In this article, Aklovya Panwar of INLU discusses top ways for start-ups to get angel funding.
“The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.” –Nolan Bushnell, Entrepreneur
INTRODUCTION
After Independence, the Indian economy has gone through various ups and down. Since we have faced economic reforms to change the shape of our Indian economy and the ways in which business has been done. In this phenomenon, the shift to individual start-ups has arisen significantly and woo the interest of various business tycoons. The investment in these startups or entrepreneurship has elevated in the past 3-4 years.
List of Schemes of the Start-ups initiated by the government can be found on (https://inc42.com/startup-101/startup-scheme-indian-government-startups/)
This phenomenon of small enterprise businesses is still trying to discover its shape in the Indian economy and the main source of their funding are the angel investors or the angel funding. According to a report proposed by the venture debt fund InnoVen Capital, the angel groups in India has grown considerably in 2016.There is an increment from Rs.70.3 Crores(across 47 companies) to Rs. 113.7 Crores(across 69 companies) in one year.
Prof Thillai Rajan, Department of Management Studies, IIT Madras say “the angel network which was absent four to five years ago is strengthening now. Several new investment avenues and platforms are opening up for entrepreneurs who need help converting their ideas into businesses.”
An angel investor/business angel/informal investor/angel funder/private investor/seed investor is a person who provides a certain amount of fund for initiating a start-up in exchange for debt or equity in the ownership. He is the person who can convert a business from a piece of paper to a proof of concept.
Angel investors (not venture capital firms) are the most likely candidates to get your businesses from a piece of paper to a proof-of-concept.
Where to find these angels?
These angel investors can be found in 3 groups:
1. Within family and friends
These investors can be there within our families and among our friends but they have their own positives and negatives aspects. The positive aspects are that these people know us the best and if they know our abilities they will surely invest the start up without hesitation. The negative aspect is also there and it is pretty major, as it is very difficult to mix the personal and professional relationship and if at any chance the start-up got unsuccessful there will be a condition of discomfort and personal relations comes at stake. So, this road is risky with no coming back, but, if the idea is brilliant and have more chance of success then it is also the easiest way to find investors.
2. By the help of an Individual Angel Investors
Individual angel investors are the anonymous helpers waiting for the most innovative and creative ideas. As finding them is not like shooting a fish in the barrel because they are not aware of the new businessmen, neither personally nor professionally. So, they need something extraordinary and promising for their money. Another problem with them is that if they don’t have the first-hand experience in the field with which startup is related, it is not easy to satisfy them, after all, it is about the money he is going to invest. That is why a person must know his investor beforehand. If they have experience in the area of your business, and they think they can aid you to hurry your efforts, it is easier for them to get above the investment barrier. If he denies from investing then there is an option to have references from him about other contacts he knows about.
There are some investors in India who are bringing the concept of angel investing to a whole new level:
| Name | About them | Area of interest | Investments in start-ups |
| Rajan Anandan | He is an MIT and passed out of Stanford.
Currently, he is the managing director of Google India. He also co-founded the Blue Ocean Ventures in Sri Lanka |
CLOUD COMPUTING, SAAS, ANALYTICS, CONSUMER INTERNET, DIGITAL MEDIA, ONLINE HEALTHCARE, MOBILE COMMERCE, AND SOCIAL GAMES SECTORS. | He has invested in 80 startups which include Druva, Instamojo, TravelKhana, Quench, Missmalini and Burrp.
|
| Sunil Kalra | He started to invest in start ups in the year 2002. | TECHNOLOGY, EDUCATION, HEALTHCARE, LOGISTICS, MOBILE, AND E-COMMERCE SECTORS. | He has invested in 50 startups which include Airwoot, Orange Scape, Crayon, Culture Alley, Wooplr, and My Shaadi. |
| Anupam Gopal Mittal | Bring a revolution in arrange marriage culture of India by developing Shaadi.com | CLEAN TECHNOLOGY, CONSUMER INTERNET, MOBILE, HEALTHCARE, AND SAAS. | He has invested in Moreover 50 Startups which includes Makaan.com, Mauj Mobile, Ola Cabs, Fab Hotels, LetsVenture, Truebil, Ketto and Prop Tiger.
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| Sanjay Mehta | He started to invest in start ups in the year 2013. | SANJAY CAN BE SEEN INTERACTING WITH ENTREPRENEURS THROUGH VARIOUS PLATFORMS SUCH AS INDIAN ANGEL NETWORK, MUMBAI ANGELS. | He has invested in Moreover 60 Startups which includes OYO Rooms, Pretty Secrets, Klip.in, Talview, Orange Scape, and Fab Alley
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| T.V.Mohandas Pai | He was a member of the Union Finance Ministry’s “Kelkar Committee” for the reformation in the direct taxes.
He started to invest in start ups in the year 2012 Head of Aarin Capital Partners in Bengaluru, He is also affiliated to Unitus seed fund and Exfinity ventures |
WOMEN ENTREPRENEURS. | He has invested in Moreover 40 Startups which includes SAHA fund, Zoom car, Zimmber, Uniken, YourStory, Kaaryah, and FairCent. |
| Anand Ladsariya | He is the founder of chemicals maker, Everest Flavours.
He is also an ex-Chairman of CHEMEXCIL(very famous name in the Indian chemical market). |
IDEA ACROSS LOCATION BASED SERVICES, CUSTOMER SUPPORT TOOLS, CONTENT DISCOVERY AND WEB DESIGN SECTORS. | He has invested in Moreover 90 Startups which includes Oyo Rooms, Myntra, Appsdaily, Tonbo Imaging, Uniphore, and Assured Risk are ventures that have been funded by him
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| Zishaan Hayath | He started to invest in start ups in the year 2011 with Ola cabs.
