India $5 Trillion Economy


Why its the perfect time to be an angel investor as India strives to become a $5 trillion economy

India’s GDP to increase $5 trillion in five years will be far more challenging than achievable.

Currently, India is a $2.8 trillion economy and to reach the $5 trillion mark by 2024, the economy would require and need nominal growth in terms of dollars at least over 12% a year.

As in the last quarter for which a collection of data is available, India grew at slower than 6% in real terms.

Some of the most reputed angel investors in the country include the likes of Rajan Anandan- the Managing Director of Google India and was previously a part of Microsoft India as a Managing Director, Girish Mathrubootham- founder of Freshdesk, a social customer support software alongside Satveer Singh Thakral of the Singapore Angel Network.The list of successful angel investors in India thus, is long upto 40 plus.

The angel investment landscape in India  in 2019 had significantly changed over the last decade. Global platforms such as AngelList were extremely active in the Indian market, and the quality of deals improved tremendously, along with effortless investments for both startups and angels.This had the potential to disrupt the conventional angel network.

With the abolition of angel tax and SEBI having classified angel funds separately, it was then possible for individuals to invest in units of angel funds. This has now opened up a significant opportunity for platforms and fund managers who wanted to manage angel funds and make the process easy for both investors and startups.

Currently it is a perfect time to be an angel investor and claim a piece of India’s startup story even as traditional asset classes such as real estate & equities have led to below 5% returns as the traditional investment products promise a safe and steady return. But these are rarely enough to beat inflation over the long run.

It is also worth noting that India’s real GDP growth rate has been about 7% each year during the past 4-5 years But this hasn’t recently applied to property prices rise or business revenue & profit growth. Moreover there is strong capital inflow signaling growth.

Opposite to the Public markets, where IPOs have gone arid in the past two years, the startup funding scenario continues to rise in India. In fact, apart from a dip in 2016, funding has increased each year from the prior one this decade.

Even in 2019, in the third quarter startups are estimated to have raised a total of $2.55 Bn, almost 25% more than the $2 Bn and $2.13 Bn raised in the preceding two quarters.

Moving ahead the threshold has gone down and is much easier.

Angel investing is a spectacular method to add a high-risk, high-return asset class to one’s portfolio, and is absolutely critical to progress towards wealth generation in the longer run.

Also It’s not just the most affluent class who have the opportunity to invest in startup businesses, but now it is easier than ever for working professionals or employees of private-sector organizations to evaluate and invest in startups in a transparent and convenient manner.

Besides this 95% of gain is made by the time companies get listed for public

In the years 80’s and 90’s the most value creation in the US happened for those investors in the Public market, who bought stocks in technology giants like Amazon and Microsoft after they debuted their IPOs. Currently, the private equity space is more strong for businesses.

Along with this, increased startup liquidity and infrastructure and tax implications for investing have been removed.There is a large scale of technology with the prevalence of high-speed internet/devices and mobile penetration as compared to the prime period of the startup ecosystem in India almost a decade ago.

Prior to this not only the access for investing in startups was limited, but the startups themselves were growth restricted because of multiple reasons like regulatory challenges, lack of infrastructure, acceptance of business models and access to capital. But now, the startup ecosystem is getting bolstered with each day. Technological innovation and startups go side by side when it comes to incorporating the latest advancements in the latest market.

Moreover, the use of the latest technological developments leads to cost-effective benefit for the business.  As compared to the large service providers, startups are more flexible in implementing appropriate new technologies that meet the business requirements.

All of this is a significant development given the fact that India will be the third-largest country to startups after the US and the UK, with more than 11,000 startups in the country.

Also our Prime Minister, Narendra Modi has stated that he sees startups, technology and innovation as exciting and effective instruments for India’s transformation and hence it is vital that the country’s ecosystem is constantly pushed towards growth as the country looks to become a trillion-dollar economic powerhouse in the years to come.

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