In early 2019, when Arif Irshad and three friends decided to start a business in Kashmir, that it would be a risky venture was a foregone conclusion.

Long shutdowns, sudden violence and arbitrary internet blockades – all common in the region – were just what businesses did not need.

And so, Irshad and his co-founders did what entrepreneurs in the rest of the country would find baffling – they were extremely careful about avoiding debt.

“We did not take any bank loan because we know the risk of failure of businesses here,” said Irshad, a 30-year-old from Srinagar with a master’s in business administration. “We didn’t want to end up in a debt trap.”

As a consequence, Irshad and his friends pooled in their own savings to start their business: Kashmir Origin, a local e-commerce platform that sells curated Kashmiri handicrafts, organic products and fabrics.

All four co-founders had worked for e-commerce companies in Kashmir as well as other parts of India, and brought their expertise to the table.

“I looked at the creative part of the business since I have experience in digital photography,” Irshad said. “Another partner, who is a software engineer, oversaw the website and tech support.”

Their fledgling business ran into an unprecedented crisis.

In August 2019, Jammu and Kashmir was put under severe restrictions and a never-seen-before internet blockade. Thousands were detained and even more troops were brought in to prevent any protests following the cancellation of Article 370 of the Constitution and the erstwhile state’s special status.

For Irshad’s business, it meant no orders. “Ours is a purely internet-driven venture,” he said. “We had no idea about the status of our orders. We thought the business was over.”

For a while, they ran their operations out of Jammu, where internet restrictions had been eased. “But we had no contact with the artisans we work with,” Irshad said. “So even if we were getting orders online, we were not able to manufacture those products.”

The months-long communication blackout after the scrapping of Jammu and Kashmir’s special status was followed by another setback – the Covid-19 pandemic and back-to-back lockdowns.

Even so, the self-financed startup managed to survive and establish itself.

So far, Kashmir Origin has delivered more than 15,000 orders, catering primarily to the domestic market.

“But had we taken a loan for our business, it would have been a nightmare for us,” said Irshad.

While Irshad has averted that crisis, it is also true that entrepreneurs cannot grow or scale up businesses without external credit. That is where angel investors can make a difference.

Enter the angels

On February 25, a Srinagar hotel hosted a meet-up between investors and startups.

It was organised by the Kashmir Angel Network, a private Kashmiri-driven initiative aiming to create an enabling environment for early-stage businesses in Kashmir Valley by tapping into a global network of angel investors.

Many local startups pitched their ideas to the 45-odd investors, largely from Jammu and Kashmir.

Three ventures succeeded in eliciting undisclosed commitments from various investors. One of them was Irshad’s platform Kashmir Origin. The two other ideas that caught investor interest included a networking platform for book lovers and an idea for an integrated agribusiness.

“The network has been solely founded with the aim to mentor and finance disruptive business ideas of our youth and help them achieve scale and value for their ventures,” reads the initiative’s introduction on its website.

The key to this are angel investors, high-net worth individuals who agree to financially back a startup or an innovative business idea in exchange for a share of equity in the venture.

“Such a wealthy individual has a lot of disposable money,” said Shabir Handoo, the chairman of Kashmir Angel Network, a former assistant commissioner with Jammu and Kashmir’s income tax department. “He can take risks to some extent with his disposable money. Our first priority is to convince them [to bet on a business idea].”

Over the last few decades, various local governments have tried to create an environment for entrepreneurship in Jammu and Kashmir.

More recently, the government came up with a startup policy that aims to nurture at least 500 new businesses in the Union territory over a decade.

But the Kashmir Angel Network is the first attempt to get angel investors to invest in the state.

“We have 30 startup ideas in the pipeline for the next financial year and that number could rise,” said Handoo. “Given the startup ecosystem in Jammu and Kashmir, the average ticket size of investment in each idea would be around Rs 10 lakh.”

A meet-up between angel investors and entrepreneurs in Srinagar organised by Kashmir Angel Network. Credit: Special Arrangement.

Funding and mentorship

“In a way, we are a startup too,” said Handoo.

The organisation was floated in August 2021 but the operations formally streamlined last year. “We are a bridge between a young startup and an investor,” said Handoo, when Scroll met him at his sparsely furnished office in an upscale Srinagar locality. “For us, this is a business. We take commission from both sides.”

But the network’s role does not end there.

It also provides mentorship to the startups until the investment starts paying dividends. “We are not brokers who get the deal done and then walk away,” said Handoo. “Our mentors and guides stay with the entrepreneurs.”

So far, the organisation has been able to bring at least 30 investors from across India and abroad on board. “Our main target is to convince stakeholders from mainland India like Delhi, Mumbai and Gujarat,” Handoo said.

In order to convince potential investors, the network puts every startup idea through what they call “due diligence.” “It’s not that a person will walk in with his idea and he will find an investor,” said Handoo.

Every business idea has to fulfill the criteria laid down by the network. “An entrepreneur has to have knowledge of the sector and should be clearly able to identify the gap in that sector which his idea is going to address,” Handoo said.

The smart pitch

Take for example, 47-year-old Syed Ashfaq, a former banker-turned-businessman, whose idea for an agribusiness has got investors interested.

Every year, Jammu and Kashmir imports mutton worth Rs 1,400 crore to fulfill the local demand. Similarly, different poultry imports amount to nearly Rs 1,300 crore annually.

“We are trying to disrupt the market by producing these things in Kashmir,” Ashfaq said, emphasising that his focus will be on quality and transparency.

The company hopes to procure a plot of 500 kanals or 62.5 acres of land for an “integrated agriculture system”, which will involve rearing animals, running orchards, bee-keeping and breeding fish.

Ashfaq’s pitch to the investors is land. “We are asking them to pump in their money so that the company can acquire land,” he said. “Since land in Kashmir is a highly appreciable asset, the valuation of the company and the investors’ stake will always increase.”

Through Kashmir Angel Network, Ashfaq has connected with five or six investors. “We are looking forward to their investment now,” he said.

A solution for Kashmir

The last three decades of militancy have taken a toll on Kashmir’s economy. Frequent shutdowns, curfews and daily violence have strained existing businesses, stalling their growth and affecting livelihoods.

The most recent shock came in the form of the clampdown ahead of New Delhi’s decision to scrap the special status and statehood of the erstwhile state in August 2019.

According to trade bodies in Kashmir, the local economy suffered an estimated loss of Rs 15,000 crore between August and December 2019.

Given the region’s vulnerability, economic experts in the Valley believe equity-based financing will encourage entrepreneurs to take risks.

“Bank loans are meant for a stable economy, not for conflict and dynamic environments like Kashmir,” said an economic expert in Srinagar, who asked not to be named.

He added, “In such a backdrop, the sharing of equity will increase the possibility of a business’s survival.”

Convincing banks or even the government to invest in a new business idea is also often a long, laborious and exhausting process.

In comparison, Handoo said, angel financing is more informal and prompt. “A wealthy individual is hand-holding a small entrepreneur to set up his business. And both of them make a profit if the venture works,” he added. “We just connect them with each other.”