articles span a good range of interests including how a start-up grows from an inspiration, start-up before and after digital era, Indian start-up hub, venture capitalists, including ironman of start-up and trending start-up in the world (On Your Own).

Though the canon of business-start-up tales isn't exactly defined, I count a minimum of three standard narratives. There are Rags to Riches, within which a founder takes ordinary business and drives it to greatness by sheer entrepreneurial fire within the belly. (Paytm by Vijay Shekhar Sharma) Then there's We Built It. They Came, within which the founder creates something to please himself or herself and finds customers lined up at the door. (Facebook by Mark Zuckerberg.) commonest, perhaps, is We Saw a requirement. We Filled It. (OYO by Ritesh Agarwal). But of these start-ups followed few similar foundations which may be wont to make their start-up as a unicorn start-up As an editor, it gives immense pleasure to hear from our readers. We intend to improve ourselves on every way step of the way and would like you to invite our readers to support the same. Keep following us on www.finstreetibshyd.in as well. Please write to us and become a part of discussion.

Email ID: editor.ibstimes@gmail.com Vikram Leo Singh (Editor-in-Chief) POC, Team IBS Times FinStreet

CONTENTS ▪ Industry View: I.T industry in COVID 19 Times by: ISHAAN ▪ How a start-up grows from an idea!! by: SIMI ▪ Start-up Before the digital era by: SANDRA ▪ Start-up After the digital era by: UTKARSH ▪ Indian Incubation system for Start-up by: PUJA ▪ Venture Capitalists by: SHREYA ▪ Softbank by: NEHA ▪ Sequoia Capital by: PREETHIKA ▪ Alteria Capital by: PRIYANKA ▪ Theil Fellowship by: HARSHADA ▪ The Ironman of Tech by: NITHIN ▪ On Your Own by: VIKRAM

The IT Industry in COVID-19 Times – A Whirlwind of Possibilities

By: Ishaan Sengupta

I graduated a year back from my B-School, with the intention and the motivation to break through, ‘win over the world’ in 5 years, and for once, be independent, after all these years having been supported by my parents. One year in the industry, introduced me to realities, factors which I hadn’t factored in during my B-School days. Surely, the corporate environment is not exactly something you are exposed to even at times like your internship. It is much more challenging and unpredictable.

Both of these adjectives can have positive connotations, if you are someone who enjoys a challenge.

But nothing can prepare you for irregularities and impediments that come tagging along with a world-wide crisis like COVID-19. There is one statement that can sum up how I, and most agreeably, everyone in this industry is feeling – “The current situation is not as bad as we thought it would be (from a work perspective), but your future is unpredictable, dependent on your own organization’s performance and leadership.” A lot of organizations like mine would add the line “dependent on your own organization’s client’s performance” as well. Which would be a correct interpretation of times to come.

A lot of IT giants would predict their Q2 sales not meeting their expectations. The reason for this would be the inability of many companies and industries, on which the IT Industry depends on, not being able to shift their resources to work as efficiently as that in normal times. What I mean by that is – You cannot expect a delivery business to ensure deliveries are reaching the prospective warehouse in the quality promised working from home. That quality

inspection has to be happened. While IT employees can create software, implement transformation projects from home, their clients cannot do the same. Another example could be Insurance companies being overburdened with claims requests by closing businesses who cannot afford to stay open or claims requests from people taking trips to the hospital to get medical treatment. All these claims dispersal require more time catering to the affected, than looking at IT transformations within the organizations. Again, while IT companies can implement strong software working from home, their client’s might not be having the best of times to give their undivided attention to comparatively temporarily futile activities like that of IT Transformations.

This is where internally, each IT company is trying to offer strategic consultations along with their IT prowess to turn-around the loss period as soon as possible. As someone who is working in this industry, I can vouch for the fact that each employee in the industry is still consulting their clients, completing transformations as we speak. In India, especially many organizations like mine have made sure each Consultant, Developer, Tester has a system at home. This has managed to portray how strong mentally each person in the leadership is as well as how seriously every employee who is consistently delivering results daily, takes their jobs. It is hard times like this that push the team to achieving greater heights.

While the present is not being affected as bad as we thought it would be, the future reeks of a possibility of a world-wide recession. While people lick their wounds

of human loss, they are staring right at the possibility of a financial ruin. You are looking at a possibility of being jobless soon. This is true with other industries much more than the IT industry, but if clients are not able to turn around their financial performances, the IT industry is also headed towards a ruin. This is where individual companies need to make sure that they manage to survive, signing new deals while dealing with the repercussions of recession.

In conclusion, these times are unprecedented, and only organizations which have dedicated, committed employees, all working themselves to meet the collective goals of their teams, can survive the litmus test. This recently study

by S&P Global in the Canadian market explain why the IT industry is still sitting on the iceberg and not slipping below it. (https://www.spglobal.com/en/researchinsights/articles/pandemic-affectscanadian-sectors-differently-evidencefrom-the-information-technology-sector).

Feel free to respond to this op-ed if you disagree.

Reach me at ishaansenguptarishi@gmail.com

A STARTUP BLUEPRINT By: Simi All Our Dreams Can Come True If We Have the Courage to Pursue Them

Lifecycle of A Start-up Stage 1:

-Walt Disney As correctly said by Walt Disney, entrepreneurs are the ones who own a vision and find methods to visualize them.

There is no defined way to success, no book that will impart you with the practical knowledge on how to run a startup. However, there are a few important parameters one must know before venturing into an entrepreneurial journey.

This stage is where the entrepreneurs conceive an idea. An idea could be generated from an underlying problem or by identifying potential business opportunities. The idea should be such that they can be turned into future actions. Conducting market research by carrying out a survey would enable you to determine if the idea is worth pursuing.

Business Model Canvas

Let us unfold a few of them here.

Generating an idea, to develop a market fit, raising a series of funding, scaling operations further, all these ingredients go into developing an idea into a start-up.

Often people get confused between a Startup and a Business!! Ever wondered what differentiates them?

A start-up often attempts to capitalize on an idea or developing a product/ service considering the consumer’s demand and requirements. Business, on the other hand, is profit/ revenue oriented.

How do you decide which one do you adopt? The answer to this varies from individuals. Depending on your objective, risk-taking ability, flexibility, and many other factors help you decide this. Simply put there is a trade-off between going for a start-up versus floating a business. Both the role you wear can give deeper learning and your desired path to reach out to your goals

BMC is a structured representation of your business model. It would help you with customers to serve, the value proposition offered, marketing channels to be used.

Proof of Concept Or Prototype.

A prototype is proof of the physical existence of the idea conceived with certain assumptions. It lets you conduct a feasibility study stating whether the idea/ product is worth pursuing. It necessarily doesn’t have to look, work, feel the same as the final product.

To quote an example we had all been waiting for General Motors to launch its first-ever plug-in hybrid electric car. The final product emerged after many iterations through AUTO CAD- Software since it is

very impractical to work on the prototype.

The developed prototype is later on given to the target audience to test drive. After recording their response and reactions changes were made to the prototype model to develop the final product.

Uber cab. The first version had only a few features. They later they added the feature ‘’invite-only” which added more users on the list. Today we have an option of fare splitting, tracing driver’s location which got added after few iterations.

MINIMUM (MVP)

Airbnb

VIABLE

PRODUCT

It is a way of testing whether the underlying prototype would be acceptable by the target audience. It need not have all the features of the final product but it works on the principle Build, Measure, Learn. It is the first working vision of the final product with features to satisfy the target audience to analyse their response and feedback.

How to build a MVP??

In 2007 Brian Chesky & Joe Gebbia had some extra space in their apartment in San Francisco. They had a solution to the problem which involved addressing the difficulty in finding an affordable hotel room. They decided to test their idea by renting out their space coupled with Wi-Fi & free breakfast. Further iterations were done and resulted in Airbnb. They targeted a particular demographic & capitalized on the existing resources.

