With revenues of Rs 2,700 crore for FY12, Intas had SEBI approval for its IPO but decided not to go ahead given the market conditions.

ChrysCapital had already invested in Intas Pharma when it utilized Rs 50 crore out of Fund 3 in 2006. The additional Rs 300 crore came in from ChrysCapital Fund 5 and marks the last investment for the PE player from this fund before moving to Fund 6.

“ChrysCapital has been an integral part of our journey and has played an important role in determining our business strategy along the way,” says Binish Chudgar, Vice Chairman and MD, Intas Pharma.

“Intas has demonstrated good historical growth and profitability and is poised for significant growth in the years ahead. The follow-on investment reaffirms ChrysCapital’s faith in the company’s ability to continue to deliver superior shareholder value over the years,” says Sanjiv Kaul of ChrysCapital.

The proceeds will be utilized for Capex and acquisitions.

Despite some short-term fluctuations, key commodity prices are on the rise. With Brent Crude oil recently back above US$120 a barrel and the outlook for nuclear energy unclear following the Fukushima disaster, cleantech is starting to look like a real alternative source of energy and a means of reducing consumption of expensive resources. Accordingly, over half of those who choose cleantech options do so to reduce their costs (52%); with 45% making the choice as a way to increase profitability. CSR requirements and environmental concerns remain important, but are not the main reason for adoption.

In India, most Grant Thornton Cleantech clients are in energy – wind, hydro and solar – “and right now, it’s too early to say where these people will branch out to – some clients want to go away from power generation to power equipment because that is where everybody sees the big money, as in the suppliers to all the small power generators,” says Vivek Vikram Singh, Associate Director, Grant Thornton India. Singh rates the following Cleantech market drivers: “One to 10 would be government regulations – everything else is 11th.”

He further adds, “Like in South Africa, we had the first phase of solar power projects tendered under the US$22bn National Solar Mission, and they have already been commissioned. The next phase of solar projects will be tendered and awarded in the next six to eight months. And now there may be a stipulation that says that you cannot import equipment for solar; it will have to be produced in India, which represents a lot of opportunity. Regardless of the proposed change, regulations that favour power generation from renewable sources, like duty exemptions, tax breaks and depreciation rate changes; have already been put in place.”

“In short, cleantech is growing up. It’s a long way from being the cash generating adult that oil and gas is, but is definitely showing signs of wanting to stand on its own two feet.”

This increasing maturity is filtering through to expectations of cleantech business, creating a bullish outlook for 2012. Going ahead, 64% of cleantech businesses expect revenue to increase this year – up from 54% last year and the same percentage (64%) expect higher profitability this year compared to last year (42%).  Cleantech providers currently see the greatest demand from the developed economies of Europe (51%), and the US and Canada (39%).

Dramatically affecting the Indian market is a proposed clean energy cess or coal tax that would be applied on imported and domestic coal. “For every ton of coal that one uses, you will have to pay a dollar to the government. And in a country like India, where 70% of the total energy produced is from coal, that would mean about US$600m every year, which the government plans to reinvest into the Cleantech sector through a Clean Technology Fund.” Singh adds that there also could be a requirement that 5% of all new power generation be mandatorily from renewable energy sources.

He says that after initial stirrings in 2005 and 2006 from research institutions, academia and policy makers, Cleantech sectors in India took off in 2010 and Grant Thornton’s Cleantech client base has grown exponentially. “Even during the recession, this was one sector where we saw a lot of optimism, and that is partly because of the government and the policy changes that have come in.” Large industrial firms – Reliance, Tata, Punj Lloyd, Moser Baer, Thermax – are all focusing on entering the Indian Cleantech sector, Singh says, and regardless of the nature of the business conversation, it eventually turns to Cleantech.

M&A and PE outlook

“Quite a few M&As and PE deals totalling about US$400m have happened in the cleantech sector, which is very promising given that this is a sunrise sector,” says Vivek. “The M&A market in India is on the rise, as well as in Asia and China. But right now, cleantech is more of a private equity play. M&A will pick up – 2011 was far better than 2010 and 2009 in terms of cleantech activity.”

