Want to know how to become an Angel Investor in India? Here are 5 steps that you have to follow.
Want to become an angel investor in India? This guide will teach you the basics of investing in start-ups and how to navigate the SEBI guidelines.
- India has witnessed a thriving startup ecosystem in recent years.
- The influx of foreign investments in Indian startups has also paved the way for the emergence of angel investors in India.
- But what does it take to become an angel investor? Let's find out.
What are Angel Investors?
India has been going through a startup renaissance for the past few years. Startups are emerging from every corner of the country.
The advent of foreign investments in Indian startups also gave rise to angel investors in India.
But who is an Angel Investor?
An angel investor is an individual who provides financial support to early-stage businesses or startups in exchange for equity ownership or convertible debt.
Angel investors are also referred to as business angels, informal investors, angel funders, private investors, or seed investors. Their task is to select the best startups with a high growth potential.
Normal people, however, cannot finance such start-ups/businesses. Angel investors are typically high-net-worth individuals, hence they have the financial means to invest in such start-ups.
General Requirements to be an Angel Investor
The Securities and Exchange Board of India is the regulatory body for the securities and commodity markets in India. It comes under the ownership of the Ministry of Finance, Government of India
To qualify as an angel investor, Indian investors are required to meet one of the following requirements:
1) An individual investor who has net tangible assets of at least INR 2 crore excluding the value of the investor's principal residence.
- He must have early-stage investment experience or experience as a serial entrepreneur
- Or a senior management professional with at least 10 years of experience.
2) A corporate body with a net worth of at least INR 10 crore.
3) An AIF (Alternative Investment Fund) registered under SEBI AIF Regulations, 2012, or a Venture Capital Fund (VCF) registered under the SEBI (Venture Capital Funds) Regulations, 1996.
- Risk is an important element of consideration if you’re an angel investor.
- Investing in new companies has always been regarded as a high-risk and high-return gamble.
- Angel investors take very high risks when they invest in such new companies that have no certainty of succeeding. The risks and difficulties of investing in a certain startup must be examined and comprehended to have a smooth process.
- You need to have expertise in the art of investing, to be regarded as an angel investor.
- Your hard-earned money should not be put into any unknown or unresearched field, regardless of how tempting it may seem.
- If you want to invest in a startup or any project, you should first thoroughly research both the project and the industry that it's built in.
- Do your due diligence on the business plan, growth potential, risks involved, and fair company valuation of the startup.
- The power of Networking is highly underestimated nowadays.
- Having a good network of people who understands investing and the perspective of markets is crucial. It will immensely help you make bets on winners rather than losers.
- To learn more about the industry, discuss with current investors.
- Let's assume you have enough net worth as well as expertise in the field. But how would you get the latest updates on new startups in this huge country?
- That's where angel groups come in. Joining an angel group will help you to communicate with like-minded people who are hell-bent on making money, and avoid common pitfalls.
- Joining Indian Angel Network, incubators, funds, and groups can help you benefit from the combined knowledge of businesspeople, financial professionals, and angel investors. It would ensure a successful startup investing journey.
How do you evaluate startups?
Let's learn how to evaluate startups from the pros.
Jaideep Mehta has been an angel investor since 2012, and he is also a Managing Partner at Indian Angel Network.
His evaluation process is more around the vision and execution capability of the Founders.
“Founders and their attitudes play a very important role when I am making early-stage investments. If the founder makes a flippant remark concerning ethics, it’s a red flag,” says Jaideep.
Jaideep takes a portfolio approach, acknowledging that a certain percentage of ventures will fail. And he certainly thinks about profitability and invests in companies that can reap dividends three to five years down the line.
Ninad Karpe, CA turned startup investor, and Founder & Partner at 100X.VC also shares how he makes funding decisions.
“Firstly, we analyze 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," says Ninad.
Lucy Chow, Senior VP at HSBC turned Angel Investor in Dubai says, “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."
