It was a conversation with Prof. Jawahar Doreswamy, CEO of PES Institutions, that prompted Suresh Narasimha to start CoCreate Ventures, a venture capital fund that focuses on student start-ups.
“Jawahar asked me why there are no funds that invest in ideas of students. That made me think. I started researching on it and structured a fund that would invest in students building start-ups, at the idea stage,” says Narasimha.
Being a student entrepreneur and raising money can be tough. In India, funds that focus on student start-ups have been far and few. Whereas, within the larger venture capital ecosystem, there exists a certain scepticism about student ventures, very often for justifiable reasons.
But, it’s not all doom and gloom for those who, in their dorm rooms, are dreaming of entrepreneurship. Lately more funds seem to be emerging with a dedicated focus on student start-ups.
High entry barrier
While student start-ups have managed to raise funding, ecosystem players point out that it has been more of an exemption than a norm.
So, what created the high entry barrier for student start-ups in terms of fund raising?
Naramasimha points out that among VCs there is scepticism about student start-ups even today, and for the right reasons.
“If I have to invest money and I don’t even know what their commitment is or how much is their ability to understand the market, I would hesitate. These kinds of questions arise when you are a student. So, naturally, the entry barrier for a student to raise money is a lot higher.”
That said, the student focus funds choose to see the other side of this and find potential in the kind of fresh ideas one develops as a student.
Dorm room start-ups
“A lot of the large transformational start-ups that have been built in the world were actually started by their founders in their dorm rooms – be it your Mark Zuckerberg or Bill Gates,” says Richa Bajpai, founder and CEO at Campus Fund, a fund which invests exclusively in student startups.
Bajpai herself started her first company in her dorm room in 2009 when she was a student.
“We believe that the next set of these transformational global companies will be built from India, now. So, we want to find these young innovators in their dorm rooms and back them early on. Also, as a fund manager, it’s the place where you can get exceptional returns,” she adds.
Risk alleviation
Student-focused funds also adopt mechanisms and procedures that help alleviate the risk associated with these young start-ups to the maximum possible extent.
Campus Fund, for example, operate very differently compared to a conventional VC, says Bajpai.
“We are in fact creating a new category of founders called student entrepreneurs. So, the way to approach them, to interact with them and to evaluate them is completely different.”
The fund has a team of around 100 students across different colleges and universities, who work with them to find and evaluate student entrepreneurs.
Bajpai notes that Campus Fund is a pre-seed investor and most of their portfolio companies are pre-revenue.
“So we handhold them for 15 to 24 months before they raise their seed round. We also have a portfolio management team that works with them to get them to a certain scale. That’s why a lot of other senior large funds are investors in Campus Fund. It becomes easy for them to invest in our portfolio companies since they get a curated set of start-ups from us.”
“Then I have a growth and exit team which helps these organizations grow, and raise their next round of funding. So it’s a very different model unlike a typical VC. We are going to the grassroots and then finding these folks.”
According to Bajpai, the fact that the fund has evaluated around 9500 student-led startups in the last 3.5 years and has invested only in 27 is a mark of the efficiency of its curation process.
Across India
CoCreate Ventures, on the other hand, runs a foundation which works with universites and colleges to motivate bright students to become innovators.
“We have a venture foundry which handholds the students from the idea stage to the product stage. We will give them all the resources and take care of expenses such as their salary, the team they want to hire, data they want to procure, marketing and so on. Once the product is ready and the initial customer is there, we will put in $200,000 in the company which can be used for market access,” explains Narasimha.
“We make it very easy for them to get in, harder for them to stay back. They come in through the foundation, go through multiple iterations with the venture studio for 12 months, and then only we will invest.”
According to him, the fund has helped initiate around 75 teams in the last 2.5 years, 30 of which have started generating revenues and seven have done follow on rounds. The later rounds being 2-4x times the money put in by CoCreate also makes it commercially a very attractive proposition for the fund.
“Globally there is lot of hype around this space,” Narasimha points out.
The team currently works with around 40 universities and 400 colleges in Karnataka, Rajasthan, Madhya Pradesh, North East India and Tamil Nadu. All the founders are less than 22 years old and around 60 per cent of them women, says Narasimha.
Entering at the right stage
Chandran Krishnan, Managing Director & CEO - Campus Angels Network, cofounded the fund to fund start-ups that are have validated their projects and are ready to go to market. This, he says, helps a great deal in eliminating risk.
According to him, while student startups do come with the risk of lack of experience, it is also not that hard to spot those with enough passion, unique ideas and good bonds between the cofounders.
“University campuses have become the hub for innovation and incubation,” he points out. The network works with incubators of IIT-M, Anna University, PSG, VIT and more.
Student experiences
Ananya Mungara, founder and CEO at SmartChakra which has developed a tyre management system, feels it’s important to have more student-focused funds as it’s easier for student innovators to approach them than the larger funds initially. SmartChakra was one of the first start-ups to be incubated by CoCreate.
“People here understand you’re a student, and you might have exams and assignments. If you go to a conventional VC they see don’t see you as a student, but as a company. Student-focused funds understand you better because they understand you as a student entrepreneur who is running a company. Funds like these allow students to give entrepreneurship a shot and lean whether it works or not for them before placements start in the final year,” Mungara notes.
