Hotel and hospitality unicorn OYO founder and CEO Ritesh Agarwal has gone bullish on funding Indian startups across several domains, business models and also regions. The 26-year-old entrepreneur has not only set up an investment firm in Singapore called Aroa Ventures to invest in early-stage startups, but has now also joined Mumbai-based integrated incubator as an advisor.
While several other successful entrepreneurs like Paytm’s Vijay Shekhar Sharma, Cred’s Kunal Shah, Flipkart’s Sachin Bansal and Binny Bansal, and Snapdeal’s Kunal Bahl have gone ahead with investing in startups in their personal capacity, OYO’s Agarwal is planning to go the VC way. However, individual investments are not completely out of the picture for Agarwal. Last year OYO’s top executives, including founder Agarwal, had pooled their individual angel investments into a limited liability partnership firm Raaga Partners LLP to invest in early-stage startups.
With his latest sprint at Venture Catalysts, he plans to boost entrepreneurship in India’s Tier 2/3 cities and beyond. Agarwal, who hails from Rayagada, a small district in Odisha, said he realises the importance of mentorship and guidance for young and early-stage founders, especially from smaller cities and towns. He went on to grow budget hotel startup OYO into a $10 Bn business spread across 80 countries within a span of seven years.
Agarwal emphasised, “I started OYO at a very young age and at a time when the ecosystem was not fully developed. I was fortunate enough to get some great mentors like Dr Apoorva (Dr. Apoorv Sharma of Venture Catalysts), Bejul Somaia, and many others, who guided and supported me in my start-up journey… Now that I have established myself as an entrepreneur, I think it is time to give back to society and support entrepreneurs like them.”
Now, with his collaboration with Venture Catalysts, Agarwal plan enables young entrepreneurs from small towns, who do not get similar opportunities that their peers in bigger cities or metros get. Sharma, founder of Venture Catalysts, added, “his (Agarwal’s) learnings will also help many upcoming entrepreneurs that have potential to become the next Unicorn but have very limited access to the right support and mentorship.
Tier 2, Tier 3 Try To Set Mark In Indian Startup Ecosystem
While Agarwal managed to find his way to the top, several Indian entrepreneurs coming from Tier 2, Tier 3 do not have the same opportunities to grow in the startup ecosystem that have an inclination towards repeat founders, people with exponential education backgrounds, and the IITians in the industry.
Analysis by Datalabs by Inc42 shows that only 20% of the total startups in India are based in Tier 2 and Tier 3 cities, with over 5,800 startups in Tier 2 cities alone. The total funding for startups from Tier II cities alone is $1.3 Bn (2014-Q1 2019). However, when compared to Tier 1 cities, there is a clear imbalance in startups and funding in Tier 2 and Tier 3 cities.
Tier 1 startups accounted for 96.54% of total funding in Q1 2019. While Tier 2 did fine with two deals in Jaipur and one deal each in Surat, Madhya Pradesh, Uttar Pradesh, Punjab, Lucknow, Kolkata, Kochi and Ahmedabad, there was a sharp decline when compared to Tier 3 deals. Besides the difference in funding amounts, the average ticket size for investments in Tier 1 startups was also higher than investments in startups from Tier 2 and beyond.
Further out of approximately 338 active angel investors in India, only 5.92% were active in Tier 2 cities.