Angel investors spot promise in Kerala startups, but flag exposure concerns

Angel investors from outside the state met hundreds of startup founders in Kerala at the Global Huddle 2022, held in Kovalam. Photo: Onmanorama

Thiruvananthapuram: Kerala’s vibrant startup ecosystem is a reservoir of unique ideas and superb talent, but it lacks the exposure to the global market trends to scale up offerings, resulting in poor valuation, angel investors feel.

The concern about the lack of market exposure was shared by the angel investors from outside the state, who interacted with hundreds of startup founders in Kerala at the Global Huddle 2022, held in Kovalam on Thursday and Friday. The Global Huddle was organised by the Kerala Startup Mission (KSUM), the state government’s agency for entrepreneurship development and incubation activities.

These angel investors found the products of many startups promising and are considering investing in some of them.

However, they have felt Kerala-based startups have a poor understanding of the market size, which, coupled with a lack of ambition, has resulted in the projection of disproportionate valuation by many founders.

“If you ask me if they (investment-seeking founders) are solving real problems, I think yes. But are they scaling it in the right way? The answer is no,” Chirag Gupta, managing partner, 8X Ventures, told Onmanorama.

“Many of them don’t know how to capitalise on the market outside,” he said. Gupta, a Dubai-based investor, who is interested in deep-tech companies, said the Kerala startups in the sector have a poor understanding of the size of the problem they are trying to solve.
Startups that have exposure outside the state understand the other ecosystems and the market better, Gupta pointed out.

Chirag Gupta, a Dubai-based angel investor, is interested in deep-tech companies. Photo: Onmanorama

He hailed the strategy of the startups, which set up their team in the state and aim to serve the pan-India market.

Rahul Prigawat, a founder-turned-angel investor based in Delhi, shared Gupta’s views.
He was disappointed with the valuation projected by several founders, who approached him.

“They lack some initial education (about the potential market). This results in poor valuation,” he said.

Prigawat flagged an interesting yet alarming trend he spotted on pitches by the founders he met: “They use too much theory, which even they are unable to explain. We are interested in less theory and more art.”

By art, he meant pictorial and graphical representations.

Prigawat is the assistant vice president of LetsVenture, a company which has funded over 850 startups in the past nine years.

Rahul Prigawat, assistant vice president of LetsVenture, a company which has funded over 850 startups in the past nine years. Photo: Onmanorama

He urged Kerala’s state-run support system to conduct workshops for startups about valuation and proper pitching.

“They should bring industry to the state. That way the early-stage startups will get exposure,” Prigawat, who hails from Rajasthan, suggested.

Kriti of Mumbai-based Lead Angels also stressed the need for proper mentoring of aspiring founders in the market outside the state. “They need to be trained to make it big outside the state also,” she said.

Kriti of Mumbai-based Lead Angels believes Kerala startup founders need proper mentoring about the market outside the state. Photo: Onmanorama

Suman Sengupta, head – professional services, Lead Angels, however, was more optimistic. Sengupta found the companies he came across as promising.

“If they are given the right mentoring and support, they will do good. They will help the state with significant employment generation," he said.

He found software as a service (SaaS ) as the most promising sector in the state while agri-tech, medical-tech and fin-tech also hold huge potential. Fintech and SaaS startups together garnered more than 60 per cent of total funding by Kerala-based startups since 2015, a KSUM report revealed.

Suman Sengupta, head – professional services, Lead Angels, interacts with some startup founders. Photo: Onmanorama

“The state has a pool of talent, strong government support and a strong diaspora,” Sengupta said, though the state is yet to tap its diaspora as potential startup investors.

Trying to fix exposure gap: KSUM

The KSUM admitted that the concerns raised by the angel investors are true. "The startup founders here do lack exposure to the bigger market outside. The KSUM is aware of the problem and we will be devising strategies to address this exposure gap," Anoop Ambika, CEO, KSUM told Onmanorama.

Kerala’s startup ecosystem secured funding worth Rs 4,557 crore since 2015, the fifth Kerala Startup Mission report revealed.

About 4,000 startups sprouted in Kerala from 2016-2021, from just 200 in 2015.

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