We have a fresh and delightfully layered story for you today. When I read it, the first thought that came to my mind was: what is the purpose of a founder? But I get ahead of myself. So, first let me give you an ultra-compressed picture of how venture investing has evolved over the past decade. As the Indian startup ecosystem has grown in size and matured, so has the pool of investors. From just a few angel investors and international venture-capital funds, it grew to dozens of angels, lots of domestic funds, syndicates, hedge funds, crossover funds, private-equity (PE) funds, and even sovereign wealth funds. Everyone was competing to find and invest in the most-promising startups before they broke out and became too expensive. If you view this as a ladder, sovereign wealth funds and global PE giants sat at the top (who usually invest hundreds of millions of dollars in companies), with individual angels and "friends and family” at the bottom. Since it’s easier for a player to go down the ladder (by investing smaller amounts in early-stage companies at lower valuations) than up (larger amounts in late-stage companies at higher valuations), things became quite heated at seed and early stages. From venture capitalists (VCs) to angel funds to individuals to accelerators, everyone was fighting with each other. Kunal Shah, the founder and CEO of CRED, has invested in over 200 startups. Sequoia has a “scout” programmed where they recruit successful founders to invest around $100,000 of their money in startups that are too young for it to bother with. It is this veritable jungle that Galaxy, a new $45 million animal, finds itself walking into. Galaxy has been set up by Naval Ravikant and Jeff Fagnan, the respective founders of investing companies AngelList and Accomplice. Instead of setting up an office and hiring lots of staff, it wants to give $1 million to a bunch of Indian founders, who will then invest amounts of up to $100,000 each in startups they fancy. Notice the transition. Galaxy gives $1 million to Indian founders, who then invest it in startups. The founders will be selected from hundreds of applications the fund receives every six months. Each of the selected founders is part of a “cohort”. Why did 500-600 founders apply to be part of the first cohort? “It is like an investing university,” says one. They like to be able to “pay it forward”, says another. Except, they are doing this without any skin of their own in the game. And why is Galaxy okay with this? Well, for one, India’s regulations do not allow it to pool money from the founders who want to invest their own money. Galaxy, the principal of today’s story, will want profits. But founders, the agents, want to learn and pay it forward. Which sounds more like altruism. Can the two learn to work on common incentives? Yes! or No??
