Angel investors have financed many of India’s successful and not so successful start-ups in the last decade. Their contribution and involvement in the matter has been largely neglected, so here is what they have to say about their decisions and experience.
These angel investors invest in start-ups primarily due to their passion and interest in a new idea, due to their willingness to take risks, and their desire to be associated with a totally new concept that could become the next miracle in the world of business.
Cutting edge entrepreneurship
They know that start-ups are doing a lot of cutting edge entrepreneurship and they like to be involved with it. It is the excitement of this innovation, this new technology that drives them. Making money is not a major factor for them, it is not the reason that motivates them to invest in start-ups.
So what is it that does induce them to put their money into somebody else’s business?
A few angel investors who have worked in the business world earlier put money into start-ups because they feel that they can contribute with what they have learned from their own experience in the world of business.
Some feel that angel investing gives them an opportunity to become an entrepreneur, indirectly. It is pseudo-entrepreneurship, with the pleasures of entrepreneurship but without the pressure and it gives them a chance to see the start-ups create value.
Angel investors look for passion in the investor, the excitement that drives them, the quality of their plans, their ability, which sectors they are working in; they also look to check if the business is scalable, what is the potential market size of the proposed business, how big is the problem they are solving and what is the level of innovation they are supporting – as long as the founder looks promising and has the potential to make it big, investors are willing to bet their money on his idea.
Invest in the entrepreneur
Some investors also look at how founders can execute the idea and take it to a logical conclusion. Some others put importance on the mindset of the founder – are they looking to make money quickly and get out or are they in for the long haul. They invest in the entrepreneur not in the business as they like to build a long term relationship.
Investors believe that even though they back an idea and the founder, micromanaging the founder does not work. They say that investors should contribute to the business but not control it. Micromanaging harms more than helps. So they connect only when necessary or when they have something to contribute or share. They feel that they should invest only when they you can contribute time and experience, not otherwise.
Many prefer to invest in syndicates or co-invest rather than going solo – they are involved in many things so they cannot spend all their time, resources, interest, money on one venture. Investing in a syndicate means they share wisdom and effort which can have better results.