A sector in transition

The Grant Thornton report shows a cleantech sector in transition. There are more companies involved in R&D (42%) and IT (29%) than in the previous year (31% and 22% respectively).

In contrast, manufacturing activity has become relatively more subdued. The number of businesses citing involvement in manufacturing of energy efficient products has decreased from 26% to 19%, although manufacturing of products for cleantech energy generation has increased marginally to 17%, up from 14% the previous year. There could be a number of reasons for this, but the Grant Thornton report stresses that the issue of capital constraint represents a big challenge for the sector and, as a result, governments.

The afternoon sessions had parallel sector showcases highlighting Sankalp’s shortlisted finalists for its annual awards in categories like agriculture, food and rural business and clean energy/ clean technology followed by an open house for the ‘technology for development’ category. The panelists in the ‘agriculture, food and rural business’ discussion stressed on the role technology can play to change the face of agriculture and rural enterprise creation in India. Dhiraj Dolwani, CEO, B2R Technologies, said that creating more sustainable and scalable enterprises in rural areas itself was the key to enriching rural lives. Mark Kahn, Venture Partner, Omnivore Capital, said that the move of next-gen youth away from agriculture and into cities was inevitable and to absorb these migrants, manufacturing should be given a boost. Sumita Ghose, Founder and Managing Director, Rangsutra, stressed on making value addition happen at the local level. Arindom Datta, Sr Director and Head of Rural and Development Banking, Rabobank, highlighted the immense opportunity that the food processing industry holds for enterprise.

An interesting post lunch session delved into the urban business model conundrum. This session was moderated by Samit Ghosh, CEO & MD, Ujjivan Microfinance, and brought to the fore problems faced in serving the urban poor as a market. Ghosh said that the urban poor are constantly shifting base within cities, which makes lending finances and serving them as customers difficult. Geeta Goel, Director, Microfinance, Michael and Susan Dell Foundation, explained that a pro-poor urban business model does not always start delivering immediately and requires a lot of patience. She, however, added that the aspirational demand and awareness already exists among the urban poor due to exposure to city life and in that sense a huge opportunity lies in serving this segment. Anil Mehta, CEO, India Shelter Finance Corporation, and Paul Sathianathan, CEO, Guardian, were the other participants in this discussion.

Day one of Sankalp Summit ended with successful entrepreneurs Ronnie Screwvala, Founder Chairman, UTV Group and Vikram Akula, Founder and ex-Chairperson, SKS Microfinance sharing their lessons with the audience.

Phanindra Sama, Co-Founder and CEO, RedBus, and Ajay Balakrishnan, Project Manager, Ammachi Labs, delivered the keynotes on the morning of the second day. The plenary focused on ‘Reaping the demographic dividend: Ensuring jobs for Indian youth’. Dilip Chenoy, CEO, NSDC, stressed the need to recognize blue-skilled workers and their contribution to make such jobs more aspirational. Manish Sabharwal, CEO, Teamlease, spoke of matching skills and demand, fixing a mismatch and building a skills pipeline. The other panelists included Sanjay Bahl, President, NIIT-Skill Building Solutions and Muralidhar Rao, CEO, Future Learning. In succession to the plenary, Intellecap released a second report titled ‘Human Resource Challenges in the Indian Social Enterprise Space’.

The afternoon once more saw sector showcases of Sankalp award finalist in the categories of health, water and sanitation and education and vocational training. The discussion in the first category focused on product, service and ecosystem areas. The panelists agreed that innovation in all three and more so, innovation focused on creating affordable and quality healthcare and sanitation products and services keeping the Indian consumer in mind is very important. A lot of the healthcare abroad is linked to the state social security system while in India it is self-paid. K Chandrasekhar, CEO, Forus Health; Murli Mohan, CEO, Maestros; and Terri Bresenham, CEO, GE Healthcare, India shared the stage for this discussion. The post lunch session on day two centered on ‘Taking risks and investing early’ in the social enterprise space. This session gave a platform to investors and catalysts in the social enterprise sphere to voice their concerns and share their insights.

