With nearly a dozen deals, Keiretsu off to good start in India

Posted on January 26, 2016 by K4 Bangalore
Originally Published on VC Circle

“The comfort level was high in investing in companies in which other people had already invested. They came from the Keiretsu network in the US.”

US-based cross-border angel investor network Keiretsu Forum has got off to a good start in India with its first chapter in the country, the Chennai chapter, finishing its first year with almost a dozen deals.

While five of the companies are India-based, six companies are based in the US.

The chapter, which came into being in February 2015, has invested a little over $1 million (around Rs 6.8 crore) in these early-stage companies. The Chennai chapter has closed 11 investments – in five Indian companies and six US companies – and is about to close its twelveth investment deal this month, Rajan Srikanth, co-president, Keiretsu Chennai chapter told VCCircle.

“All 11 deals happened in the last five-six months and we are hoping to complete one more before the end of this month,” he added. Four of the five Indian companies are based in Tamil Nadu, while the fifth is based in Madhya Pradesh.

The Chennai chapter backed IIT-Madras incubated underwater rover maker Planys Technologies Pvt Ltd, Coimbatore-based Purple Ironing Services Pvt Ltd, specialised exotic vegetables seller Bison Agro Farms Pvt Ltd and energy analytics company Ojas Digital Technologies Pvt Ltd (EnergyLy), besides Madhya-Pradesh based Artison Agrotech Pvt Ltd which develops bamboo-based alternatives for timber.

The Chennai chapter of Keiretsu Forum, which has 27 members, typically makes investment in the range of $25,000 to $40,000 and has invested up to $200,000 in a single company.

Keiretsu Forum is an invitation-only platform. In the US, it admits those with an annual income of $200,000 which is the US Security Exchange Commission's criteria for accreditation. Though no such norms have been set for India, the local chapters in India largely follow the same rule in enrolling members.

In India, besides Chennai, it has a chapter in Bangalore and is looking to expand to other regions in the country.

In Chennai, around 20 members joined the network in the first six months but no deals were signed in that period. Srikanth said most of the members in Chennai were first-time investors and were cautiously approaching the angel investment activity.

“The comfort level was high in investing in companies in which other people had already invested. They came from the Keiretsu network in the US,” Srikanth said.

As a cross-border platform, Keiretsu presents deals from other centres to each chapter. When a chapter invests in a company it prepares a ‘due diligence document’ that comes in handy when other chapters evaluate the same company.

This has helped the Chennai investors to pick up stakes in US companies including rooftop solar system provider YouSolar Inc, IoT-based video streaming technology provider Viakoo Inc, small medical practices focused business analytics company WhiteSpace Health Inc, provider of technology tool for senior care professionals iHealthHome LLC, no-fog goggles maker Abom Inc and financial services sector focused enterprise IT company Zenyx Inc.

Srikanth said that some of these companies have plans to expand their businesses to India and expect their Indian investors to help them with local market connect.

It invested in the 11 companies after screening 45 companies. All its investee companies had already launched their products in the market before making investment pitches to the Keiretsu Forum.

The Chennai Keiretsu members have so far not funded any e-commerce company. “Many of our investors are not from the IT space. Our investors have strong appetite for non IT, non-internet and nonecommerce deals,” said Srikanth. “Out of 45 deals that were presented, not more than four or five were ecommerce companies.”

Noting that it takes a bit of effort to find the kinds of deals it is interested in, Srikanth said they had only scratched the surface. “There is a huge ocean of high quality non e-commerce deals that are waiting to be discovered,” he said.

With membership growing and the momentum picking up, Srikanth expects the number of deals in the second year to touch 18. The Indian companies that raised money from the local chapter are now in the reckoning for follow-on funding from Keiretsu chapters abroad.

The backing of the local chapter is a validator for additional capital raising, Randy Williams, the founder of Keiretsu Forum told VCCircle during his visit to the country in September. The angel network is estimated to have invested around $800 million till date in similar number of companies across the globe.