Product Market Fit

Here are a few examples of the successful MVP of start-ups, we know Amazon In 1995 amazon started its operations only by packing and shipping books. They bought and manually package their items, not allowing other suppliers to sell their products. Once they realized that their concept worked, they expanded into other different products. They have also become an aggregator model thereby letting other suppliers sell their products.

Uber They tested their MVP as a mobile interface only by founders and friends known as

The biggest challenge for any start-up is to develop a Product-Market Fit. It is important to find the right market that satisfies the market. VCs usually demand a product-market fit. It is a way to test whether the company’s target customers would buy, use & promote through word of mouth. Start-ups had to pivot many times before they found a perfect product market fit. For example, the YObyke launched in 2006 was one of the first brands to launch to electric vehicles. A lithium battery-powered vehicle, it took about 1012 hrs to get charged. As was technologically way ahead of its time, it failed to capture the Indian markets.

STAGE 2 VCs generally do not invest unless the entrepreneur gets the idea validated, gained

traction and proves that their vision can be executed.

Bootstrapping It is a form of financing where you rely on your own money to operate and expand, without the support of outside capital or VCs. The majority of the start-ups are usually bootstrapped- either by the founder or co-founder of the start-up.

achieve.

Seed funding vs crowdfunding Seed funding- a traditional form of raising money usually friends and family your own money or angel investors. It is rightly called seed funding as it is received in the early stages before the company starts.

Crowdfunding is when a pool of people invests in your start-up. Most of the crowdfunding at present is through internet websites like GoFundMe, Patreon, Indiegogo, Kickstarter. All you need to do is to launch a campaign by creating an account on the website explaining why need to raise the money, your objective/ goal, about your idea persuading them to view your idea.

Valley of death •

Valley of Death This refers to the situation of negative cash flow faced by the start-up in the early stages. To overcome this issue bootstrapping, self-funding or funding with the help of family & friends can be resorted to. After the struggle phase there comes a point where the start-up takes a turn and reaches the Break-even point ( no profit –no loss situation ). Once it crosses the Break-even point it starts its growth stage where it receives a series of funding.

•

A, B, C Funding The seed funding the next set of funding is the Series A, B, C to G. Once the companies demonstrate their MVP, thereafter

STAGE 3 Pitch Deck To raise money from VCs you need to have a Pitch Deck. It is a brief presentation of your start-up idea/business model. The most popular term used is the elevator pitch wherein you pitch the idea to your VCs in 60 sec.

Hockey stick It simply refers to the revenue growth pattern which every start-up wishes to

•

series A funding begins. It gives the start-ups the runway for a few years to iterate and develop the product.

Series B funding is the next level wherein the company has to demonstrate strong achievements.

Series C funding generally occurs to make the start-up reach the level of IPO, Merger& Acquisition. can further receive a series D, E, F G, Private equity funding, etc

Stage 4 Unicorn companies Coined by Aileen Lee in 2013, unicorn companies mean those private companies which have reached a valuation of over $1 billion. Around 452 unicorn companies have been listed raising $345 billion.

Dragon companies A dragon firm is the one who has raised $1 billion in a single funding series from investors. Eg of such a company are Flipkart, Uber, Airbnb. There are only 6 companies who has so far received funds in a single round Mergers & Acquisition Once the start-up has reached the growth stage successfully with a huge customer base & market potential, there are many takers to acquire the company. The most popular example is that of Walmart – Flipkart acquisition which took place in 2018.

All these parameters have to be taken into consideration holistically to understand the start-ups & its operations. Having said that there are some great ideas which failed to

capture the hearts of customers, not so good ideas which have shown wonders. You don't have a set of pre-defined rules or instructions to run a great start-up. Your start-up is like your child – it deserves enough care & attention at all stages of its growth. Great Entrepreneurs are the ones who have failed many times and yet mustered the courage to stand up again to win the world.

Start-Up Before Digital Era An entrepreneurial venture which is highly risky and requires fund from the founders or their families and friends is known as a start-up. These entrepreneurs work for developing unique products or services which they have to claim that it is new in the market. There is a huge difference between a start-up and a traditional business. Many often think that start-ups are the same as a traditional business where you are bringing up a new business.

Start-ups are different in one way in which it is designed to grow fast. It should be designed in such a way that it can be sold to a very large market. In the case of a traditional business, you don't need a big market instead you need to create a market.

You can find most of the start-ups as tech start-ups due to this. Online business is very productive due to their nature of time and space consuming. Investment plays a major role in start-ups. A start-up investment can be through angel investors or venture capital firms whereas, in the case of small businesses, they rely on loans and grants. A venture capitalist has more role in the company in terms of giving advice, after all, the investor is the one who is taking the biggest risk. Another important thing is the exit strategy which you have to follow during the pitching of venture capital funding. To maximize ROI venture capitalists depend on the exit strategy. This plan should ensure that there will be steady revenue to pay off investors, an IPO instead of a buy-out or you can opt for another strategy with your funds or loans and grants, either private or governmental. If you are own your own business there won't come a problem with the exit strategy. In a traditional business, you don't need an exit strategy at the start. Even if you decide to

by Sandra

sell, merge or launch it on the stock market the ultimate responsibility lies5 with you.

The last two decades have been marked as the development of Indian start-ups. Due to the limitation of incubators and accelerators, and few active investors and the number of support organizations, the ecosystem was still immature even though some start-ups were founded in the 2000s.

Some exits occurred in the 2000s and there was an increase in start-ups in the last 10 years. Bangalore has emerged as the primary hub of start-ups and later on, it started to develop in Mumbai and National Capital Region (NCR).

Over the last two decades, the start-up ecosystem has evolved in India. Start-ups gained support recently after the joining of many actors. Hence, the ecosystem is in the process of developing. The burst of the dotcom bubble ended the life of few start-ups which came in the New Economy in the late 1990s. Those are times in which internet connectivity was low, broadband penetration was poor and support structures were hardly available. The situation changed in the next decade and more startups entered the market. Some of them performed well and some exits happened.

One of the major start-ups occurred by the Bangalore-based e-commerce start-up, Flipkart with an investment received in 2009. The incubators, accelerators and other support organizations increased fast in the subsequent years. Growth of tech start-ups came in the period 2013 to 2018 between 7200 and 7700 increased overall base growth at 12-15%. InMobi was the first Indian unicorn which is an advertising technology start-up in Bangalore.

Currently, the highest valued Indian start-

up is $10-billion One97 Communications which is the parent organization of Paytm and e-commerce platform Paytm Mall. As the external capital increased, large funds were set u in India and foreign capital came from investors in the US, Singapore, China, Japan, and the Middle East. Financial losses occurred in the early funding boom where more money was invested in start-ups with just ideas. After some time, few funds closed and a cleansing of the market took place, approached investing became more prudent. The situation improved in recent years and government and CSR programs are also making an impact in the investment scene.

Before the digital era there were few entrepreneurs like Jamsetji Tata, Bill Gates and Henry Ford who transformed the world into the next level. In 1868 Jamsetji Nusserwanji Tata who is an entrepreneur and philanthropist founded Tata Group.

The first luxury hotel, Taj Mahal Palace and Tower were incorporated under the Tata Group in 1902. In 1991 J.R.D.'s nephew Ratan Tata took over the chairmanship of Tata Group. Before the world going into digital Bill Gates and his friend Paul Allen found Microsoft which makes computer software on April 4, 1975. Now, during the digital era, Microsoft is used entirely in every computer. When Microsoft became public in the year 1987, the 31-year old Bill Gates became the world's youngest billionaire. Henry Ford who was the man behind Ford Motor Company built his first experimental car in a workshop behind his home in 1896. Later on, Model T was introduced which increased demand for the car directed Ford to develop new massproduction methods to distribute in sufficient quantities. Ford announced in 2018 of its withdrawal of passenger cars,

except the Mustang and Ford Focus Active.