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E-COMMERCE, TRAVEL, MOBILE, REAL ESTATE AND EDUCATION SECTORS | He has invested in Moreover 30 Startups which includes startups such as Olacabs, AdPushup, Housing.com, SquadRun, Shopsense and Hola Chef. This IIT passout has co-founded Toppr and Future Bazaar owned Chaupati Bazaar. |
More details of these angel investors can be found on:
https://angel.co/india/investors
3. Angel Investor Networks (AIN)
This is one of the best possible ways to get investment for a start-up. It networks accumulating angel investors. In this, the investors set aside funds for the purpose of investment in new start-ups. It is maintained by a professional team who source the deal for the network. They invest as a group in a particular start up.
Examples of AIN in India and their contact details:
- Anil Godhwani- He is the Co-Founder India Community Center, CA and Simply Hired.com Avendus Advisors Investor, Avendus
Address- Avendus Advisors IL&FS Financial Centre, West Quadrant – 2nd Floor, Bandra-Kurla Complex, Bandra (East) Mumbai – 400 051
Phone: 91-22-6648-0050
Fax: 91-22-6648-0040
Focus-Indian Companies with strategic growth advantage; IT Services, IT Enabled Services, Pharmaceuticals and Healthcare, Media and Consumer Products and Services.
- Arun Seth- He is the Chairman, British Telecom Advisor, Seed Fund
Address- BT Limited 70 Nehru Place New Delhi 110019
Website-www.bt.com
Phone: +91 11 5211 9900
Fax: +91 11 5211 9901
***For details of other AIN one can visit (http://www.tcoe.in/?q=content/indian-angel-investors)
How to woo the angels?
Be creative.
Before approaching the investor, the entrepreneur must work on his term sheet as it is the way to provide them an investment. This sheet discloses what your business is and what the aspiration with an investor in the partnership is. This is the reason it should be unique and simple to deliver your ideas and not a mere copy from the internet. Angels want to sure that they are protected, they will go through the term sheet very carefully to ensure everything you have said or presented.
Include all the numbers.
A start up must be good in planning and should keep in mind every aspect of the economic terms that makes sense for you as well as your investor rather than just round numbers. There is more to a term sheet than meets the eye. The term sheet should include all the variables including an interest rate variable, a discount variable, and a time variable. A start up should understand that how these variables work together and what are they impact on each other.
Do scenario planning.
With a brilliant idea, you must also the ability of risk taking and in-pressure working skills. The investors will surely look into your ideas but with that, they will check your determination towards the idea, whether you can embrace the situations if things get into the wrong direction. That is why you must prepare yourself with multiple scenarios. Think through the options, even if far reaching, and spell it out. And be sure to follow up on any unanswered questions; it’s a great way to establish a relationship.
It’s a team sport.
This is the important scenario to keep in mind before going to an angel for funding. The
Angel investors tend to be a cross-section of domain and industry expertise. At the time of group reviewing each angel who has invested in the startup will come up with a different set of queries and expectations. Example an economist will play on the round numbers and variables while a lawyer will be envisaging perfect legal scenario so that in the end there will be no barrier from legal authorities. The best start-ups take advantage of the “multiplier effect”. That is why your term sheet describes everything you want so there should be no bluffing or misrepresentation in that, it will be disclosed through the angel investor group’s dialogue about the opportunity you are presenting to it.
Do not rush into decision-making.
The new businessmen should not get into the misconception that as soon they reach the market they will find an angel. Don’t try to close your deal quickly, you may find an investor early but he may be not of your space of interest. So, educate yourself on how long it takes to fundraise, and plan your timing and deadline accordingly. Because there are innumerable small businesses and the organizations are very less in number.
So, don’t rush into decision-making process, be patient and search for the better opportunities rather than a low-hanging start.
Research the investors.
This is an important point many start-ups oversight. Instead of finding “any” angel investor find the “right one” who is a person of your space of interest and understand your idea. Before, approaching an angel research on that investor very carefully like his past investments, his work field experience, his area of interest and his hobbies as well. Because if your idea is able to connect with the investor personally then there will be more chances of his investing in the work.
Treat your initial interactions as the first step in a long-term relationship.
Before going to an investor think that he is going to be your mentor and it’s going to be a partnership almost like a marriage. So, be transparent in sharing your idea and try to interact with him because even if he will not invest, he can surely give some future tip as well as contacts to some other investors. Your unpretentiousness will act as a catalyst in providing investors and wooing angels.
What about your long-term plans?
This is the one thing investors want in the start-ups i.e., the sight of seeing beyond. There is a possibility that in the starting the business will run well and your startup raises money but what after that? This question needs to be kept in mind before going for searching an investor. You must be clear with your focus that where you want to take up this start up. “You’re focusing on the fact that ‘I need that half-million dollar.’ But that’s not the most important thing,” Think about what you’re going to do after you have the money and focus on executing that multi-year plan.
CONCLUSION
Today, start ups are on a rise and the main source of the investment in these startups is angel investing or angel funding.In the financial year of 2015-16, the highest number of deals has taken place in comparison to previous years. “According to the Innoven report, demographically, Delhi-NCR had emerged as the preferred destination for entrepreneurs, attracting 36% of angel deals, followed by Bengaluru (20%) and Mumbai (10%)”.
The main failure why one startup didn’t get the investment while other one gets it is because they miss certain things which are necessary for wooing the angels. By keeping these points in mind the chance for investment raises for the start ups.
References
http://trak.in/india-startup-funding-investment-2015/
http://guides.wsj.com/small-business/funding/how-to-get-funding-from-angel-investors/
https://www.inc.com/patricia-fletcher/how-to-land-an-angel-investor.html
https://www.wsj.com/articles/SB118530808497176497
