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60% CXO-level executives invest their wealth in startups: Survey

Posted on August 3, 2015 by K4 Bangalore
Originally Published on Economictimes.com

In a sign that a formal financial architecture for such investments is still to evolve in the country like it exists in developed economies, a large number of the executives who have invested in startups said they had put in money in enterprises founded by friends and acquaintances.

As many as six in 10 CXO-level executives in India have invested a portion of their wealth in startups, an ET poll of 100 randomly selected C-Suite occupiers across companies in a range of industry sectors has revealed. This indicates that startup investing is more than just a fad and is here to stay for the top honchos of Indian industry.

The poll, conducted with a promise of anonymity to the participating C-Suite executives because they were revealing personal investments, showed that 60 out of 100 CXOs had invested sums ranging from a few lakhs to several crores in startups. Among the ones that hadn't, 25 planned to open their wallets to this asset class in the coming months.

As many as 79 CXOs said they would recommend investing in startups to others, although with an important caveat that these investments were risky and investors needed to make them with their eyes fully open.

The poll, the first of its kind, covered executives in sectors as diverse as banking, finance & insurance to FMCG & retail and from manufacturing to technology & consulting, and its findings showed that startup investing was broadbased

As many as 23 respondents were in the broadly defined retail and consumer sector, while nine were from infrastructure and 11 from finance and insurance.

However, in a sign that a formal financial architecture for such investments is still to evolve in the country like it exists in developed economies, a large number of the executives who have invested in startups said they had put in money in enterprises founded by friends and acquaintances.

The reasons for investing in these firms ranged from a desire to staying ahead of the curve given the growing reputation of many startups as disrupters of traditional sectors to having an esoteric element in personal wealth management to plain gambling.

India is in the throes of an entrepreneurial boom with hundreds of startups mushrooming across sectors, many of them, especially webbased ones, chased by a flood of risk capital.

Risk capital investments in India during the first half of this year have surpassed the money inflow in all of 2014, setting the stage for another record funding year. Venture capital investors funneled in Rs 15,600 crore, or $2.46 billion, into Indian startups this year till June 26, compared with Rs 14,850 crore, or $2.34 billion, in 2014, closing 197 deals during the period, according to data from financial research firm VCCEdge.