Why Invest in Early-Stage Startups in India?

Invest in early-stage startups in India for high growth, equity benefits, and tax incentives. Explore key advantages.

Risk is the primary rule of an investment and acquiring a high ROI. The bigger potential profits you have, the bigger risk you can take. One of them is high-risk investment in startups. But the Returns do go through the roof if you invest in the early-stage startups in India.

Initial investors are able to reap large long-term profits and bonus recognition for helping develop breakthrough startup idea innovation. Here are some of the merits of investing in early-stage startups that we will discuss in this blog. But first, let's get familiar with what we call early-stage startups.

What is Early-stage Startups in India?

They are Sources of Capital: Early-stage startups are in the initial stage of their journey and require a formalized business model. You are up to date till October 2023, they are building minimum-value products and mainly work on market research for product-market fit for the startup profitability and with their success.

Seed investment is the much-needed money for the startup to get the business going, for R&D, to collect concrete data to help raise funds in the future. Some of the early-stage investors aiding startup growth is: Early-stage VC firms, angel investors, incubators, and crowdfunding

Let us explore some of the early-stage funding benefits for startups and investors

Why You Should Invest in Early Stage Startups

Investors who focus on the startup stage play a critical role in both the startup ecosystem, and the nation’s economy. Here are eight advantages for both startups and investors!

1. The early-stage financial aid

Funding is the oxygen for survival for early-stage startups. Research & Development Stage: At this stage, you turn your innovative idea into a working startup business model.

As an early-stage startup investment, it accelerates the development process and allows the startup to create an MVP and do market research to tap the right audience for a successful and highly-returning venture. It allows the startup to release the product in ASAP level and iterate based on performance and customer feedback.

2. Startups and entrepreneurs’ mentorship

Especially for new entrepreneurs, everyone requires a toe up in the beginning phases. The early-stage backers tend to be domain experts who are passionate about supporting blue-sky companies. So, with investment, they bring their experience to the table to help you out-perform your venture success, avoid pitfalls, and recognize and adapt to market trends. Investors provide a significant financial boost to startups in the early stages while also offering a wealth of knowledge around investors, allowing R&D to give them a competitive edge.

3. Expand business network

Perhaps the biggest advantage of early-stage investments in startups is that you get to network with early-stage investors. You will have access to a variety of different startup investors, such as early-stage VC firms, angel investors, incubators, and much more. They allow you to be networked with more industry players to start business relationships for startup growth. Networking helps you build relationships with potential business partners, investors, and experts who will aid you in the rocky road of a startup.

4. Lower initial valuation

Compared to startups in the West, early-stage startups in India have lower initial valuations due to the absence of a structured model, MVP, or product. Thus, first-stage investors can give in the required capital and get a higher percentage of the equity. As a startup grows, so too does the value of their stake in said startup. This leads to increased returns and better returns on their investments.

5. Less exposure to bureaucratic decision making

Since the valuation is low, they can get a massive return on investment (ROI) if the startup takes off. As a startup, they can invest a little amount initially and once the startup picks up and they have a brand presence in the market. Hence, the early-stage venture capitalists are always on the lookout for potential startups with big payouts in the future.

6. Tax benefits and incentives

India is one of the world's fastest-developing economies with a GDP of $3.5 trillion. This phenomenal growth has mainly been driven by the startup ecosystem. The government has a significant support facility through tax relaxation and incentives such as subsidies. One is subsidization and tax return with investment of startup in rural areas in order to grow the society and create more jobs related to the same process.

7. Creating variety in the portfolio

Risky and safe investments are a good mix for a well-balanced investment portfolio. Which makes investing in early-stage startups a ideal high-risk high-reward play. There are early-stage VC who invest in these to get higher returns over the same period. This is an early-stage startup investment for angel investors and allows them to diversify their types of investment.

8. Nurturing innovation in its infancy

Therefore, many startups are aimed at solving real world problems with novel solutions. So, we can also be part of this transformation by investing in early-stage startups. You can make a difference in building a better world by supporting startups at their most important phase. Few of them include Fintech, Health and Edtech which are exploring the most out of the innovative startups. That is why you can make a difference by helping out early-stage startups with either some funds or mentorship.

How to Reach out to Investors for Early-Stage Startup in India?

There are enough challenges in finding the right investors. Finding early-stage investors is a whole other beast. Well, there are a couple of ways to get you to the right investors for startup investment for early-stage companies. Reaching out to your network is one of the most trusted methods to find early investors. Networking helps you build repo and credibility to attract early-stage investors The network also assists you in discovering potential business partners for your growth and expansion.
21BY72 is an angel network that connects startups with investors. We had conducted three huge successful global startup summits, where we assisted start-ups in raising more than $10 Million. Startup Exhibitions, pitching events, and intriguing panel discussions await participants at our Global Startup Summit, catering to startups, investors, and subject matter specialists. Here are global investor and start-up star of a startup or early stage investors. Check our website for previous events!

Conclusion

Early-stage startups are the lifeblood of the startup ecosystem in India. They can disrupt the industry with a out of the box approach towards solving a real world problems. Their R&D needs are huge and cannot be funded enough. These early-stage startups that's where they invest hope to profit from when the startup matures and suddenly can scale. Because the valuation is lower, the return on investment also has a potential to increase if all goes well. Not to mention, credit of supporting innovation and mentorship of revolutionary startups is the added advantage. If so, you can join our Global Startup Summit and collect
businessmen, industry leaders and investors from around the world. Mine the website for dates of upcoming startup summit

FAQ

How are early-stage startup investments dangerous?

Of the many types of startup investment, early-stage investment is the most risky; primarily due to the limited amount of market data, an unrefined business model, and intense competition. There is an equal chance of how the startup failing and succeeding. So you need to take things like the entrepreneur’s understanding of the market and the nature and potential of the startup into account.

What are early-stage funding for the startup?

Angel Investment, Incubators, Crowdfunding, Government Grants and Early-Stage Venture Capital Firms are the types of Early-Stage Startup Investment options. Each has its own specific conditions, but the one that stands out most is the equity shares the investors might ask for.

What Should they Look For In An Early Stage Startup Investment?

The early-stage VC firms seek out early-stage entrepreneurs and their teams, startups which have strong potential, market trends, and their business models. The final decision is based on the Startup product and service functionality and market validation.