Hence the company will be focusing on pickups, SUVs and crossover vehicles.

The ecosystem is available with more knowledge as the first generation of Indian entrepreneurs have made their mistakes and experiences. These founders became successful and inspired by entrepreneurial

Start-Ups in Digital Era: New Approaches and New Challenges in Businesses!!

This era of technological advancement and development acts as crutches to the humans for innovation. Technology has not been left behind in running businesses and ideas.

An idea which transforms into a product shares the similar path of innovation which technological advancement has gone through in the past. With the explosion of technology in 21st century the start-ups are all set to adopt and are even adopting, numerous ways by which they can generate a handsome share in the market.

This millennial generation of ours demands every service and product at their fingertips without compromising the quality standards. It becomes really challenging for companies and start-ups to harness the necessary online infrastructure in order to serve the target audience. Today, talking about artificial intelligence is not a new thing in start-ups. It helps the start-ups in identifying the customer prospects and their retention strategies through a process of machine learning. The most common example is Chatbot: An AI driven messaging bot interacts with customer for enhanced services. Google: The Global Tech. giant is a base for most of start-ups and business to run; like the food delivery start-ups utilized the Global positioning system as an integral part of their business.

This wouldn’t have been possible if we were not in information revolution century.

Use of a 3-D technology is not new! Startups now use 3-D glasses along with 3-D advertisement in order to create an image of product in the minds of customer across all dimensions. The better the picture of product, more clearly the product is placed in the minds of customer. For a successful start-up to grow it is very essential to

By Utkarsh identify the needs of customer very well.

The current competitive market demands customization of products. Use of Virtual reality is yet another striking feature in digital age.

Especially gaming entrepreneurs can explicitly use this technology for better gaming experience to their customers. For a successful business it is very important to not only understand the demands of customer but also the supply chain process and cost analysis. This becomes extremely crucial for a start-up as they are usually under resourced and underfinanced. The digital analytics platform has helped the businesses to analyse the current demands, their supply strategy, the resources required for successful delivery of product to customer on time. This digital era has allowed all such parameters to be estimated within a short span of time with the help of analytical tools and software.

During the management course, a student is usually taught that most important activity in line function is marketing. Without marketing there is no awareness of product and hence no sale (A usual theory taught in every marketing lecture). With the increase in online infrastructure the start-ups and businesses have adopted various platforms and means for marketing. Different Social media platforms run their businesses on paid advertisements by other businesses.

Tracking the number of views; generating revenues out it; analysing the relevance of advertisement of product in the minds of customer, has all brought in marketing solutions many steps ahead. Use of popUps and animated graphics on various essential online services not only draws the appropriate customers but also adds a source of revenue to the other business.

India has witnessed a boom in internet penetration in the last decade and so the investors. The increase in the number of smartphones has allowed businesses to flourish online. Various start-ups like music streaming apps such as Gaana, Video on demand such as Netflix and Hotstar sell various commercial entertainment products to vast number of viewers. This is yet another evolved business model over the period of time. With the government’s plan to make India digital there was increase in the number online payments. These online payments reduce a lot of costs as compared to previous business challenges. Various payment platforms using a common united payment interface have grown over a short span of time.

When it comes to business development, the sole agenda should be to generate profits by along with customer satisfaction.

With the changing software capacities almost every day! The customer needs, wants and demands are also changing at faster rate. For a start-up to survive and to become a whale in market it is imperative to analyse and utilize all the technologies.

The world will become more competitive and so will the businesses be in future.

The Hatchery: Indian Incubation System for Start-Up Business

By: Puja Bhowmick

Denotation of Incubation

The perfect analogy for incubating start-up businesses is hatching of eggs in the incubator. The incubators cushion the eggs in all possible ways so that they can hatch at a proper time with proper haleness. A business incubator is a company or an organization intended to develop new and start-up companies by providing them different services like rendering education, management training, and providing marketing strategies. The origin of business incubators is in the United States of America. According to National Business Incubation Association (NBIA), “Business incubation is a business support process that accelerates the successful development of start-up and fledgling companies by providing entrepreneurs with an array of targeted resources and services.

These services are usually developed or orchestrated by incubator management and offered both in the business incubator and through its network of contacts. A business incubator’s main goal is to produce successful firms that will leave the program financially viable and freestanding. These incubator graduates have the potential to create jobs, revitalize neighbourhoods, commercialize new technologies, and strengthen local and national economies.”

The objective of the business incubator is to yield successful businesses commonly known as "graduates" of the incubator.

Business Incubators are the facilities that provide shared resources for young businesses, such as office space, consultants, and personnel and also act as financial consultant and provide technical support. They assure safe environment to new businesses, which will help them to grow before they become self-reliant and run autonomously. Presently NBI has given an estimation of 900 affiliated business incubators in operation across the United States as well as in 40 other countries and India is one of them. Incubator firms are increasingly getting recognition as an essential channel for fostering the development of new businesses that will revive local and regional economies.

Business incubators are the life-line for entrepreneurs especially for technologybased entrepreneurs as they support the new business from scratch. They exclusively help the young businessmen survive the jump over the "Valley of Death." In the early stage of setting up the business, the start-up companies will not have the privilege of seed or venture fund. Most seed and venture capital investors are reluctant to invest until the start-up firm shows enough potential and their success blueprint in numbers as it is too risky for them to invest. In this situation, Incubators come in aid.

Incubation System in India In India, the Science and Technology Entrepreneurs Parks (STEP) was launched by the National Science and Technology Entrepreneurship Development Board (NSTEDB) in the early 1980’s and the Technology Business Incubators (TBI) in

the beginning of 2000. Currently, there are 312 functioning Business Incubators and Accelerators and around 60 Science and Technology parks in India which are supported by Department of Science and Technology (DST). The Government of India is focussing on setting up more business incubators to facilitate employment. There is large number of business incubation environments in India and Government intends to expand the Incubator extensively across India. An extract from the report on “Entrepreneurship” released by the National Knowledge Commission says that “There is a need to massively increase the number of incubators in the country. USA has about 1400 incubators while China and Korea have about 800 and 400 respectively.

According to ‘The Indian STEPS (Science and Technology Entrepreneurs’ Parks) and Business Incubation Association (ISBA), the apex professional body supporting business incubation’, India has only about 100 incubators. Scaling up the numbers also means widening the reach beyond centres of excellence in metropolitan cities (i.e. beyond IITs and the top-grade engineering and business schools), going beyond alumni entrepreneurs and exploring areas beyond high tech. Further, there is a need to widen the incubation horizon beyond the idea-stage to accommodate issues relating to scaling up. There are initiatives already being proposed. For example, there are plans in Gujarat to set up a number of incubation centres with possible venture capital infusion in certain selected regions.

Expansion of incubation centres on a globally competitive scale will necessitate much greater involvement of private players as well as PPPs to supplement the current governmental initiatives”.

The establishment of Incubation Centres in India is deferred for quite a long time but they have played an important role in promoting entrepreneurship and boosting Indian Economy. Indian Institute of Technology, Kanpur founded SIDBI Innovation & Incubation Centre (SIIC) in 2000 which incubated 53 start-ups. The Centre for Innovation, Incubation and Entrepreneurship (CIIE), Ahmadabad, established in 2001, facilitates the conversion of hi-tech and mass-impact innovations into enterprises and have accelerate 500 start-ups across various sectors. The Technology Business Incubator, National Institute of Technology, Calicut, (TBINITC) was established in 2003 and claims to provide 87% success to start – up companies.