Day two ended with the award ceremony. Eram Scientific bagged the honors in the health, water and sanitation category while Invention Labs stole the limelight for the technology for development category. In the education and vocational training space, Edusports walked away with the trophy while Vinfinet Technologies emerged as the winner in the agriculture, food and rural business space. To close the award ceremony, GIBSS stole the crown for the clean energy and clean tech space. Overall, Sankalp Summit 2012 was a great platform for social entrepreneurs to meet ecosystem stakeholders, learn, network and grow in the days ahead.

The former posterboy of Indian microfinance, Akula, who, in 2006 was named one of Time magazine’s 100 most influential people in the world, has finally come out of self-imposed exile, nearly six months after his unceremonious exit from SKS Microfinance, the firm which he set up, took to dizzying heights and saw being mired in controversy over farmer suicides and the firm’s aggressive debt collection tactics.

Making a rare public appearance for the first time since his November 2011 exit from SKS amid the wave of controversy, Akula held a packed audience spellbound at the Sankalp Summit 2012 organised by Intellecap in Mumbai, where he admitted he made ‘many, many, many mistakes’ in his journey as a social entrepreneur.

AgSri is founded by Biksham Gujja, who worked with WWF-International, Switzerland, who also led a team of professionals in a WWF-Icrisat joint project to focus on improving water productivity for major crops like rice and sugarcane. Today, Akula says he is associated with this movement in AgSri to help the 45 million small farmers, and says the technology which has been pioneered by AgSri will remain open source and will not be patented by them.

But the new avatar as sustainable agribusiness messiah is not all that Akula is busy with. He is now focusing on corporate governance in social enterprises as a task force member of the Schwab Foundation for Social Entrepreneurship, and also helping budding social entrepreneurs grapple with problems to ensure they don’t end up making the same mistakes as he made.

Keen to prove he is determined not to repeat his SKS mistakes again, Akula said: “I am not setting up a fund, I am going to help other social entrepreneurs.”

Carefully avoiding any direct mention of his problems at SKS Microfinance, Akula said social entrepreneurs needed to focus on the 3Cs to be successful: culture, code of conduct and control of their institutions.

“Other than the first round of 3Cs I propounded earlier for microfinance and social entrepreneurship – access to capital, dealing with capacities and costs, the new 3Cs are vital for social enterprises,” Akula said. Asked by audience members on what were the key mistakes he made at SKS, he skirted a direct answer, saying, “I just did not focus on the three Cs: did not focus on culture, code of conduct and control.”

Culture was critical, said Akula, pointing out that as social enterprises grew in size and scale, the view was that any professional could take it to greater heights. However, it was imperative the professionals had the correct balance of the culture of the organisation to succeed. “Professionals may not always have the same passion and intensity as the social entrepreneur himself. After all, these are not just enterprises, they are social enterprises.”

Culture, however, was not enough, Akula added. “There need to be some rules as social enterprises scale up. The rules complement the culture. The code of conduct, therefore, is very critical. Culture is a necessary condition, code of conduct makes it sufficient,” he said, adding he was focusing on this aspect at the Schwab Foundation. “Google exhorts you saying don’t be evil. However, for a social enterprise, it has to be taken further by saying be good,” Akula exhorted, saying social enterprises had a greater responsibility than normal enterprises because they had a social mission.

Control, he said, was equally important. “Social entrepreneurs are often naïve. I know I was,” said Akula, adding that while social entrepreneurs want to do good, they also often end up trusting people too much. “I know I should have been much more savvy of control. Social enterprises should also have lawyers and advisors to help the social entrepreneur so that the mission is not turned upside down,” he said. “Otherwise, they will end up facing the same problems as the others.”

Saying he was now busy as an angel investor, seed funder and helping other social entrepreneurs, he advised budding social entrepreneurs to “pause and think about the 3Cs before you are caught up with the heady thrill of success.” A heady thrill which Akula himself was all too familiar with before it all fell apart.

