How do Angel Investors make funding decisions? We spoke to 4 Angels to understand their point of view.
Seasoned Angel Investors who made the leap as an angel investor while still holding their corporate jobs.
Today besides the big investors, a lot of professionals in the corporate world are diversifying their investment portfolio and becoming angel investors.
According to Fortune India, India is home to over 26,500 plus angel investing communities, comprising successful entrepreneurs and private investors.
Contrary to just almost a decade ago there were just a handful of Angel Investors!
Here are 4 seasoned professionals who made the leap as Angel Investors, while still holding their corporate jobs. They share what they look for when investing their hard-earned money in startups.
Jaideep Mehta has been an angel investor since 2012. After 20 years of corporate life, in April 2022 he made the switch, to follow his passion as the Managing Partner at Indian Angel Network (IAN).
He didn’t become an Angel Investor by design. It was a relative of his, who first came to him with a startup idea.
Jaideep’s first investment turned out to be quite successful; Amazon bought the company four years later, and he got a nice exit.
“My evaluation process is more around the vision and execution capability of the Founder(s), as simple as that.
Founders and their attitudes play a very important role when I am making early-stage investments. It’s a big turnoff for me if the founder makes a flippant remark with respect to ethics.
The second biggest turnoff for me is if I perceive a founder to be close-minded; with the 'My way or highway' 'This is my business and you don't understand it as well as I do' attitude. A rigid mindset is the enemy of a successful start-up.
I certainly think about profitability, and invest in companies that can reap dividends three to five years down the line. It's my hard-earned money.
And let me tell you that I don’t focus on hot startups, I instead think about whether they can help the environment, educate some people, or provide jobs or not.”
After qualifying as a CA, Ninad Karpe got into practice, and worked as a consultant for 13 years.
Fast forward, he joined a large computer software company that was just starting out in India.
In 2019, seeing the startup boom, and his vast experience, he joined 100X.VC as a partner. Over the last few years, they have invested in 60 out of almost 14000 pitch decks.
“Firstly, we analyse the size of the market, as we only invest in companies that have a large market size.
Secondly, we critically evaluate the founders to see if they have the passion and ability to scale, as these are the companies that will make us money.
Being an entrepreneur and being a start-up founder are slightly different.
Let's say an entrepreneur runs a lifestyle business. They want to have a good quality of life and earn a lot of money. But a startup founder has to go beyond, and has to ensure his startup scales rapidly, and makes a lot of money for himself and the investors.
We follow guidelines and intuition to decide on the right start-up founder."
Lucy Chow is an entrepreneur and director of the Women’s Angel Investor Network (Wain) in the UAE. She is a Senator in the UAE for World Business Angels Investment Forum (WBAF) as well.
She spent over a decade in Hong Kong working as a senior vice president for HSBC. In 2008, she moved to Dubai and eventually was approached to be a Director at WAIN and be an Angel Investor!
“We look for companies that have a ‘minimum viable product.’ Something that shows that there is a market demand!
If you have no paying customers yet, show testimonies and/or examples of other similar companies doing well in the same space.
So, we invest in the 'business model' but yes, the founders have a huge influence on our decision-making. I call this the ‘X' factor!
Every time we have a ‘round’, only a tiny percentage of companies are funded!
For example with the WBAF, we had 100 companies pitch. (this number was already shortlisted from 500+ entrants globally) From the pitch, we narrowed it down to 10 firms. From the 10 we will realistically fund 2-3.”
Angel Investing is an art and science says Jignesh Kenia, Head of Corporate Strategy and Digital Transformation at Times Network. He has invested in 50+ start-ups and was able to successfully exit 5 of them.
Jignesh is a Chartered Accountant who has over the last three decades seen how the business landscape has changed in India.
“I consider the following factors for assessing what startups to invest in:
The Founding Team – Investable companies are led by solid management teams with experience, knowledge, and complementary skills, along with the ability to build a great culture as the Company grows.
Validation of the Product by Customers - We speak to the Customers or potential buyers to confirm that they plan to buy it. Does it solve a major problem or pain point for them? And how does this product compare to the competition?
Is the problem big enough (scalability) and would the Customer pay for this solution?
Factors like Go-to-market strategy - What is the process to get to market? How long is the Sales cycle? How do the market and the product work together? Who are their Partners and Suppliers?
Apart from these I also think through:
- What would be the exit strategy?
- Who could be the Potential investors or Acquirers in the next rounds of investment?
- Is the valuation reasonable?
Personal preferences - Choosing a startup for investment is a personal decision and over time Angels develop their own preferences. Many Angels start with investing in industries they are familiar with.”
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