Famous Angel Investors in India
Ratan Tata: He is the Ex-Chairperson of the Tata Group and is quite an active angel investor in India.
He majorly invests in Technology and E-commerce sectors, including companies like Xiaomi, One97 Communication, YourStory, Snapdeal, UrbanClap, etc.
Kunal Shah: He is a popular angel investor in India and the founder of Cred, an Indian fintech company. His first startup venture was Paisaback, which provided cash-back promotions for organized retailers.
He majorly invests in EdTech, FinTech, E-commerce, and Coworking Spaces. So far he has invested in around 150 companies.
Kunal has holdings in companies such as RazorPay, Unacademy, Bharat Bazaar, OneCode, Niro, Onsurity, etc.
Anupam Mittal: He is an Indian entrepreneur and one of the biggest angel investors in India. He is the founder of the matrimonial site shadi.com, makkam.com, and mauj.
He has invested in nearly 200+ companies including OLA, skippi ice pops, reevoy, tradex, etc
Vijay Shekar Sharma: He is the founder and CEO of Paytm, an Indian digital payments and financial services company. He was even featured in Time Magazine’s World’s 100 Most Influential People 2017 List. Vijay was also ranked as India’s youngest billionaire in 2017 by Forbes.
With a net worth of $1.2 billion, he invests in EdTech, FinTech, HealthTech, and Consumer Internet sectors.
Vijay has holdings in companies such as Unacademy, Milaap, Truly Madly, Nurturing Green, InnerChef, etc.
Binny and Sachin Bansal: They are the founders of the E-commerce company Flipkart.
In December 2018, Binny Bansal launched xto10x, a SaaS consultancy startup, with former eKart executives Saikiran Krishnamurthy and Neeraj Aggarwal.
At first, they both thought of starting a comparison search engine, but then they realized that the E-commerce market can have a large stage in India. And Flipkart was launched.
Their major investments include SaaS, Online Commerce, Media & Entertainment industries. The duo has holdings in Inshorts, Unacademy, Purple Style Labs, Planet Spark, Rupifi, etc.
Kunal Behl: He is the Co-founder & CEO of the popular e-commerce platform Snapdeal, and is also a renowned angel investor in India.
He has invested in around 100+ companies including in FinTech, EdTech, Transport marketplace, and B2C marketplace sectors.
Ola, Rapido, UrbanClap, Quest, Powerplay, and Vahak are some of the companies that he has invested in.
Sandeep Tandon: He is the managing director at Tandon Technology Ventures, Infinix Healthcare, and the co-founder of FreeCharge, an Indian financial services company. He is also an alumnus of Harvard University.
Sandeep is an active Angel Investor and has invested in many startups such as Razorpay, Fabelio, Zip loan, Inc42, etc.
He majorly invests in domains such as FinTech, Healthcare, Education, Internet Services, etc.
Embarking on the path to becoming an angel investor in India offers a unique opportunity to contribute to the growth and success of the startup ecosystem.
By following a few key steps, you can position yourself to make informed investment decisions and maximize your impact.
By equipping yourself with knowledge, defining your investment criteria, networking, and leveraging angel networks, you can navigate the realm of angel investing with confidence.
Q. How many angel investors are in India?
From a handful of individual investors just over a decade ago, India currently has a thriving angel investing ecosystem of over 26,500 entrepreneurs and private investors.
Q. What is a good ROI for angel investors?
An angel investor could expect a 30% return on their investment. As part of their exit plan, angel investors will anticipate a return on investment. This is the phase at which they sell their stock in the firm to recover their initial investment as well as any gains.
Q. What are angel investors and their types?
There are different types of angel investors based on their investment preferences and strategies.
- Family and friends
- Professional angels
- Angel syndicates
- Business executives
Q. Top 10 angel groups in India?
- AngelList India
- Mumbai Angels Network
- The Chennai Angels
- Venture Catalysts
- Chandigarh Angels Network
- Indian Angel Network
- Let’s Venture
- Lead Angels Network
- Hyderabad Angels
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