In a country which has the majority of its population involved in agriculture and related activities and has a growing income scale resulting in an upward-looking consumption pattern, early stage innovation is the need of the hour. Looking at these factors, Harvard Business School graduate Kahn, who has been working at Godrej Agrovet since 2007, came up with a novel idea. His concept: Begin a venture fund to assist companies looking to innovate in agro tech that can help Indian agriculture flourish.

The Godrej connect

In 2010, Kahn and Atish Babu, then Vice-President, Nexus Venture Partners, pitched the idea to the Godrej family. The idea got the green light and Omnivore Capital came into being in September 2010. Godrej Agrovet is a strategic advisor and anchor investor in the fund. The fund is, however, independent and Godrej Agrovet is on the investor committee of the fund.

Jinesh Shah, who was serving as the CFO and Vice-President at Nexus Venture Partners, also joined Omnivore as partner a few months later.

The investors are just finishing with the fundraising activities for their first fund of `250 crore in the coming months. Last August, Omnivore invested in weather-based solutions provider SkyMet. They are looking to announce their next investment in April 2012 and will announce one investment per quarter thereafter.

For its fundraising, Omnivore partnered with Barclays and is raising capital from High Networth Individuals in India, PSU banks and insurance companies, besides its overseas fundraising initiatives in the U.S.

Background check

Kahn has a background of having worked with agri-businesses. Before Godrej Agrovet, he worked at Syngenta, a global agri-business, in Switzerland.

Shah and Babu too have experience in the space, thanks to agricultural technology deals in India done by Nexus Venture Partners like Sohanlal Commodity Management, Suminter India Organics and Eka Software.

Why this fund?

There are problems like urbanization eating into farmland, depletion of water table, a collapsing labor market due to programs like NREGA plaguing the Indian agriculture sector. Kahn’s experience in agri-business management made him realize that there is a large scope for innovation and technology solutions to fill in the gaps in India’s agriculture sector. “You can either lament all these problems or you can tap the opportunities glaring at you. But it was evident to us that cracking these bottlenecks would also yield rich dividends for us,” says Kahn. He adds that he expects this sector to see a lot of meaningful reforms in the coming years that will result in massive growth in the space.

Readying the ecosystem

The reason for Godrej’s interest in helping set up Omnivore was to facilitate the creation of an innovation ecosystem in the agriculture space.

Though Omnivore’s investments are focused mostly on early-stage rather than seed-stage companies, many of their marketing initiatives will be focused on agriculture universities, those offering agriculture MBAs and other state universities.

This will be done with the aim of preparing an ecosystem and creating a pipeline of companies to fund in the future for Omnivore.

“We need to create a change in the mindset, so that someone who is in an agriculture university and watches an Omnivore presentation feels the urge to join this sector,” explains Kahn.

‘Intense’ involvement

Jatin Singh, Founder and CEO, SkyMet, which Omnivore invested in last year, says that the involvement from Omnivore has been very intense.

Kahn says the fund will not be passive investors in companies. “We talk to someone from Omnivore almost every day and take all strategic decisions with their insight,” adds Singh. The experience and connections of the partners can be very beneficial for any company working in this space, he says. “We had a turnover of close to $1 million when Omnivore invested in us last August. Things have looked upwards sharply since,” he adds.

Building a portfolio

Compared to a traditional VC, one of the biggest differentiators for Omnivore lies in the way it selects companies to invest in. Most of the companies they are looking to invest in are based in Tier II and Tier III cities and towns.

The fund will actively seek companies to invest in, meeting 100-200 companies in each sub-sector like information technology, agricultural mechanization, supply chain and storage technologies. It will then narrow down focus to 10 companies; and finally pick three companies to invest in.

Kahn says Omnivore is not keen to look at a company that comes through a banker or through other VC funds.

“Our business model is more search-intensive and relies less on intermediaries. We spend a lot of time touring the country,” explains Kahn.

