Here an insight on how to become an angel
Back in the day, in the city of Los Angeles, there were a group of people who started investing in the movie industry. They took the high risk that came with the industry and also enjoyed the benefits of it. The city - Los Angeles - gave birth to the term angels. The term today is used to characterise an investor who funds a project that is very early in the cycle and more and more the trend has also come into building enterprises.
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| Vijay Anand |
A few years ago, angel investing was a nascent phenomenon in India. There were very few people who understood the legalities and nuances of investing into early-stage ventures. Today, as the entrepreneurial fervor rises in the country, there are an increasing number of people who get involved in these activities.
India, today, has an estimated count of more than 32 million small and medium enterprises and with support for most of these enterprises to grow to scale, they also become possible avenues for investors to grow their money and extend their expertise to.
If you are a first or second generation entrepreneur who has been successful and would like to explore the option of becoming an angel investor, here are some useful tips to explore:
1. Get Plugged into Networks: It has been a rather harsh reality that until a decade or two ago, building profit-making enterprises were still looked down upon. The support that was extended by ecosystems was rather limited, and while there were associations and trade unions that were established to represent the interests, very little was done that would make the life of entrepreneurs easier. The result? We had entrepreneurs who rarely came out, mingled with the community, and shared their learnings. The first step, and the crucial one, to becoming an angel would be to get plugged. Today, there are large and well-known networks like TiE, NASSCOM, CII, etc., where everyone comes together for the larger good. These networks also provide avenues for your thought process to get streamlined.
2. Investor-Not-Entrepreneur Attitude: The hardest part for an entrepreneur turned investor is the boundary to not get involved in the business should it stumble and fumble a little along the way. It is like raising a child; one could put them safe behind the confines of a cradle for life, but they will never learn to face the real world. The attitude of an angel investor has to be aligned to the interests of the entrepreneur. The first set of investments will be and should be among those whom you have had the privilege to connect, interact, and work with.
3. The Right Connections: While entrepreneurs usually have their noses deep into figuring out how to make their business work, the right investor and board member can help provide a larger view of the opportunities, and, at times, also make the right connections for the company. While cash is king, when it comes to startup capital, smart capital (money that goes beyond just a bank balance and can also help in revenues) is preferred.
4. Insightful in the Industry: Would you consider yourself to be a thought leader in the industry that you operate? If you do, you probably have a long list of things you believe can radically change the way things are done. Having such insights do help when provided in the right doze to the companies that you invest in. Angels do have various styles of investing - some invest in sectors they are familiar with, while some others invest in areas which have a commonality, but can cross border some of the learnings from other sectors. Find your style and dig deeper into it.
5. Being Approachable: The lonely path of an entrepreneur at times also hardens the attitude towards a younger entrepreneur who is filled with nothing but optimism. Generate a persona of approachability and contribute to those who do ask for your time. The best part is that more often than not, you might learn a thing or two about a sector that you didn’t know. Overtime, all that knowledge makes it easier to validate the teams that approach you.
6. The commitment to give back: Anyone who is in the investment business would tell you that the earlier you get involved with a company, the more amount of work there is. But you also realize that the economic motive to get involved with a company as an angel investor is also for the reason that you are the second - only to the promoters - to get the shares of the company at that valuation. If it makes it big, it will bring back significant returns. But that does not happen without the commitment to give back to the community, as failures at this stage are also rampant.
7. The Value System and Process of Scale: Value systems are crucial when it comes to building enterprises. Half the issues that are discussed in the world today related to the corporate world stem out of the lack of value systems. CSR initiatives and stringent corporate policies are the result of corporates and enterprises without a soul. More than anything, value systems define the longevity of an organization, will become the backbone of culture to an organization, and will give it life beyond the lifetime of the promoter. Inculcate that into the company early on.
8. Meeting the fellow tribe: There are several angel networks in the country today, the predominant ones being The Indian Angel Network and Mumbai angels. Most of these networks are also quite open to sharing their learnings from valuing an early-stage company, to tackling any issues that come up. Do keep in touch.
9. Understanding Macro Trends: The web has shrunk the world much more than we realize. Investing in companies, and the models that go with it, have taken rather extraordinary, evolutionary paths in the past decade, and there are ecosystems where iterations of this happens in much faster cycles. Learning from them, understanding the strengths, and adapting it to local ecosystems will go a long way.
10. Being up-to-date: Enterprises are not just about the way you structure and raise capital, but also about the offerings that the company promises. In an article by Sir Richard Branson, he talks about the role of senior employees in an organization and how they carry insights to the future of the company by the past they have experienced. The same goes for experienced entrepreneurs who are investing into future companies. That said, it is also crucial that we update ourselves with the tools, processes, and trends of where the world is moving, so that we continue to carry ourselves as assets to the organizations we are part of and in the value-creation process.
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Vijay Anand is a serial entrepreneur, known as The Startup Guy. Until recently he was the vice president of New Ventures at IITM’s Incubation Centre. He is the founder of The Startup Centre, spearheads various startup initiatives, and sits on the board of a few companies.
To write to the author, please send an email to dare@cybermedia.co.in with the subject line 'Vijay Anand'.
Disclaimer: The views expressed here are that of the author and do not represent the magazine's.
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