Vellore Institute of TechnologyTechnology Business Incubator (VIT-TBI) started functioning since 2003 and focuses on pre-incubation. The Agri Business Incubator-ICRISAT was established with the aim to help the farmers of our country through business incubation approach. It has incubated around 74 agriculture base

start-ups companies and around 8, 00,000 farmers benefitted from these companies.

Society for Innovation and Entrepreneurship, SINE, was launched in 2004 and focused on promoting entrepreneurship at IIT Mumbai. They have incubated around 46 companies. Apart from the firms mentioned above there are many other firms like Technology Business Incubator, IIT Delhi, Start-up Village, Indian Angel Network, GSF Accelerator, Angel Prime etc which stood to be a shield for young businessmen in India. The scope of dying brilliant ideas due to fund issue has been narrowed down by these incubator firms. The start-up companies just have to select an appropriate Incubation firm related to their sector and convey their unique business ideas to the Incubation firms. If impressed by the idea then they would provide the start-up company services like mentoring, helping them to get the right pitch, providing infrastructure and a cross –functional team, providing great business opportunities by sharing their network and some incubators even invest capital on great start-up ideas.

Motion of Author’s View With the declaration of Start-Up India by our Prime Minister, Narendra Modi, the business of incubators accelerated.

Although huge awareness program are needed to be organized so that it reaches every corner of India and there is less scope of premature end of a great business idea .

The success of incubator firms shows the evidence that both the government and common people are in support of uplifting the start-up ecosystem. More involvement from angel investors, universities, corporate etc are required so that the incubators firm can reach to its highest potential. Indian incubator firms have

generated huge number of jobs and have the ability to fight against unemployment. They can reduce the failure rate of start-ups by assigning subject matter experts and can also raise the spirit of Innovation. The incubation ecosystem is bound to evolve from time to time as Indian business keeps diversifying.

Venture Capitalist By: Shreya “The myth is that venture capitalists invest in good people and good ideas. The reality is that they invest in good industries.”

Introduction Venture Capital is a private or institutional investment made into early-stage / start-up companies (new ventures). As defined, ventures involve risk (having uncertain outcome) in the expectation of a sizeable gain. Venture Capital is money invested in businesses that are small; or exist only as an initiative, but have huge potential to grow.

The people who invest this money are called venture capitalists (VCs). The venture capital investment is made when a venture capitalist buys shares of such a company and becomes a financial partner in the business.

Venture Capital investment is also referred to risk capital or patient risk capital, as it includes the risk of losing the money if the venture doesn’t succeed and takes medium to long term period for the investments to fructify.

Venture Capital typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms.

It is the money provided by an outside investor to finance a new, growing, or

troubled business. The venture capitalist provides the funding knowing that there’s a significant risk associated with the company’s future profits and cash flow.

Capital is invested in exchange for an equity stake in the business rather than given as a loan.

Venture Capital is the most suitable option for funding a costly capital source for companies and most for businesses having large up-front capital requirements which have no other cheap alternatives. Software and other intellectual property are generally the most common cases whose value is unproven. That is why; Venture capital funding is most widespread in the fast-growing technology and biotechnology fields.

A venture capitalist (VC) is a private equity investor that provides capital to companies exhibiting high growth potential in exchange for an equity stake. This could be funding start-up ventures or supporting small companies that wish to expand but do not have access to equities markets.

Venture capitalists are willing to risk investing in such companies because they can earn a massive return on their investments if these companies are a success. VCs experience high rates of failure due to the uncertainty that is involved with new and unproven companies.

Understanding Venture Capitalists: Venture capitalists are usually formed as limited partnerships (LP) where the partners invest in the VC fund. The fund normally has a committee that is tasked with making investment decisions. Once promising emerging growth companies have been identified, the pooled investor

capital is deployed to fund these firms in exchange for a sizable stake of equity.

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Contrary to public opinion. VCs do not normally fund start-ups from the onset.

Rather, they seek to target firms that are at the stage where they are looking to commercialize their idea. The VC fund will buy a stake in these firms, nurture their growth and look to cash out with a substantial return on investment (ROI).

Well-known venture capitalists include Jim Breyer, an early Facebook (FB) investor, Peter Fenton, an investor in Twitter (TWTR), Peter Theil, the cofounder of PayPal (PYPL) and Facebook's first investor, Jeremy Levine, the largest investor in Pinterest, and Chris Sacca, an early investor in Twitter and ride-share company Uber.

Venture capitalists look for a strong management team, a large potential market and a unique product or service with a strong competitive advantage. They also look for opportunities in industries that they are familiar with, and the chance to own a large percentage of the company so that they can influence its direction.

Types of Venture Capital funding The various types of venture capital are classified as per their applications at various stages of a business. The three principal types of venture capital are early stage financing, expansion financing and acquisition/buyout financing.

The venture capital funding procedure gets complete in six stages of financing corresponding to the periods of a company’s development •

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Seed money: Low level financing for proving and fructifying a new idea Start-up: New firms needing funds for expenses related with marketing and product development

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First-Round: Manufacturing and early sales funding Second-Round: Operational capital given for early stage companies which are selling products, but not returning a profit Third-Round: Also known as Mezzanine financing, this is the money for expanding a newly beneficial company Fourth-Round: Also called bridge financing, 4th round is proposed for financing the "going public" process.

A) Early Stage Financing:

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•

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Early stage financing has three sub divisions seed financing, start up financing and first stage financing.

Seed financing is defined as a small amount that an entrepreneur receives for the purpose of being eligible for a start up loan.

Start up financing is given to companies for the purpose of finishing the development of products and services.

First Stage financing: Companies that have spent all their starting capital and need finance for beginning business activities at the full-scale are the major beneficiaries of the First Stage Financing.

B) Expansion Financing: Expansion financing may be categorized into second-stage financing, bridge financing and third stage financing or mezzanine financing.

Second-stage financing is provided to companies for the purpose of beginning their expansion. It is also known as mezzanine financing. It is provided for the purpose of assisting a particular company to expand in a major way. Bridge financing may be provided as a short-term interest only finance option as well as a form of

monetary assistance to companies that employ the Initial Public Offers as a major business strategy.

•

B) Expansion Financing:

• •

Expansion financing may be categorized into second-stage financing, bridge financing and third stage financing or mezzanine financing.

Second-stage financing is provided to companies for the purpose of beginning their expansion. It is also known as mezzanine financing. It is provided for the purpose of assisting a particular company to expand in a major way. Bridge financing may be provided as a short term interest only finance option as well as a form of monetary assistance to companies that employ the Initial Public Offers as a major business strategy.

Steps Involved in the Funding Process of a VC: The venture capital funding process typically involves four phases in the company’s development: • • • •

Idea generation Start-up Ramp up Exit

Step 1: Idea generation and submission of the Business Plan The initial step in approaching a Venture Capital is to submit a business plan. The plan should include the below points: •

There should be an executive summary of the business proposal

•

Description of the opportunity and the market potential and size Review on the existing and expected competitive scenario Detailed financial projections Details of the management of the company

There is detailed analysis done of the submitted plan, by the Venture Capital to decide whether to take up the project or no.

Step 2: Introductory Meeting Once the preliminary study is done by the VC and they find the project as per their preferences, there is a one-to-one meeting that is called for discussing the project in detail. After the meeting the VC finally decides whether or not to move forward to the due diligence stage of the process.

Step 3: Due Diligence The due diligence phase varies depending upon the nature of the business proposal.

This process involves solving of queries related to customer references, product and business strategy evaluations, management interviews, and other such exchanges of information during this time period.