“In agricultural technology, some areas are more compelling either because they are more scalable, more differentiated, have more IP protection, more potential for fast growth or a better exit opportunity,” he adds. The fund plans to get 60-70 percent of its companies to invest in this way. Another 10 percent of its portfolio is likely to be built by investments in companies that pitch their businesses to them.

Godrej Agrovet, which is also exposed to many early-stage entrepreneurs and technologies, shows Omnivore a lot of ventures to fund.

“There is one very compelling deal we are currently looking at which came to us through Godrej,” says Kahn.

Investment criteria

The fund is looking at companies that are less than seven years old and at a level of less than `10 crore in terms of turnover, have a strong technological differentiation, scalable technology and a strong entrepreneurial team.

Some of the biggest challenges the sector faces, according to Kahn, are that historically agricultural universities and the Indian Council of Agricultural Research thought about technology as something you give away for free.

However, most often that option is not really scalable and thus the technology cannot be made available to a large number of farmers.

Distribution, too, can be a daunting task for companies working in the space. Many companies adapt to improved technologies in one or two states but fail to scale beyond that.

In such cases, Kahn says, “We will leverage Godrej to help these companies scale. Godrej can help identify dealers, distributors and supply chain partners.”

He also feels that the government needs to remove some of the market distortions for the sector to truly flourish. “It must focus on improving research and development and educational quality in this segment,” he adds.

The fund is looking to invest in up to 12 companies from its first fund and is looking to make its first exit in the next four-five years.

“If this one goes well, in the next four-five years, we will start raising more capital for our next fund,” he signs off.

“If you look at the market, on the supply side, there are many mom & pop operators, who find it difficult to reach out to customers. A big pain point for customers, in turn, is selecting a cab company offering quality services, especially in unfamiliar cities. With Savaari, we felt a time has come, where technology can play a huge role in aggregating these fragmented suppliers and giving customers a seamless interface.” Kumar is optimistic on building a valuable business in a short amount of time.

Savaari, which has received Series A funding of Rs. 5 crore, will use this capital, to further invest in technology solutions, beef up its sales team, to grow its business across India, as well as hire senior executives as department heads. Currently, it has its operations center in Moradabad and a customer care center in Dehradun. Both Kumar and Parag Dhol from Inventus Capital Partners will join the firm as Directors. “We will bring our experience of scaling businesses, that’s the value-add we have, including user experience issues and hiring senior recruits,” said Kumar.

Launched in 2006, Savaari has organically grown to a network of over 100 operators (vendors) across 60 cities and clocked an experience of over seven lakh trip hours and 75 lakh trip kms. Its business model services three verticals: corporate users, online travel agents and retail users. It has has 300 corporate customers and total number of users to date have been 100,000, of which 30 percent comprise retail customers. Savaari’s clients opt for day trips as well as multi-day, multi-city trips.

While the company does not own any vehicles it ensures operators meet standards in terms of experience, number of cars (25 for metro cities, 10-15 for tier 2 and 3 cities), and Internet adeptness, following which it trains vendors on Savaari’s expectations on customer service. Further the company has invested in an integrated back-end engine that allows easy booking management and automated billing for its customers as a convenience for corporate clients. “Our corporate clients get one collective bill and can even track usage through our system to prevent misuse,” said Gaurav Aggarwal, Founder and CEO, Savaari.

Speaking on its branding strategy, he said, “There are various touch points where a customer can see our branding – the water bottle and newspaper in the car as well as the duty slip signed carry our name and logo.” Building a good team, Kumar said, should be Aggarwal’s priority area. The company’s current workforce, across its three offices, comprises 25 people. Of these only five are sales personnel. As for challenges, he feels, Aggarwal will need to spend some time on new customer acquisition.

According to Aggarwal’s research, India has 40,000-50,000 taxi operators. The non-airport segment is valued at Rs.10,750 crore and is growing at 15 percent year-on-year. Savaari addresses both business (73 percent) and leisure (27 percent) segments within non‐airport segment, which is a major focus area for the company. “We are excited to have access to Inventus and their entrepreneurial experience. We believe that their support and direction will help us innovate and establish ourselves as the leader in the online car rental space in the country,” said Aggarwal.

