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Investment in Cloud Startups

In: Business and Management

Submitted By pradjumna
Words 551
Pages 3
Introduction and Objective:
Indian Angel Network, India's first angel network is a platform for entrepreneurs and has a unique model of an incubator which is investor led and based on value added mentoring. The Network has met with early successes and has already invested in companies across multiple sectors and geographies, and helping create ventures which give 5x returns over 1 to 2 years.
The project deals with analysing the Cloud start up ecosystem in India as a potential investment sector by the Angel and Venture capitalist firms. It includes deep understanding of the Software as a service (SaaS), Platform as a service ( PaaS), Infrastructure as a service ( IaaS) technologies and their applications. A thorough understanding of the existing players’ business model is done along with understating their scalability potential and valuation methodologies.
Project deal sourcing is the first stage of the cycle which involves gathering primary data of start-ups by attending several networking sessions. In the Second stage short listing of the firms is done on the basis of their business models and other factors. Later the start-ups Pitch for the investments against the Angels / High Net worth Individuals. After getting screened through this process, valuation of the firms is done (Pre valuation and Post valuation). This valuation is based on the expected future cash flows discounted to the present value. Also a possible potential exit strategy to earn the returns is developed. It could be an acquisition or selling to a VC and can exit in cash or hold a part of equity.
The project involves in depth understating of the Cloud technology and its potential benefits for the firms which use it. The applications of the cloud in education, healthcare and mobile apps sectors are mapped. Also several revenue models for the start-ups in the sector are to be examined. The valuation of the business model is calculated as per the conventional valuation methodologies and the structuring of the deal and methods of financing is decided.
Research methodology:
The analysis of the ecosystem and few startups in particular need large amount of data from various sources- both primary and secondary research in undertaken
Primary research – Details like founder’s background, investment made till date, product information, marketing strategies, scalability factors, exit opportunities etc are directly obtained from the interaction with the founders. Several startup events in Mumbai, Pune region have helped find the details and interact with various entrepreneurs, investors etc., in the ecosystem.
Secondary research- Information like government policies, regional and global competition, investment methodologies followed by other VC earlier, reviews on startup products from customers etc., is retrieved through secondary research.
Assumptions: The data provided by the startup firms for pitching in sessions is assumed to be true to the best of the promoter’s knowledge. Hence analysis of the firm is done taking that the data/ past financial reports provided is authentic. However a severe scrutiny is done on the estimated financials provided by the promoter for the next 5 years.
Limitations: Cloud start up ecosystem in India is at a very nascent stage and is rapidly growing in India and other Asian nations. The potential of the technology is not totally unleashed. The sources for fundamental analysis are limited to a large extent and are majorly dependent on founder’s interaction with investors.

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