Step 4: Term Sheets and Funding If the due diligence phase is satisfactory, the VC offers a term sheet, which is a nonbinding document explaining the basic terms and conditions of the investment agreement. The term sheet is generally negotiable and must be agreed upon by all parties, after which on completion of legal documents and legal due diligence, funds are made available.

Exit route There are various exit options for Venture Capital to cash out their investment: • • •

IPO Promoter buyback Mergers and Acquisitions

•

Sale to another strategic investor

Examples of venture capital funding •

Kohlberg Kravis & Roberts (KKR), one of the top-tier alternative investment asset managers in the world, has entered into a definitive agreement to invest USD150 million (Rs 962crore) in Mumbaibased listed polyester maker JBF Industries Ltd. The firm will acquire 20% stake in JBF Industries and will also invest in zero-coupon compulsorily convertible preference shares with 14.5% voting rights in its Singapore-based wholly owned subsidiary JBF Global Pte Ltd. The funding provided by KKR will help JBF complete the ongoing projects.

•

Pepperfry.com, India’s largest furniture e-marketplace, has raised USD100 million in a fresh round of funding led by Goldman Sachs and Zodius Technology Fund.

Pepperfry will use the funds to expand its footprint in Tier III and Tier IV cities by adding to its growing fleet of delivery vehicles. It will also open new distribution centres and expand its carpenter and assembly service network. This is the largest quantum of investment raised by a sector focused ecommerce player in India.

Conclusion: Considering the high risk involved in the venture capital investments complimenting the high returns expected, one should do a thorough study of the project being considered, weighing the risk return ratio expected. One needs to do the homework both on the Venture Capital being targeted and on the business requirements.

SoftBank- Powering Ideas Globally By: Neha Thampi “Information Revolution - Happiness for everyone”

value and was forced to write off many of their investments entirely- including Webvan, Kozmo.com and Global Crossing.

Despite the burst, however, its investment in Yahoo! Proved to be relatively fruitful compared to the initial investment.

Alibaba

SoftBank Group Corp. was established in 1981 as a computer software distributor by Masayoshi Son. SoftBank gets its name from “Soft” which is software in Japanese translating to “Bank of Software”. Today this internet-based innovator has several segments under it that operate in the different areas of the information industry from providing telecom and broadband services to investment activities.

The Dotcom Bubble and Bust SoftBank was among the many who rode the dotcom bubble of the 1990’s making over $2 billion investments in many companies including some of the top ecommerce and e-finance sites like GeoCities, ZD Net’ e-buy.com and Yahoo!.

Each of these investments was treated as the start of a strategic alliance and led to Son getting a significant stake in the business.

At the peak, SoftBank owned as much as 25% stake if the cyberspace creating the general perception that it was an internet company.

By early March with the bust of the dotcom bubble SoftBank lost 95% of its market

Back in 2000 when Alibaba was just a small tech enterprise SoftBank invested $20 billion i.e. a 34% stake in the company. Post the dotcom bust, Son was the first to look to China having realized China’s scope for growth. Son decided to fund Jack Ma after just one meeting with him along with a promise to make it just as successful as Yahoo!. Within the next ten years, Alibaba became the face of e-commerce in China.

Post its IPO in 2014, SoftBank’s share in the company stood at $60 billion. Even though they sold some of its stake in 2016, Softbank continues to own 24% of Alibaba.

Today SoftBank is a rival to Amazon and is said to be one of SoftBank’s most successful venture.

SoftBank Vision Fund Vision Fund is the $100 billion investing arm of SoftBank and has provided funding to several of the big names across the globe making it one of the most successful venture capitalists. Since it arrived in 2016, Vision Fund has grown exponentially and a large part of it can be attributed to their investment strategy.

While most venture capitalists invest small amounts in the early stages of a start-up, SoftBank invests in huge amounts in the most successful tech start-ups of an industry. Masayoshi is credited with having great foresight- helping him identify opportunities often even before they have materialized.

Several companies see Son’s large investments as an effective way to raise capital without going public while in certain cases, they have helped inflate valuations I the pre-IPO stage.

On the downside, however, Saudi Arabia’s sovereign fund is the largest external investor to Vision Fund with its contribution amounting to $45 billion Any company that has such backing ties itself to the Saudi crown prince – Mohammad Bin Salman which has been a point of contention for some.

SoftBank and India

Paytm raised $1.4 billion from SoftBank in 2017 giving it a 19% stake I the business.

Further investment was made again as a part of its funding in 2019. With this round of funding the valuation of Paytm is expected to shoot up to $16-18 billion.

•Oyo Founded in 2013, Oyo provides budgetfriendly accommodation across India, the Middle East, Europe, and Southeast Asia.

They raised $1 billion from SoftBank in 2018 making SoftBank its largest investor.

In 2019, Oyo launched its operations in Japan through a joint venture with SoftBank Corp and SoftBank Vision Fund.

Some of their other investments include Grofers, First Cry, and Delhivery.

WeWork fiasco

SoftBank has made its presence known in India, providing funding for several Indian start-ups. Some of their most popular ones are mentioned below.

•Ola Ola was one of the flagship investments of SoftBank in India. They have participated in several rounds of funding for India’s cab aggregator. SoftBank made an initial investment of $210 in a series D funding in 2014. It has also participated in subsequent rounds of funding in 2015 and 2017. Ola Electric raised $250 million from SoftBank giving the company a 22-24% stake in Ola Electric.

•Paytm

Founded in 2010, WeWork is a coworking space start-up based in America that provides shared workspaces. WeWork is said to be the biggest failure of SoftBank; an ill-planned venture that backfired and led to falling in the valuation of SoftBank as well as Son. SoftBank had invested $10.6 billion into the start-up expecting it to be the next “Alibaba’ for SoftBank. The IPO of WeWork in August 2019 revealed the true picture of the business affairs- issues of mis governance and ethical lapses. Amid a scandal and resignation of its founder Adam Neumann the IPO was withdrawn.

Overnight the IPO which was valued at $47 billion dropped to $10 billion. SoftBank faced its first operating loss in fourteen years due to WeWork as well a loss of $4.6 million to its investments.

In October as a part of its bailout, SoftBank agreed to pump in additional funds as the company had nearly run out of money but at the same time considered reducing its

stake in the company. Currently, with the virus forcing companies to opt for work from home, their revenues have taken a major hit. At the same time, the company is also gearing up to take on SoftBank in the court over the stock deal.

What does the future hold for SoftBank?

SoftBank has declared an emergency sale of its assets amounting to $41 billion to fund a buyback to combat the impact of Coronavirus. The company is expected to buy back 45% of its stock which would also help tide over the loss that it incurred with the WeWork crisis.

The trust of investors in SoftBank and Son’s investment choices has declined to post WeWork with several critics saying that the investment strategies followed are too aggressive and often extravagant.

Investors are waiting to see if SoftBank can make a turnabout from the series of poor investments.

SEQUOIA CAPITAL By: Preethika How Sequoia Invests?

We just need to believe more in ourselves.

- Sequoia Capital India

Sequoia Capital is an American venture capital firm that focuses mainly on energy, financials, and financial services, enterprise, healthcare services, internet, outsourcing technology, and mobile startups. The firm helps a small number of daring founders build their legendary companies.

Sequoia Capital was founded by Don Valentine in November 1972 and it is located in Menlo Park, California. In 2006, Sequoia Capital acquired Westridge Capital partners, an Indian Venture Capital firm, which was later renamed as Sequoia Capital India. It manages multiple investment funds including the funds specific to India, Israel, and China. In 2003, CB Insights recognized Sequoia Capital as the number one Venture capital firm. In 2006, Sequoia Capital raised around $400 million (Rs 2550 crore) followed by another $300 million (Rs 1913 crore) in 2007 becoming the 1st Silicon Valley venture capital firm by having an exposure of more than $1 billion in India.

