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Myths

It's Time to Break Down Myths about Angel Investors

Owing to the autonomy, individual growth and profitability associated with the entrepreneur's role, the millennial prefers to initiate their ventures early
It's Time to Break Down Myths about Angel Investors
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4 min read
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Entrepreneurship has always been an impressive and aspiring job for people. Owing to the autonomy, individual growth and profitability associated with the entrepreneur’s role, the millennial prefers to initiate their ventures early. This kind of zest is not only found in the millennial, but also in the industry veterans, which, in turn, has given rise to hundreds of startups every year. According to reports of NASSCOM, over 1,200 startups came up in 2018, which has increased the total startups to 7,200 in India.

For commencing the business, a startup company requires huge financial support that can only be offered by angel investors. The angel investors are not ordinary investors; they come into the play when the startup owners seek funding to commence the business. They offer monetary support to the startup and don’t indulge in the company merely for profits.

Soaring Angel Investors in India

Releasing the importance of angel investors in the business, the number of angel investors is surging in India and in turn, giving opportunities to startups to cross the bars. Following the foray of international companies, namely Softbank and Walmart, in India, now it’s the emergence of a dedicated funding platform, The Collective.

The Collective is will be launched by the crowdfunding platform, Angel List. After the US, India is the first market wherein this type of fund will be introduced. Various Indian companies and investors are coming forward to sponsor the newly established funding platform, including BinnyBansal, Co-founder of Flipkart, Avnish Bajaj, founder and MD of Matrix Partners and Salil Deshpande, MD of Bain Capital Ventures.

Like AngelList India, the Indian funding platform, The Collective will be deploying money in the various startup companies. “The Collective will deploy about INR 1 crore each across 60-80 companies annually and will give access to quick capital to its Syndicate leads,” as reported by the Indian daily news, The Economic Times. 

As angel investments will be spiking in the near future, it is essential to clear away doubts and misconceptions regarding angel investors.

Myths Surrounding the Angel Investors

While endowing money in a startup, the angel investors are not solely concerned about viability factor. Besides profitability, the angel investors try to help the pea-sized companies to grow in the market. The extra push that the angel investors offer in the form of “invested money”, sometimes, is taken in other ways and consequently, myths emerge.

1.    Eye-Catchers for Angel Investors

The companies, which are earning revenue beyond its potential, are always in the limelight. However, it does not mean that the angel investors eagerly look for such startups for the investment.

 Apart from growing the startup company, the angel investors seek timing of personal growth in the business deal too. There is the unsaid thing that investor-seekers don’t realize in the beginning that is the shareholdings that the angel investors possess can be sold off to others for the exchange of money. Thus, it is vital for the business to be potentially good so that the investors retain their shares in the market.

2.    Exit Matters more than the Company’s Profits

A company’s revenue does not directly flow to the angel investors. Essentially, there is a channel for the revenue chain and the angel investors get it in the form of returns.

Even the shareholding that the investors possess can be sold off to others for the exchange of money. Thus, apart from growing the startup company, the angel investors seek timing of personal growth in the business deal too.

In essence, the angel investors don’t purely seek investment returns; instead, they seek ownership in the company and also, the exit timing of the business owner. Thus, the entrepreneurs, who stick to the company and don’t exit despite prevailing profit or loss, are not found alluring investment opportunities from the viewpoint of the angel investors.

3.    Knowledge of the Investment-Seeker

When an entrepreneur approaches the angel investors, a financial report and business outline are required. Through the documents and amassed knowledge, the entrepreneur can explain his/her business project and in turn, increase chances of getting the investment.  

Basically, the investors are well-versed with prevailing market trends but they want to ensure that the investment-seeker also possesses the same so that, the entrepreneur apprehends the business better.

The aforementioned points highlight the intrinsic nature of angel investors.

This article was originally published by Jaspreet Kaur.

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