It was chance that inspired Prabhash Nirbhay to launch an angel network that focuses on supporting lower-tier startups in India.

In 2020-2021, Hanuman, a health technology startup based in Patna, was looking to raise funds so that it could help more people in need of outpatient and rapid diagnostic services at home. Hanuman needed funds to expand his ambulance aggregation game and diagnostic services, but typical issues for a startup originating in a non-metropolitan city prevented him from accessing capital.

Around the same time, a friend contacted Prabhash seeking funding for his startup – an edtech play that aimed to provide quality education in lower-tier cities in India.

Although he ran his own startup, Flipcarbon, in Bengaluru, Prabhash was well aware of the many hurdles one had to overcome to raise funds, even with easy access to the venture capital network.

“I realized that if the fundraising process was so laborious for startups based in metros, it would probably be 10 times harder for a startup based in a Tier II or III city in India,” he says. .

It was then that he decided to create Angels of Jharkhand, an angel investor network focused on incubating, funding and providing acceleration services to startups based in small Indian cities, as well as those working to solve common problems in these areas.

(Credit: Yash Saxena, Team YourStory Design)

Founded in 2021, Jharkhand Angels mainly helps connect startups to investors, and guides them to become proficient in the art of pitching and fundraising. It also provides valuable business mentoring and training services to help startups solve problems, learn from others’ journeys, find resources and grow.

The angel network, which was started in Ranchi, is now based in Bengaluru as the founders moved and successfully raised funds for GoSeeko, HanumanZiffyTech, Fydo and The Playbook so far and is about to close a round for JhaJi Store, which was featured on Shark Tank India.

Although Jharkhand Angels did not disclose the names of the investors associated with it, it said they invested Rs 3 crore in total, in five startups, between 2021 and 2022.

Investment thesis

Prabhash says there is a basic criteria that startups applying to fundraise through the Jharkhand Angels network must meet. First, they must either come from a Tier II, Tier III, or lower city, or their solution must meet the needs of underserved consumers in a lower tier city.

The angel network is independent of the sector, says Prabhash, who is its chief evangelist.

JAN portfolio companies (Design credit: Yash Saxena, Team YourStory Design)

The challenges of being a lower-tier startup

Prabhash says building a startup in a lower-tier city is much easier now than it was two years ago, but it still comes with unique challenges.

For starters, state schools and colleges other than IITs and its ilk do not offer any kind of startup mentorship programs or incubation facilities that could fan the flame of entrepreneurship.

“An engineering school based in Jaipur or Ranchi might be five times better than one in a Tier I metropolitan city, but, infamously, these schools are not equipped or designed to encourage students to pursue entrepreneurship. We are losing a lot of talented potential entrepreneurs there,” says Prabhash.

Not only are students missing out on entrepreneurship as a career choice, they are also failing to make the critical and necessary connections for mentorship and funding that could prove helpful.

Then there’s a severe talent shortage in smaller cities and towns, especially with larger startups now adopting the work-from-home model, hampering those startups’ access to critical expertise and people at the ready. innovative spirit.

“The question people are asking today is ‘why would I work for a startup based in a small town when I can just as easily work for a company based in Bengaluru, Chennai or Mumbai, which could pay me better and provide better benefits. . Startups in lower-tier cities are struggling because of this talent migration,” says Prabhash.

Access to the upper layer of the startup ecosystem, such as customers and users, venture capitalists, fellow startup co-founders, incubators and mentors, is more difficult in Bihar or Raipur, by compared to Bengaluru or Delhi. Networking and connections — the difference between a steadily growing startup and an unsustainable startup — are rare in lower-tier cities, and entrepreneurs there have to work a lot harder to keep up.

“And unfortunately, sometimes even hard work isn’t enough to stay afloat,” says Prabhash.

But, perhaps, the biggest challenge Tier II and lower startups face is the lack of a founder mindset.

(Credit: Yash Saxena, Team YourStory Design)

“I have observed that small town entrepreneurs, despite having the basic DNA of an entrepreneur, often lack the growth mindset that is so necessary…they lack the mind to look beyond the smallness of their immediate surroundings and their own problems, which is why they often miss the big picture,” he jokes.

The lack of a work ethic — the quintessential “hustle” ethos — sometimes makes it difficult for investors to also take interest in startups in lower-tier cities, he adds.

Despite these multiple hurdles, Bharat startups have several advantages that their urban counterparts do not, such as easy access to a large customer base since the majority of Indians reside in non-metro Indian cities.

The biggest advantage, however, is the innate ability of these startups to operate without external funding.

Lack of access to venture capital funding is an equal bane and boon to startups in lower tier cities, as they are forced to start up and earn significant money that can be reinvested into the business. business, rather than relying on capital they have not yet earned.

“Startup is a lesson in entrepreneurship that urban and metropolitan startups could and should learn from Bharat-based startups,” says Prabhash.

Future plans

In the longer term, the angel network wants to create and operate its own fund to make small investments in startups.

It also plans to add more big-name investors and angels to its network, launch its own incubation program and enroll 30-40 startups in it, and work with lower-tier colleges to help them. to set up their own incubation cells in the next 6 to 12 years. month.

The Tier II and lower startup ecosystem, overall, looks quite promising, even in terms of return on investment, says Prabhash, despite the funding winter that has kept many startups in the metros from getting off the ground.

“For better or worse, Tier II/Tier III startups aren’t funded anyway, so we don’t really mind the funding freeze,” he says.

As investors tighten their purse strings, his advice to startup founders — metro and non-metro — is to come prepared to host meetings with numbers and answers to questions about shareholder return, profitability and growth. ‘impact.

“Find and focus on solving real, real problems – the bells and whistles can wait.”