In the same year, it invested $11.5 million in SKS Microfinance, the then India’s largest microfinance company. Between April to June 2015, Sequoia Capital India was one of the most active Venture Capital investors in Asia, according to a ranking by CB Insights and KPMG. The investments

by Sequoia capital in those 3 months were the hyper-local grocery Grofers, the ondemand grocery app PepperTap and online furniture retailer, UrbanLadder.

Sequoia Capital India specializes in investments like start-up seed, early, mid and late expansion, public and growth-stage companies. Its investment ranges between $100,000 and $1 Mn in seed stage, between $1 Mn and $10 Mn in early-stage and between $10 Mn and $100Mn in growthstage companies. Sequoia India operates in Southeast Asia and India where they actively partner with founders from a wide range of companies including BYJUS’s, Carousell, OYO rooms, Druva, Go-Jek, Mu Sigma, Tokopedia, Truecaller, Zilingo, Zomato, Just Dial, Wildcraft and more.

Over the years, Sequoia’s India investment had ranged from healthcare to financial services, beauty and personal care to kitchen appliances, but it is the technology that is often seen as a Sequoia capital India’s sweet spot, with the investments in startups including digital wallet MobiKwik, fashion app Voonik, and self-driven car ZoomCar. Meanwhile, Sequoia has exited a total of 12 companies in India, from which 7 got acquired, 3 went for an Initial Public Offering (IPO) and the rest 2 were shut.

Sequoia Capital exited 3 companies, SKS Microfinance, Mannapuram Finance, and Just Dial, which went for IPOs. Some other firms like Freecharge, TutorVista, Dexetra, and ApnaPaisa, among others, were acquired.

Investment Decision Shailendra Singh, the managing director of Sequoia Capital, has seen the rise and fall of many companies during his decade long period at the Indian arm of the world’s top investing firm, by making investments across India and Southeast Asia. Shailendra

Singh is one of the top go-to guys for startups in the region for entrepreneurs. He said that Sequoia Capital takes investment decisions differently like they invest based on whether they like an industry, a founder, a company or a sector and they take 10-15 years to view it.

Working of the firm In 2019, Sequoia Capital India had launched its start-up accelerator and incubation program called “Surge”, a rapid scale-up program for start-ups, which has been created to give founders an unfair advantage to scale, grow and make smart business model choices. The accelerator program has a separate team and they work independently of sequoia. The early-stage program has committed to pick up 10-20 early-stage start-ups twice a year and invest around $1.5 Mn in each of them at the start or very early-stage. Sequoia is expected to invest over $100 Mn over the next four-five years under its accelerator program surge by targeting the start-ups both in India and Southeast Asia across the sectors such as consumer internet, deep tech, enterprise software, healthcare technology, fintech, crypto or direct-to-consumer brands.

In April 2019, the firm had announced its first cohort of Surge program, where 8 out of 17 selected start-ups were from India and these start-ups include Doubtnut, Khatabook, Azani Sport, Bulbul, Flynote, Hippo Video, Skillmatics, and Interview Bit Academy. During the same month, Google’s former Vice President Rajan Anandan had also joined Sequoia Capital India as a Managing Director. In May, the firm has introduced the applications for the second cohort of its accelerator program surge, with a flexible investment bracket of $1 Mn to $2 Mn, instead of the fixed $1.5

Mn per start-up investment in Surge 01.

At the end of the Surge program, the firm invites other venture capital by setting up an investor week to boost the start-ups. The initiation taken by the firm is to narrow down some losses caused by the low funding and angel tax issue. The bold step taken by the firm could make other large venture capital firms to initiate similar programs. Sequoia India is the only Indian Venture Capital firm that has put a structure in place to write cheques of all sizes from seed to growth.

The bankers and entrepreneurs who have been engaged with Sequoia Capital said that the firm had a strong research framework with a habit of catching startups early and their belief about the industry is very strong. Also, because of their global presence, they have a strong connection with the emerging industries globally, especially in the US. There has been a profitable exit like Scio health Analytics, Just Dial, Quick heal, Citrus Payment and Equitas, to name a few.

In a $180 Mn deal with Madison Capital, Sequoia either partially sold its stake or completely exited some of the existing portfolios, including Micromax. More recently, the firm had sold some small part of its stake in Byju’s for about $180 Mn and in Pine labs for $150 Mn.

COVID-19’s Impact The Venture Capital firm Sequoia Capital calls the COVID as “The Black Swan of 2020” and said that start-ups should brace themselves for turbulence. Sequoia had said that many companies are facing challenges amid the COVID-19 outbreak, with a sharp decline in business activities. Some companies have seen their growth rates drop sharply between December 2019 and February 2020 and several companies which were on track are now at risk of missing their Quarter 1 of 2020 plans as the effects of the virus spreads wider. The lockdown in china had also affected the global supply chain by which Hardware, Direct-to-Consumer and Retailing companies may need to find alternative suppliers whereas Software business, which is less exposed to supply chain disruptions remains at risk. Sequoia had said that it will take time, maybe several quarters before the virus is completely controlled. It will take even longer time for the global economy to recover.

ALTERIA CAPITAL By: Priyanka

Alteria Capital is India's largest Venture Debt fund focused on innovative startups (start-up’s majorly) backed by strong VC sponsors with its headquarters in Mumbai- Maharashtra.

Alteria Capital, established in 2018 by Vinod Murali and Ajay Hattangdi. Alteria capital is a private debt investor with a maiden fund of 9.6 million Indian rupees. It regularly invests in the middle of Rs 2 crore and Rs 100 crore in new companies across areas. Hence It does a angel investment. As venture debt is the most popular way of funding. Investors of funds include SIDBI, Induslnd bank and other high-networth individuals of the country.

Here is the list of companies in which alteria has invested- it has a portfolio of 24 companies of which the most valued and popular ones are generico, vogo, raw preserry, toppr etc… In Generico, it has contributed 10 crores fund and is also keen to contribute more than 100 crore in this start-up(generico). In the long time since it began, Alteria Capital has contributed Rs 540 crore across 28 exchanges. Another Rs 75 crore has been submitted across different arrangements. The originator said they hope to totally convey the store in year and a half, and may begin take a shot at fund II at some point one year from now.

Investment is a necessity for a start-up, where there are 10000’s of new ideas popping in the market everyear there are very few who gets the required fund, hence VC’s play a important role. So how does it all work ? alteria focuses on three things before investing in a company, investors,

founding team and business plan. In one of the interview Mr hattangdi said “Passion provides the fuel that entrepreneurs have to be compelled to obsess regarding their firms and drive forward unrelentingly. However, entrepren eurs that job with solely pure passion could miss the signs that the business is off track. Knowing a way to balance these 2 forces is crucial for fulfilment,”. The investment in any company also depends upon its founding team if the founding team has the ability to pitch its idea and impress the investors there are maximum chances it can impress us all with its business. Lastly its business plan is what makes it a start-up successful or not successful, so Alteria capital look for these factors before investing in a company. The rate at which alteria lends the fund id higher than the banks off course because the risk a venture capitalist takes is way more than that of what banks take. The additional capital from venture debt will facilitate corporations build a lot of substantive progress towards achieving milestones previous their next funding spherical.

It also can facilitate increase the money runway of a business, or act as an extra capital buffer to manage business or market uncertainties.

These edges considerably facilitate improv e the chances of growing enterprise worth for an organization in preparation for its next funding spherical. in addition, this boost to enterprise worth additionally comes with savings in dilution, which might otherwise is incurred had the extra capital been raised as equity. Thus, venture debt essentially helps build venture equity a lot of economical, and boosts venture returns, with larger savings in dilution and enlarged future enterprise worth to each founders, staff an d early-stage investors.

