The Indian startup ecosystem is witnessing a rush of capital, with each class of investors striving to carve a niche for themselves. However, it takes a leap of faith to evolve from being an angel investor to launch a venture capital fund.
Rockstud Capital, the Mumbai-based micro-VC fund founded by Abhishek Agarwal in 2018, has broadened this horizon from being an angel investor in 2014 to make more institutional bets into startups.
Among the growing tribe of VCs in the country, Rockstud Capital differentiates itself for investing into both startups, which are privately-held and unlisted, and also into publicly-listed companies. This strategy allows the fund to minimise its risk and generate good returns to its investors.
Rockstud mostly invests 51 percent of its capital into startups and the rest into public equity. “We are the only fund that has innovated in terms of investing in both listed and unlisted companies, which are in different stages of their evolution,” says Abhishek.
Today, Rockstud Capital has invested in nearly 10 startups, and is expecting to close the fund size to around Rs 50 crore. It typically invests in sectors such as edtech, healthtech, consumer internet, etc. The ticket size of its investment is anywhere between Rs 1-2 crore.
“We always look at the scalability and uniqueness of the business opportunity when we invest in a startup,” says Abhishek.
The start
Abhishek, who comes from a family who were traditionally into equity broking business, was always interested in the world of finance. After his education in the UK, he worked at a stock investment firm as a research analyst in 2008 before joining the family business in 2010.
However, Abhishek’s time in the UK gave him exposure to how things were changing rapidly, especially with the emergence of ecommerce industry, and he realised that the same could happen in India through startups.
“Our family business did not invest in IT and relied on the traditional economy, but I knew things were changing,” says Abhishek.
So, he decided to come out of the family business and follow his passion for investing in startups. His father was quite concerned about Abhishek losing money by investing in startups as there was a high degree of uncertainty. But Abhishek promised his father that he would invest only the profits he made out by investing in publicly-listed companies.
Between 2014 and 2018, Abhishek invested in around 24 startups as an angel investor, which required building linkages as well as networking with various groups.
Abhishek became part of the India Angel Network, LetsVenture, and Venture Catalyst, among others, to invest in these startups. Now that he had deployed the entire capital, which was available into startups, the question was what to do next.
Leap to VC
It was then that Abhishek decided to launch a VC fund in 2018, following his passion for investing in startups and given his four years of experience as an angel investor.
The beginning was tough, as investors were not keen to back his fund as there was no track record of his startup investments.
After consulting various people, including lawyers, a suggestion was made to Abhishek that he could launch a fund where a certain portion of the money would be invested in startups and others into publicly-listed companies.
This seemed to be the judicious route as Abhishek had a healthy track record of generating handsome returns on public equity investments.
However, it requires numerous meetings, pitches, and interactions to raise capital from the investors.
Returns made
There were also certain good tidings for Abhishek as the first close of its fund was in December 2018, but in the first three months of 2019, he got three exits from startups, the investments he made as an angel investor.
“The three exits recovered my entire investment into 24 startups,” says Abhishek.
Today, Rockstud Capital has made close to 10 startup investments and is expecting to close the fund size to around Rs 50 crore. The VC fund had a larger target, but the COVID-19 pandemic hampered its plans.
On the learnings over the years as an investor into Indian startups, Abhishek believes that these young companies need to be well capitalised as it would reduce the chances of failure. Also, experienced founders seem to have better odds of success.
Rockstud Capital’s exposure to investments in publicly listed companies also provides them the experience in terms of giving inputs to startups on the kind of structure they need to put in place or the governance mechanisms that should be employed to set oneself on the path of growth.
Abhishek also plans to launch another fund in the near future, which will only invest in startups.
“One thing I have learnt the hard way is that one requires a lot of patience in India while investing, and there is no shortcut to success,” says Abhishek.