Mohit Khanna (VP Operations) and Manik Shah (VP Customer Support) are the other two co-founders of Savaari. Tight-lipped on current revenue figures, Aggarwal said they are aiming to touch Rs. 500 crore in the next five years. The firm was set up with initial investment of Rs. 2 lakh.

Inventus Capital plans to invest in another three to five companies this calendar year. It largely invests in software services, mobile and internet. Online bus ticketing company redBus.in is one of its portfolio companies too.

After the government appointed S Ramadorai, former CEO of Tata Consultancy Services (TCS), to look into the problem the proposed tax was causing to startups and entrepreneurs, frontline entrepreneur organization, The Indus Entrepreneurs (TiE), is now working on a set of alternatives which it will propose to the government through Ramadorai. This, TiE believes, will address the problems the tax can cause for genuine startups and angel investors.

Ramadorai is also the advisor to the Prime Minister in the National Council for Skill Development.

Confirming that alternatives are being worked on, TiE Executive Director – Operations Kanchan Kumar told Entrepreneur that the organization would come up with a set of alternative solutions which can help ameliorate the problem for genuine startups while keeping the government’s concerns on unaccounted money in mind.

As reported in Entrepreneur earlier, in Budget 2012, finance minister Pranab Mukherjee proposed a tax on premium over the fair value of shares bought by investors in closely held companies. This premium would be treated as income, not investment, and taxed at the highest rate of 30 percent. The proposal also gives enormous powers in the hands of assessee officers who need to be convinced about the fair value of such shares. Venture capital firms are outside the purview of this tax.

Effectively, this deals a body blow for small startups and enterprises who depend heavily on angel investors for funds and can derail the rapidly growing startups and angel investor movement in the country. TiE and other angel networks have already said the move is a huge blow for the entrepreneurship movement in the country.

While the TiE solution is still in the works, what is broadly proposed as a workable alternative is a limit on the amount of money raised by such startups from each angel investor or investor company, above which the funds can be subject to tax. There could be a cap for individual angel investors and also a separate and higher one for companies which are not registered VCs. The tax will then be levied on transactions above those amounts. The caps would be arrived at based on typical deal sizes which angels and investor companies are usually involved in. For example, if the cap arrived at for an angel investor is Rs 1 crore, any amount over this cap will be subject to tax.

“The idea is to sift out the genuine deals and ensure that true entrepreneurship and angel funding do not suffer. We will suggest these solutions to Mr Ramadorai soon,” sources said.

The second – and equally important – move being examined by TiE is to come up with an organization for angel investors on the lines of a self-regulatory organization (SRO). This will not be a statutory body but a kind of self-regulatory association where angel investors can be members. Angels who are members of this organization can then be exempt from the premium tax. This will give the government comfort about the authenticity of the angel investors who are funding these startups. Currently, the angel investor space is very loose and unorganized and largely based on individual or small group investor initiatives.

Sources in TiE said these proposals would be submitted to Ramadorai shortly. “We genuinely believe it was never the government’s intention to stymie the growing entrepreneurship movement in the country. The concern on unaccounted money has unfortunately caused this collateral concern. I am sure the government will understand it and create a solution.”

Kiran and Shroff are angel investors and members of the Indian Angel Network and Mumbai Angels. Shroff sold Fame to Inox in 2011 while Kiran quit Starcom in 2010 to pursue new ventures. Angels are affluent investors who provide informal start-up capital for new businesses.

The first such angel nursery to be located in Mumbai, VentureNursery (VN) aims at mentoring and accelerating up to a dozen start-ups in the first year. Following a unique Angel-in-Residence model, in addition to providing business and infrastructural support, VentureNursery will offer intensive and immersive mentoring to a batch of entrepreneurs by active angel investors throughout the acceleration process.

Participating companies that graduate successfully will be considered for seed funding by angels. As opposed to incubators which are essentially government-run, accelerators are more intense and active mentoring platforms, have shorter durations and are run by private entities.

