Finding a good angel investor can literally add wings to several startups. The key is to look out for the right person with eyes wide open. Read on to find out more.
The venture capital world is evolving and morphing into another form to keep up with the change that
is happening with the way companies are built. No longer do companies require enormous amounts of upfront capital to build their base, but can rather start with a prototype, leverage cloud hosting services, outsource development, and make use of the countless performance-based and pay-as-you-go business models that are emerging today.
All said, what cannot be undermined is the fact that startups still do require capital, even if it is in small dozes, to be able to achieve the potential they set out to achieve.
It is often claimed that India does not have an active angel investment community. The truth couldn't be farther away from it. It is true that we do not have the likes of a Ron Conway to lead the way in angel investments and in making bold moves, but the silent movement continues as it always has been in India. If that is the case and if startups that we know of aren't able to raise capital, then the mistake must be elsewhere.
The Unveiling:
If you look at the Indian stock market, the sheer volume of money that is transacted via channels such as mutual funds, and those who are now investing in real estate, not for sentimental reasons, but to gain a profit in the upswing, one thing is obvious: the sentiment to invest in high-risk ventures is not the one that needs major rehabilitation.
The boom of the industrial and the IT sector in India, taking along with it the retail and affiliated verticals, has created a new class of affluent people. Look at any of the IT companies and the category of senior managers and you will realize that most of them take home a package that is capable of expenses, savings, investments and some disposable income. There are visible signs of the angel community emerging.
The Wrong Approach:
When I first started off as an entrepreneur and started understanding the inner workings of the investment community, I was told about the angel community as those who do not like to be in the spotlight, nor be recognized and yet have the capability to invest in companies.
The sad bit about the startup entrepreneurs in India is that they expect someone to walk into a conference wearing a T-shirt saying "Hi, I am an angel investor, would you like a cheque?" If that is the scenario, you are never going to find the angel you are looking for, unless you are dreaming.
Secondly, there is also the notion that angel investors somehow do not care for returns and that they should invest without asking too many questions. Unless we are talking about your mom and dad, that does not fit the description of angel investors. Let us be very clear—philanthropists and parents are not to be confused with angel investors. An angel is smart, business-savvy, carries domain expertise with experience, an extensive network, and will make you work for your money. Do your homework, and persuade the investor — be it an angel, friend, fool or a VC, with the assurance that you have the capability and capacity to build a business, make it profitable and make a return. That's the only pitch that sells.
The Golden Path:
If you are a startup entrepreneur, do not shy away from the network of influential people. Organizations such as TiE, NASSCOM, CII, though they do not directly cater to startups, do bring together the right category of folks who do have leftover cash as part of their earnings, the desire to start something, the network to connect you to and lend credibility, and the experience to guide you.
That said, do not walk in asking for money. Walk in to find a mentor who you can trust with your idea, someone you respect and can take his/her word for, and will add value to your thought process. If you impress your mentor with the lucidity of thoughts that you have about your business, would perhaps be the best pitch that you can make. In the real world, that is how angel investments are made; when the mentor offers to put money because he is impressed at what you are building and wants to invest in the venture and almost never by you asking for it.
When To Find a Mentor:
It is said that there are two kinds of people in this world--the people that you go to for career advice and the people that you want to work for. You mix these two groups of people and you will realize that you end up in a world of unfulfilled dreams. Tell the person that you want to work for, everything about your thought process and your uncertainties and that almost sends any chance of working for them, out of the window. At the same time, if you want to get anything out of a person you are trying to get career advice from, you have to bare your soul a bit for them to understand what you are passionate about and what leaves you cold.
The same rule applies here: Go find a mentor, and a possible future angel, before its time and you will end up with just a mentor, nothing more. If you want to have a chance of going beyond that and getting the mentor vested in you and your company, maybe as an investor, he would want to see clarity in your thought from day one, maybe a working prototype that gets his imagination and thought process going, a possible roadmap of the future ahead and his role in the whole thing.
The key to engage a mentor is to define what you expect from that person. I have borne witness to plenty of entrepreneurs approaching a well-known entrepreneur in a crowded room and asking them to be his/her mentor. Given the circumstances, neither parties can refuse and it feels like the deal is done, but you realize years down the lane that the mentor was never fully convinced. A mentor who is convinced against his own will is not a mentor at all.
Instead try this the next time you approach someone: Do your homework. Get clarity on what you are building, understand the risks, the disadvantages and the weak points; I am sure you will fill in on all the good things in plentiful; shortlist a set of people who are well-known and can genuinely help you, do some background research on them, talk to people who've worked with them and get to know what its like to work with them, and then approach them and give them the pitch that this is what you are doing, this is where you are falling short, and where you'd like the mentor to help.
Trust me, that's a pitch that is sure to deliver. And if you keep at it, you would be surprised as to where the angels, that we speak of so often, are really hiding, mostly in our own backyards.
Vijay Anand
Vijay Anand is an entrepreneur who has experience starting and building various technology startups, starting at the young age of 16. He is currently the Incubation Manager at RTBI, an incubator in IIT Madras that focuses on building rural-focused businesses. He is also the founder of Proto.in, India’s premier technology showcase event and is involved in various initiatives that are shaping up the emerging entrepreneurial scene in India. He blogs as The Startup Guy at www.vijayanand.name and tweets regularly at www.twitter.com/vijayanands.
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