Hi All,
I have heard speakers, panelists and entrepreneurs saying lack of angel financing as a major gap in the Indian entrepreneurial ecosystem. At Canaan, we have always tried best to participate in the start up ecosystem. This year, we are contemplating to initiate a dialogue with angel investors in a more systematic manner. In this regard, I would like to reach out to angel investors on this forum for suggestions on the nature and form of this dialogue.
I would also love to hear challenges faced by angel investors while making investment decisions or working with companies. They can be in areas of deal sourcing, regulatory visibility, network in corporate groups, working with the companies after investment etc.
I would also request start ups to send me names of their own angel investors with contact address and I would reach out to them individually. Keep viewing this forum for more on this and you can write me at mukul.singhal@gmail.com
Regards,
Mukul
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Hi Mukul,
I read your post, that is most interesting, in terms of content, although, I must agree with Rehan when he says that the true Angel in India is quite absent.
Take me, for instance. I am a second generation businessman with a famiy business in Apparel Exports. I am scouting for Investors in a venture to retail Mid-Range Branded Lingerie (launching our own brand), on which I have spent time, effort and money, to create a sound business plan, a marketing premise, and a whole lot of numbers to validate the business ideas.
I cultivated sources, did passive market research, met consultants, who were very interested (subject to funding), met legal experts who gave me lots of advice on incorporating / receiving foreign funding with company formation info.
I had no issues with diluting my stake upfront, with holding a minority stake, and/or with submitting to an angel investor in the interest of seeing the business come to light.
I got several letters evincing interest in this venture, from VC’s, and Angels, all of whom were interested in seeing the brand work before they put in their money.
It is deeply frustrating and quite bitter that even with pithy marketing campaigns, and sad value props, websites and online ventures still get funded, whereas investors are wary of investing in a brick and mortar business that makes no false promises and is based on sound technicals and market knowledge.
It deters enterpreneurs like us since I understand if I were some kid just out of college brandishing a 2 page mission statement, looking to get funded. But even serious professionals like me must get support to grow further.
Thanks,
Pranay
Mukul – thanks for the post in reply to my question. The points you mentioned are activities usually the entrepreneur would initiate – rather than the angel investor himself doing it. Also – formalizing a process like this is difficult because of the kind of relationship that may exist between the investor and the entrepreneur – few are hands-on, some may have a family connection, etc. The interactions need not be clean and professional and if a third party is involved at this stage it may even sour the relationship. As you said, we are really not yet in a mature ecosystem.
Rehan – Both points are valid. However; I think Indian funding industry is pretty young. As we see successful exits, I am hopeful more and more entrepreneurs will come and participate in the angel environment.
Sum – There can be many reasons. On top of my head, I can think of following:
1.) In case the company scales, Angel Investor would like an institutional investor to invest in the company. Individuals may have limited availability of capital to invest in one particular venture.
2.) Angel investor can leverage the resources (network, global reach, existing portfolio companies) of institutional investor in validating the market opportunity early on.
3.) Angel investment in India is unorganized and various angel investors might not be interacting with each other. An institution can provide a platform for such interaction. It’s difficult for an individual to devote time and money on creating such platforms. Imagine an angel investor in Chennai looking another individual as an co investor in a deal.
4.) It can be a win win deal to co invest with institutional investor at an early stage of the opportunity. We have seen many instances where angel investors has invested with VCs. VC has got the advantage of an individual’s expertise in a particular area and individual have participated in a round which he won’t have done on his own.
There can be many more. Read Rehan’s post and talk to him. He is an active angel investor, so would be more appropriate to tell his reasons of talking.
Regards,
Mukul
I think the reason you are hearing what you hear from entrepreneurs is because Angel investors in India are seeking some market validation before investing. So in that sense Indian angels are not true angel investors, which is not a good thing for the ecosystem (hate that term!)
There are 2 ways to address this problem:
1. Educate entrepreneurs that with the small budgets they have, to generate some validation, however small it may be.
2. Educate investors on how to asses a prevalidation startup
There is possibly yet another reason you are hearing from entrepreneurs that insufficient start-up capital is available, that is because they do not have a strong startup team. A good team is required to build a good business, so they must be educated in getting a good team together, even if only contingent (to funding) hires inorder to attract investors.