Kiran and Shroff said entrepreneurs often approach the angel network in an underprepared stage. Consequently, they take too long to raise funds at a time when they should be focusing on their business model. This is the stage where VentureNursery will come in and help the startups in the pre-angel stage.

VentureNursery will also take up ‘sweat equity’ in the startups it will help accelerate. Many startups fail to move to even the basic next stage of angel funding for want of proper mentoring. While as many as 200 potential startups apply to angel networks every month, only about six to eight are allowed to pitch for funding. Even less actually get the funding.

“The idea is to give smart idea owners a fighting chance to take off,” explains Shroff, who is also managing partner of South Yarra Holdings. Kiran, on his part, also runs Friends of Ambition (FoA), a growth advisory firm targeted at middle-India.

Modelled around some of the world’s best known accelerators, VentureNursery will be run by incubator expert Apoorv Ranjan Sharma, who has joined as executive vice-president. He was till recently Head, West India, for Indian Angel Network.

While VN will be sector-agnostic in the long run, it will initially focus on five sectors – media and entertainment, retail, e-commerce, consumer technology, education and cleantech.

Hybrid mode

Sharma said, “VentureNursery will run on a hybrid model. Its primary method will be through the boot camps it will run twice a year. The founding team of each chosen start-up will be invited to work in our office and will be given working infrastructure and business support services through our partner companies.”

Over the 13-week programme, VN’s Angels-in-Residence and Charter Angels will work closely with start-ups on their gap areas to ensure that each start-up evolves as a team and develops a business proposition. “In addition, under our ParallelTrack programme, we will accept relevant applications from a few start-ups every year outside the boot camp as well.”

Kiran said in addition to the Angels-in-Residence and Charter Angels, the accelerator will work with a group of Advisors-in-Residence and Executives-in-Residence to complete the support to the start-ups. VN aims to announce the first list of Charter Angels and the Advisors-in-Residence shortly.

The applications for the first BootCamp will be accepted starting 1 April 2012, through the company’s website. Interested start-ups can also approach VentureNursery through social platforms such as LinkedIn, Facebook and Twitter.

Shroff said through the sweat equity model, VN hoped to eventually earn some revenues though that was not the chief aim of the venture. “Several angels want to do their bit and give something back. Mentoring startups is, therefore, our chief objective,” he said.

Budget hit

As reported earlier by Entrepreneur, the budget has hit angel investors and startups hard by seeking to impose a tax on the premium charged over the fair value of shares when investors buy stakes in closely-held firms. Speaking about the move which has raised the hackles of the angel investing community, Shroff, however, said the intention of the government was never to kill angel investing or entrepreneurship but to deal a blow to unaccounted money. “I am sure the intention of the government is noble. There are several representations which are being prepared on this aspect and I am sure the government will do something to address the problem,” Shroff said.

Now that the Budget fineprint is emerging, the Devil truly appears to be in the detail. For the entrepreneurship and startups space, despite some sops given by Finance Minister Pranab Mukherjee to micro, small and medium enterprises (MSMEs), there is one clause which may derail the entire entrepreneurship movement currently taking place across the country.

There is a Budget proposal to tax at 30 percent any investment received by closely held companies where the aggregate investment exceeds the fair market value of shares. Put simply, this would mean an angel investor investing in a company where the investment is in excess of the fair value of the shares, will be taxed and his investment will be considered as income for the entrepreneur.

In Budget lingo, this pertains to cases “where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or a venture capital fund”.

While venture capitalists are not included, the entire angel investor space is a hugely worried lot owing to this proposal.  Quattro’s Raman Roy, a leading angel investor himself, said the proposal will ‘kill entrepreneurship’. Overseas private equity players are also agitated over this proposal.

Saurabh Srivastava, a celebrated angel investor and co-founder of the Indian Angel Network, has also been quoted as saying the proposal seeks to tax the company and convert an investment into income.

Ravi Kiran, co-founder of middle-India advisory Friends of Ambition (FoA) and member of Indian Angel Network told Entrepreneur: “There seems to certainly have been an error in understanding on the part of the Budget makers. If this is pushed through, it will spell serious trouble for the angel investor and entrepreneurship space. I feel this is an error and should be corrected quickly before it leads to confusion.”

