The Indian Angel Network (IAN) announced yesterday that it was making an investment of US$ 1 million in Bangalore-based Vayavya Labs that will be used for various purposes including strengthening R&D and reinforcing marketing and sales efforts.

Being a first of its kind investment in an India-based electronic system level design technology venture, this deal is of significance as it can play a role in supporting India’s dream of becoming an important member in the global semiconductor supply chain. Although India is already a recognized destination for global semiconductor companies, IAN’s latest investment means many more local startups can now hope to realize their entrepreneurial aspirations in the hardcore engineering space.

IAN boasts a vast and varied exposure to different industries that helps it to take a ‘go’ or ‘no-go’ decision about investing in a potential business opportunity. IAN comprises a network of 170 angels. So far the network has made investments primarily in IT and IT related business opportunities. But entering the hardcore technology R&D business without a robust evaluation model is not a very easy decision. Without a proper evaluation model it will not be easy for IAN to evaluate the prospects of a proposed investment. The problem becomes more pronounced as the investee companies are start-ups with little or no historical data that can provide a clue to the potential of an idea.

Evaluating a start-up is always a difficult task and this becomes every bit more challenging in the context of a hardcore technology venture. To that extent, kudos to IAN for taking what appears to be a step in the right direction!

At the CMR Semicon Industry Practice, we are in the process of developing a research-based tool that can be adapted to evaluate such complex investment decisions. The tool would attempt to take into account all critical factors such as long-term demand projections, macro-economic outlook, new technology developments and unforeseen disruptions in the technology-business environment cycle that may impact the global semiconductor industry from time to time. The goal is to allow for accurate evaluation of future business potential and add objectivity to the decision making process of a technology investor. Of course, even after this tool is ready and in place, idea execution is something that cannot be extrapolated or measured in advance. For that, investors will need to continue to rely on their judgment and consider a range of factors including promoters’ background and their own risk appetite.