CXOs turn to start-ups as traditional asset classes lose their luster

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With traditional asset classes losing their luster since the outbreak of the pandemic, the affluent CXO class has bet on innovative start-ups, investing as little as 2.5 lakh up to 15 crore.

Before the pandemic, Inflection Point Ventures (IPV), an early stage angel investment firm, had 750 investors. This base has grown to over 3,500 in the past 14 months, of which 90% are CXOs and 1,500 of them are first-time investors. Venture capital firm 100X.VC, founded before the pandemic in December 2019, has funded 50 start-ups to date and 50% of the 418 investors who have directly invested in these start-ups are CXOs. Five-year-old venture capital firm Venture Catalysts has more than 90 CXO investors on its platform, a number that has been rising since the start of the pandemic.

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Why CXOs are betting big on start-ups

“The media glorified start-ups with news of unicorns, multibillion dollar valuations and investors returning home with big returns. CXOs read it every day. However, one of the main reasons for the increased number of CXO Angels on our platform since the pandemic is that, for the first time in years, they have the time to answer our calls, to ask questions. difficult questions, to assess and become familiar with our processes and to start investing in start-ups. We held Master Classes every Saturday for 90 minutes on various topics on the reasons for investing in start-ups, how start-ups are valued, legal documentation required for start-up investments, etc. And guest speakers like Ronnie Screwvala, Kunal Shah, Rajan Anandan, Shekhar Kapur, Tarun Davda and the founders of Razorpay and Zomato to address these CXOs. The response exceeded our expectations (up to 500) with 1,500 CXOs participating in these courses, and we had to obtain special Zoom licenses to accommodate all of these CXOs. We now have CXO investors from 45 countries, mostly NRIs, ”said Ankur Mittal, IPV co-founder.

According to Dr Apoorva Ranjan Sharma, founder of Venture Catalysts, the pandemic has led to an increase in the number of CXO inquiries on her platform. “India has created over 50 unicorns in just 18 months, which has allowed many early millionaire investors to walk away. The start-up segment suddenly became very lucrative. It used to be more of a passion driven investment in CXOs, but now it’s more strategic. Seed investment is also seen as a ‘status’ symbol, when they can co-invest with some of the ecosystem’s reputable investors, ”Sharma said.

Sanjay Mehta, founder and partner of 100X.VC, says many CXOs invest directly in start-ups in his portfolio. “These CXOs are no longer tourists in the venture capital investment space, they are here to stay. Take, for example, our portfolio start-up CORA Health, which raised funds this month, was led by renowned CXO angels, including Apurva Parekh (executive director, Pidilite Industries Limited), KRS Jamwal (executive director , Tata Industries), both in their personal capacity, with Dhanpal Jhaveri (Vice Chairman, Everstone Group), Amit Chaudhary (Lenskart Founder), Kushagra Pant (Nomura MD), Neha Saraf (Visa Director), Anusuya Roy (Flipkart Director) , Ajay Mian (Founder & CEO, All e Technologies) and Headstart Investor Circle.

Lucrative returns

“Start-ups have become the most lucrative asset class over the past five years. On average, an investor makes 20X IRR (internal rate of return). However, there are also aberrations. Several investors in our network have achieved 80X returns on BharatPe in less than three years. No asset class would give you that kind of return, ”observed Sharma. Of the first 50 IPV CXO investors who joined the platform in 2018, 24 achieved an IRR between 30 and 75%, 10 achieved an IRR between 75 and 150% and 10 achieved an IRR of over 150% . Sanjay Mehta, who has been an angel investor for the past 11 years, says his returns are 103% year-on-year.


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