I just finished reading “The Dhandho Investor” by Mohnish Pabrai ( the man behind Dakshana). I enjoyed it and it stimulated some new thinking.
I also looked at my investing in India over the last two years. On a portfolio with 85% exposure to equities I managed a 45% CAGR(cumulative annual growth rate). I guess that may be just about okay. ( this is all in just a few boring stocks)
Will my angel investing give me anywhere close to that. I doubt it. This is what makes angel/seed investing tough in India. I hope to by investing both time and money improve my odds. I have abandoned the “spray and pray” approach where you put small amounts if you like the idea or team and trust the entrepreneur. This approach also relies on if xyz and pqr are also investing then I feel good about investing.
An excerpt from a quote from Kahlil Gibran ( full quote in book)… “You give little when you give of your possessions. It is when you give of yourself you truly give”
The full quote is more about giving selflessly to the needy ( I am atleast ten years away from that phase if I ever get there) but the first few lines lead me to think more of a heavy involvement model and not a “spray and pray” model.
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Dear Anonymous,
In the heavy involvement model I would probably be the CPO, Chief Product Officer but with a view to cut my involvement as the team gets built.
As for the next gen startups in India I think they will be in many sectors and of many types since the economy is growing rapidly. My interest and expertise is more in the Naukri.com type startups where there a large number of users and the ARPU(average revenue per user) is relatively low.
Hi Sanjay,
I am a Entrepreneur looking for Investors and a recent reader of VentureWoods.org.
My take… Every job has its own risks, work and pay offs. Entrepreneur has his share and so does the VCs. Definitely the scale of risks, works and pay offs vary. But the game is the same. Infact the risks, work and pay offs for the entrepreneur and the VC involved, fall almost in the same line.
The metriculous involvement of a VC to safe gaurd his interest in multiple ventures is all about calculative people management and time management to monitor and keep track of the investment in my view.
We live in a world were certainity is uncertain and something we can’t change is a ‘change’. Control is the not to the ability to stay perfect and be predictable. It is the ability to navigate against different winds and still maintain our composture. We risk. We adapt to the risk. We Navigate. That is control. So it is not ‘Spray and Pray’. According to me. It is..
Spray. Navigate. (Pray if you like.)
I met someone at dinner last night who’s just finished a grand tour of all the major temples in India. Nothing wrong with that. Except this guy does little else and lives of support from siblings. In his own words “god is the only one who looks after us”…well, investing in stock markets is a bit like living a low involvement life and leaving it all to God.
Angel investing is in a different league from investing in the markets and should not even be compared. In Angel investing you get to become part of the project and normally that project has an extraordinary opportunity with an extraordinary team, so the chances that your money will do well is high. Ofcourse the exception is what Sanjay calls the “spray and pray”, because that is not Angel investing, its like betting on Markets and then you are better off at the Market than in the Angel arena.
Stock markets will always do better in the short term, won’t they? Though I get your point – why invest in angel rounds unless it can beat stock markets. And to beat stock markets you are taking the path of more active investing, where active means perhaps closer to management.
Stock markets will give you a 20-30% visible return on a raging bull run. And you have the option to cut your losses, and liquidate your gains when you choose. You have none of that with private unlisted equity.
But your argument holds water. Warren Buffet gets stellar returns because he closely manages his companies. No BH company is public on its own; he takes them private and controls them. His philosophy is not ‘buy-and-hold’ like many like to believe; it’s buy-and-manage. Similar to what you are proposing; and perhaps has a better statistical success rate in the longer term.
Btw,if you’re more involved in your investment, aren’t you now an entrepreneur rather than a seed investor?
Are you looking to be a CXO after investment in the heavy involvement model?
Since you like white elephants…..
Microsoft, Sun, Yahoo, Google are not born in India. In India, there are Tatas, Birlas, AMbanis or Wipro,Infosys,Mindtree kind.
Is next generation startups in India be like Microsoft, Sun, Yahoo, Google?
thanks for answering in advance.