Apart from venture debt it also deals with structured finance in which it finances through a operating asset.

Alteria capital can help growth stage companies to structure a range of highly customized asset based funding structures which allows companies to optimally leverage their operating assets and cash flows. The capital released can be used to fuel growth and reduce the need for further equity dilution.

Hence venture capitalist specialize in funding to companies and building young, innovative enterprises to support business expansion with strategically. venture funding is currently an essential piece of investment for new businesses across stages and segments. There is better attention to how the item can be used by new businesses just as the desire on returns for financial specialists into the reserve. The venture capital industry in India has really taken off in and it unbelievable role in Indian Economy. Venture capitalists not only provide monetary resources but also help the entrepreneur with guidance in formalizing his ideas into a viable business venture with existing resources or import new technology.

THEIL FELLOWSHIP

“Knowledge that is acquired under compulsion obtains no hold on the mind.” -Plato Every year thousands of people join popular b-schools with a view that they can transform their ideas by acquiring the right knowledge. Of course, college can be a good place for learning about what’s been done before, but does it encourage you to do something new or does it give you the right direction to implement your unique ideas? Each idea needs a unique course, the unique idea and unique course together can help young people to succeed by thinking for themselves instead of following a traditional track and competing on old career tracks and that’s where Thiel fellowship comes into the picture.

Thiel Fellowship is the prime example of no-college trend which is created by Peter Thiel, a two-time Stanford graduate, and creator of PayPal. This fellowship is started in 2011, offering grants to people under the age of 22 who show evidence of being able to produce a “grand idea”, who want to build new things instead of sitting in a classroom. It is the first and foremost, an alternative to education allowing fellows to expedite their growth by giving them the freedom to pursue their greatest ventures and ideas during their most intellectually productive years. It is proving that higher education is not the only answer for people who are dedicated to bettering themselves and generating a difference in the world. It

By: Harshada says, if you spend two years and never raise money, never exit, never build a team, but have grown more than you would have traditional education, it was a success.

How does Thiel Fellowship work?

There are no demographic requirements, the finalist is judged through interviews with Thiel and his associates. It is the twoyear program where recipients are awarded $100,000 grant and support from the Thiel Foundation’s network of the founder, investors, and scientist. The hardest thing which young entrepreneurs face is that they haven’t met everyone they need to know to make the venture succeed and that’s where fellowship helps them to connect to investors, partners, prospective customers.

It gives quick and easy access to some of the nation’s most successful business people. It also pays them stipend that liberates them to work to improve the world, rather than saddling them with debt.

The fellows get mentorship, workshops, connections to resources, and an alumni network without a formal alma mater.

Every year foundation selects 20-30 fellows for this program. The applicant needs to be a college dropout and who’s aged 22 or younger. The fellow receives $100000 which is spread out over two years where the foundation does not take equity in your company.

Indians who won Thiel Fellowship The first Indian winner of Thiel the fellowship is Ritesh Agarwal who is the founder of Oravel.com which is an alternative to booking hotels in India (who currently owns largest and fastest- growing hospitality chain “OYO”.) currently, Agarwal is the only Indian resident on the list of “20 under 20” years of age globally.

He is the youngest entrepreneur from India to raise angel investments from India’s first angel-backed accelerator- Ventura nursery.

The second Indian winner of theil fellowship is Diwank Singh Tomer. He got a fellowship at the age of 19 and currently working in Palo Alto, CA. he dropped out of his college in India to put his energies into an online platform for learning to code.

He’s the exceptional hacker and engineer who was awarded the Mozilla WebFWD fellowship for his efforts to improve learning online.

The majority of fellows came from the USA, including dropouts from Harvard, MIT and other elite universities of the USA and Silicon Valley.

THE IRONMAN OF TECH

Tesla, Space X, PayPal, HyperLoop, The Boring Company, and Solar City. All these high-profile companies bring only one name common to our minds. And that’s none other than the so-called Iron Man of the modern world, Mr. Elon Musk.

A phrase that well suits a man who has made mind-blowing innovations in the technological world. The net worth of this South African born Canadian American businessman is $32 billion which ranks him among the top 30 richest people in the world. However, the growth to this ultimate success wasn’t spoon-fed to him but catered by extreme poverty conditions which shaped his basement and values strong.

They thrive to excel was backed up by his continuous motivation to learn and innovate. The conditions that paved his way to success made Elon Musk appreciate the value of new ideas from budding entrepreneurs and companies which in turn brought out the angel investor in Mr. Musk.

By now I am pretty sure you all will be aware of what an angel investor is. So in this section, we would be focusing more on those start-ups which have attracted the billionaire and the technological pioneer to invest upon. Gaining attention and support from an investor like Elon Musk isn’t a piece of cake and so we need to know what

By: Nithin

these start-ups are all about from a management perspective. After all, we are management students and these lessons are with no doubt going to be helpful down the road at some point in time.

Growing to the level of a company from a start-up is difficult and the probability of turning to one is very small in number. The ones who succeeded did follow a common pattern and that is the selection of the right community, partners and the network of support. Clarity of purpose is very much essential to attract the funders to invest upon in the start. Elon Musk has been the angel investor for a handful of start-ups majorly started by people he was related to one way or the other. Pursuing through his angel investment timeline we can see that his investments were mainly driven by his connections to the founders as well as the potential success he found in the ideas.

From an investor's point of view, Musk was a person who was ready to take the risk to the utmost level and that portrayed in his investment portfolio too. He believed that he had the advantage of investing in himself or others acting like an angel. This is, in fact, one of the main traits found in a confident investor.

Musk’s angel investment portfolio is listed accordingly to the years as follows.

Everdream: Musk started his angel investments in the year 2003 to support his cousin, Mr. Lyndon Rive, with his start-up Everdream which initially didn’t produce much return.

This investment turned out to be a boom and the biggest support at a point when Musk was collapsing financially. During

the initial hard times of Tesla in 2008, Musk was able to hold together only because of the return from this angel investment.

Everdream is a California based start-up company that was involved in remote servicing and management of computers which recently got acquired by Dell. Elon Musk made an investment of $12 million in the Everdream corporation in the year 2003.

The owner of Everdream later in the coming years became one of the cofounders of SolarCity along with Musk. Therefore, apart from financial support, in the later stages, this angel investment had paved way for his expansion in business as well and this can be classified as another unspoken advantage of angel investments.

Game trust: It was in the year 2005, Elon Musk invested $9 million in a start-up called Game Trust.

Founded by Adeo Ressi, he was the roommate of Musk back in the university of Pennsylvania. Once again relationship became the backbone of financial investment. Game Trust worked as a developer of online casual gaming infrastructure. With the investment, Elon Musk was included in the board of directors of the firm. The company was later sold off in the year 2007.

Mahalo: This site was a combination of Wikipedia, Quora and Ask Jeeves which allowed people to post questions and answers.

Founded in 2007 by Jason Calacanis, Elon Musk invested $16 million in the company.

Apart from the question-answer section the site also provided techniques on how to create videos plus live interaction between users on the platform. At that period, the

site was one of the rising competitors for the world’s most preferred search engine Google.

Halcyon Molecular: Classified to be one of the failures of Musk’s career. The company was aimed to be the doorway to future genetics technology which attracted Musk to the concept. Was founded by brothers William Andregg and Michael Andregg in 2008 to unlock all the hidden secrets of DNA. The goal was to generate a cent percent human genome under the cost of 100$. But due to heavy competition from companies competing with the fast and cheap DNA sequencing technologies, the company was forced to shut down in 2012. Musk didn’t get a favourable return from this investment though.

