Is This the Right Time to be an Angel Investor in India?
With quick-and-easy money no longer on tap, start-up founders are turning to angels and recognizing that their diligence while investing is an asset
The days of venture capitalists pulling out their chequebooks and accepting unrealistic valuations are fast disappearing. With quick-and-easy money no longer on tap, start-up founders are turning to angels and recognizing that their diligence while investing is an asset. As an investment opportunity, a well-chosen early-stage venture can lead to serious wealth generation. But there's more to it than that—approach returns on investment as a byproduct rather than the sole purpose of it. This is, in fact, the key to angel investing in India.
My focus is always on choosing the right businesses that are backed by technology and are potential enablers for the future, and then help them set up optimally, build the teams they require, provide contacts and market introductions, and then help them scale—globally, if needed—and transform internally when required.
Indian start-ups understood the need for such support from angels early and have actively sought such "depth investments'. From an angel's point of view, such investments typically result in a lasting relationship with founders.
When we use this approach, we also realize the considerable benefits of angel investing in start-ups as an asset class in India.
In any case, angels are better suited for seed investments simply because the amounts they deploy are small, forcing founders to be wise about their outflows. Also, since it is the angels' own money, they choose start-ups more likely to succeed, introducing efficiencies into the system by reducing wastage of investments. Again, this is important in India, which requires such rigour.
Too much funding is a thing, and it leads to hurried decisions and extravagance—which start-ups can ill afford. Angel investors are a counter-balance to this and increase the business' chances of success over the long term. India has been flush with venture capital funds and there is a need now to make sure start-up basics are right, without which you cannot build a sustainable business.
Angels, for the reasons outlined earlier, do not invest unless they have a genuine belief in the business idea. They spend a considerable amount of time knowing and evaluating start-up founders. They look for genuine passion and commitment instead of merely an investment opportunity.
While the temporary economic speed bumps in recent times may have given pause to some, the fact is that start-up funding in India is on a roll. In the first six months of this year, start-ups are estimated to have received a record $3.9 billion, according to Venture Intelligence, a start-up data tracker. This was a jump of 44.4% over the same period last year.
Investments till date in 2019 are comparable to the full-year investments of $4.2 billion and $4.3 billion in 2016 and 2017, respectively. This is a very healthy scenario, one that angel investors can participate in.
Angel investing backs for great ideas and fearless founders, thus defining what future businesses will look like.
Given India's vibrant start-up landscape, and the mind-boggling array of ideas across sectors we are seeing, there hasn't been a better time for angel investors. Businesses are seeking them out as much as angels are seeking the right opportunities. It's a match made in start-up heaven.