According to Kiran, who focuses on middle-India enterprises where there is a surge in entrepreneurship and interesting ideas, while the proposal seeks to treat angel funding as income for the entrepreneur, it also overlooks critical aspects of the whole angel funding model. “It’s not just the money an angel investor gives. Along with the money, he also does a lot of mentoring for the enterprises. Would you tax that? Angel investors commit money and several hours of guiding the entrepreneurs.”

Importantly, the clause also says “the fair market value of the shares shall be the value—(i) as may be determined in accordance with such method as may be prescribed; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assetsbeing goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature.”

Angel investor circles also say that if the proposal is allowed to go through, it will also mean enough scope for negotiation with the assessing officer, and could lead to further corruption. “Investee startups will now start requesting Rs 120-130 for Rs 100 investments because the assessee officers will have to be taken care of,” points out an angel investor.

While Mukherjee, in his Budget speech referred to this move as one aimed at deterring the use of unaccounted money and “increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value” angel investors point out another growing phenomenon.

“Unlike, say, five to seven years ago, today a number of professionals and salaried people are coming into the angel funding space. Where is the question of unaccounted money in their case? The money they put in is already in hand after tax and when it is pulled out later, it will be subject to capital gains tax. Besides, angels don’t look at exiting in the short term anyway,” points out Kiran, emphasising that he feels it is a genuine error and would be corrected soon enough.

However, till the government clears the confusion on this, the startups and angel investor space is a hugely worried lot. As would be the hundreds of students from the IITs and IIMs who have decided to take up entrepreneurship—and not salaried jobs—as career options. Will Pranab Mukherjee do something for them?

Speaking exclusively to Entrepreneur on the investment, Sinha said, “This is an interesting space and the promoters have adopted an innovative model to sell these products online which makes it unique.” “Plus price points for these second-hand products are 30–50 percent cheaper than MRP and thus open up a huge market beyond the metro cities of India, especially for higher value durable items (like prams, cribs, car seats) – that makes it even more exciting,” he added as reasons for investing in the startup.

According to Sinha, 60-70 percent of India’s population is below 30 years and makes up the segment with children or expectant parents. “The demand for baby products will only increase as the current generation of young parents have grown up with the internet,” he cites as an opportunity.

The startup launched operations in June 2011with initial investment of Rs.5-6 lakh (self) and began generating revenues November 2011 onwards. To date it has clocked in Rs. 2 lakh in revenues with an average of 18-20 customers a month and expects to increase sales to Rs 7-8 lakh a month by end of 2012 on the back of this funding.“We will use this capital to scale operations and increase our inventory,” said Khan.

Currently, the startup sources products from its target segment in Mumbai but sells pan-India. The company buys used durable baby products in good condition from parents, and post- sanitizing at its warehouse then offers them on sale on its website and has a ticket size of Rs.2,500 per customer. Khan said they will continue to source products from Mumbai only for the next 12 months. “It’s a very large market to start with,” he said.Pre Cared also has informal alliances with NGOs wherein if the parent doesn’t want to accept money for the product he/ she is selling, then the money is donated on their behalf to the NGO by Pre Cared.

“We will work with the promoter to scale operations in 24 months, acquire customers and build a brand simultaneously,” said Sinha, who will also be on the company’s Board as an advisor-cum-mentor. “We are aware of negative perception of second-hand products in people’s minds,” he mentioned.

MyFirstCheque will be announcing its next investment in April 2012 and is bullish on food (retail) and healthcare sectors apart from e-commerce. It plans to make another six investments in 2012.

The fund is typically involved in companies from concept stage and works with startups and budding entrepreneurs for 24 -36 months with an average investment size of Rs.5-25 lakh.

MyFirstCheque is started by three experts with more than 50 years of entrepreneurial experience, including successful exits, between them – Gautam Sinha, Prahlad Rao and Monisha Advani.