Stripe: After exiting from PayPal, Stripe was the next online payment venture in which Musk invested. With an investment of $2 million in 2011, Musk took a share in the companies working. This start-up company aimed towards a new system of accepting payments via social media sites like Facebook, Twitter, etc. According to the latest updates, the company is currently valued to have a net worth of $5 billion.

Seems like Musk wasn’t disappointed with this investment.

Deepmind: 2014 was the time when Musk started investing in the segment of artificial intelligence. Musk personally wasn’t a person favouring AI and that was quite evident in many of his statements.

According to Musk, the investment in AI is for him to keep an eye on what’s going on in that field. He always feared the time when AI takes over the Human intelligence and therefore sought to keep control of that.

Deepmind aimed to solve intelligence by converting machine learning and neuroscience into computer algorithms.

The start-up was later sold to Google for an undisclosed amount.

Vicarious: Calling AI “the devil” Musk always underlined the fact that he was against AI to take a complete human intervention. Well, films like Terminator does give us a sort of insight on how this can go so wrong in the modern world. Musk too believed the same.

Due to the fear of this outcome, Elon Musk always invested in the top AI-oriented companies to keep a check on the position they have reached with time. Vicarious was one such start-up. It’s one of the start-ups where Musk has invested the highest amount ranging to around $40 million. The ultimate aim of this company was to develop a computer that thinks and behaves like a human without anything to eat and drink. Wait! I have seen this film!

NueroVigil: The company that developed the world’s first brain monitor was launched in 2007. It

focused on analysing the electrical signals emitted by the brain which would be useful for the drug companies. They aimed towards the treatment of neurological diseases which was increasing in the present generation due to varied lifestyles and habits. Musk became an investor of the company in 2015 seeing its widespread potential.

Going through his Angel Investments portfolio, one thing which we can see is that his investments are in those areas where he has sound knowledge. Also, most of his investments are circled people whom he knows and to whom he could develop a better rapport. The effect that this produced is that rather than just providing a control mechanism as in the traditional board of directors, it gave him a higher hand to influence the working process in these companies. The betterment of technology and its applications were other added advantages. And his angel investments weren’t just a finance multiplier in his career. They acted as the main pillars of supports to the multi-billionaire at a phase in his life when everything was turning upside down which made him stand on the verge of bankruptcy. Thus, angel investments played a very significant role in the career of Elon Musk and have a very high share in the success of this investor. And as the saying goes “do not put all your eggs in one basket” holds again.

On Your Own OYO, which stands for On Your Own, was founded in 2013 by CEO and founder Ritesh Agarwal is a Thiel fellow who started the company in 2011 when aged just 18. His original business was called Oravel, which was an Airbnb clone that time which later pivoted to become OYO.

The service helps bring the long-tail of small hotels online to generate bookings whilst also ensuring minimum standards for travellers, such as hot water, clean towels and linen and Wi-Fi. Oyo not only brought technology to the space but also a new brand known as OYO Townhouse, the launch of Townhouse brand in 2017 played a key part in improving Oyo’s image with customers.

Townhouse properties are owned by Oyo and fully managed by the company’s staff they work like any other branded budget hotel.

By: Vikram Townhouse has helped Oyo improve customer service and address the problems of fake bookings and high cancellation rates that it faced under the marketplace model.

Expansion: Since 2013, Oyo has grown rapidly to become the 6th largest hotel operator in the world by the number of hotels, and now expanding its reach globally. Oyo is present in more than 350 cities across the 9 countries and claims to host more than 125,000 stayed room nights every day. Oyo claims to have has more than 8,700 buildings and over 173,000 rooms in India across 259 cities and about 87,000 rooms in China across 171 cities. China, where it says it covers 11,000 rooms across 26 cities. Its major focus in China is on Tier-2 and 3 cities. Oyo has also been aggressively expanding its global footprint over the past one year by entering markets such as China, the US, United Arab Emirates and the Philippines, among others. OYO claims to manage close to 500,000 rooms across 18,000 franchised or leased hotels and 6,000 homes in nine countries: India, China, USA, Malaysia, Nepal, the U.K, UAE, Indonesia and the Philippines.

Investments:

OYO is more appealing to investors as because it has shown signs of promise in China, which represented a key part of its focus following the Series E round. Overall, it’s been a long journey for OYO, since 2013 when at first it raised $25 million. Oyo was one of the breakout start-ups from the funding boom of 2015, raising a surprise $100 million from SoftBank in that year.

Oyo raised around $800 million from Japan's SoftBank Group Corp. last year followed by infusions from Chinese giant Didi Chuxing and Asian ride-hailing giant Grab as part of the Series E funding which sums up to than $1 billion from Japan’s SoftBank Vision Fund. This round valued the company at around $5 billion, making it India’s second-most valuable start-up after Paytm, and the latest to join the coveted unicorn club. Existing investors include Lightspeed Venture Partners, Sequoia, Greenoaks Capital and Hero Enterprise.

The latest inflow of cash came from familiar west Home-sharing company giant Airbnb which has invested between $150 million and $200 million in Oyo. This funding will give the necessary firepower to OYO to continue its aggressive expansion outside India, West Asia and other markets.

OYO and Airbnb had previously been rivals of sorts, but OYO has pivoted toward

hospitality services including logistics and management rather than simply aggregating budget hotels.

The two companies are also exploring the listing of about 10,000 Oyo properties on Airbnb. The company is trying to explore newer businesses while remaining focused on both organic and inorganic growth through the deployment of fresh capital to expand globally with its model of enables small hotel owners to create quality living spaces. And since Airbnb as an investor has brought new access to OYO with its global footprints and access to local communities which will help OYO to strengthen and grow. We’re excited by the possibilities and committed to bringing benefits to the millions of travellers who can now rely on Airbnb and OYO Hotels & Homes to find a home away from home,” added Maninder Gulati, global chief strategy officer for OYO. But after an expansion spree, the firm, which began as a marketplace, struggled to keep pace as customers complained of poor service and many rooms remained unoccupied. Oyo is laying off 5,000 of its roughly 30,000 employees, pulling out of numerous cities and signalled that it needed to moderate its breakneck growth pace. He said that the company’s more mature Indian business has seen losses shrink, but that “there is a lot more to be done." Oyo’s foray into the U.S. vacation-rental market comes as the novel coronavirus outbreak is upending the hospitality industry. The recent spread of the virus in Asia, Europe and the U.S. has led businesses to restrict travel and caused tourists in China and elsewhere to cancel vacation plans.

There are hotels using its technology which stream lines everything from bookings to

food orders to hotel maintenance and branding world-wide including in China, the Philippines, Indonesia and the U.K. It also is exploring opportunities in the U.S. The majority of Oyo’s business comes from persuading small budget hotel owners to sign up to be part of its franchise. It takes a fee of about 20% from hoteliers in exchange for helping them improve their hotels and list their properties on its app. In recent years it has expanded its offerings, including managing properties for homeowners. Those differ from Airbnb because they are fully managed by the Indian company. Airbnb’s global reach and presence in local communities “will open up new opportunities” for Oyo.

FINANCIAL TRIVIA

MONEY FOR THOUGHT: 10 years ago, deals ranged between $10 million and $25 million in the US; now there is a trend of $50 million plus deals getting a greater share of total investment. 2008 saw global annual VC investment of $53 billion. There has been a Compound Annual Growth Rate (CAGR) of 17% in the past decade. In 2018, seed activity from all deals sank to a record low of 25%. Late stage deals swelled to record highs and total annual VC funding globally rose to $207 billion. The sector has grown by 12.1% annually since the financial crisis, and the amount of capital raised per year has grown by 100% over the decade. Corporate Venture Capitals were involved in over 20% of all venture capital deals in 2018. 72% of sovereign wealth funds invest directly in VC deals, with commitments doubling each year.

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