Angels are not your average calculator-wielding, ratio-obsessed hard-nosed investors; a closer look reveals.
Over the last decade-and-a-half, economic reforms have unshackled the Indian economy, liberating India from the infamous 3% growth rate the country was used to after independence.
While perhaps not comparable in terms of impact, the period saw the emergence of a new class of investors—the angels—with dynamics of their own.
Unlike traditional investors, the factors that motivate angels are unlikely to be found in any textbook on economics. Unlike traditional investors, their method is more an art than a science. From patriotism to altruism, to fear of forgetting one’s hard-earned skills, today’s angels are motivated more from their heart than their head.
Saurabh Srivastava, founder of IIS Infotech (now Xansa) and one of the earliest first-generation entrepreneurs and angel investor says the peculiarities of this class of investors arise from their origins. “Traditionally, businesses in India were run by families. However, such people always invest their money into other businesses owned by the family. Only people who have been first-generation entrepreneurs, who don’t have a vast family-business set-up, invest in other people’s companies. Only they have the requisite experience to help others like them,” he points out.
“It is only in the last decade or 15 years that you have had people who have set up their own companies, have done well and have money. For the same reason, 15 years ago, there was
no angel investing in India,” he remembers.
Srivastava is credited with playing a crucial part in setting up two forums for such investors—the Infinity Venture Fund in 1999 and the Indian Angel Network a year and a half ago. The Network, by far the biggest investment platform in the country by a number of investors, currently has around 70 members. “In another four months, we would hit 100 members, two years after we started,” Srivastava says.
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The investors are drawn from across the spectrum, like academecians, CEOs, former entrepreneurs, lawyers, finance professionals and retirees. What sets them apart from the usual investors—VC and PE funds—is the motivation. Impelled by an urge to share their knowledge and expertise, angels typically invest in business areas they know about.
“I am not a guru in everything,” says Vikram Upadhyay, the youngest of the three sons of a professor at Allahabad University who went to Japan to study and work, but stayed on to
partner with his brother in running a software business. Thirty-two-year-old Vikram, who started investing only a few months ago, displays the ‘patriotic urge’ typical of many angel investors.
“Why is India not able to create world-class products? Why has India not been able to create anything like Google or Facebook? I decided to start investing because I realized there are people who can create such products, but they don’t find the support, not just financial, but all round,” he says, “I want to share with Indians whatever I have gained in Japan in ten years, but I can’t just say ‘hey, I have learning, take it...’ More than money, I am investing my knowledge and my experience”.
Sanjay Bhasin, formerly head of Nokia’s mobile base station business in Finland and now CEO of Essel Propack, shares his sentiments. “I know this is a bit far-fetched and a bit emotional but this is what it is,” he says, “I want us to take small steps for India to be the global powerhouse in innovation and new venture creation, to create a path so that some day a Google or a YouTube or a Facebook may be created out of India”.
While a desire to seek better changes in the community is a strong motivation with today’s angels, a similarly strong urge is to preserve their hard-earned knowledge, skills and relationships.
“I have had a very long and satisfying career,” says 62-year-old angel investor Arun Duggal, who retired from the Bank of America as an investment banker seven years ago and
“accidentally” got involved in angel investing soon after. “It started with friends and family, and then a couple more were referred to me by friends,” he remembers.
Duggal considers angel investing as an extension of his natural inclination to share the knowledge he has cultivated over the years. “Even if someone just came to me and said I need some advice, I would probably help him out. It is natural for me to use my skills, knowledge and contacts to help others. Angel investing is an extension of that, with some financial help thrown in,” he points out.
While patriotism, a desire to give back and share may all contribute to the ‘angel’ movement, for sold-out entrepreneurs, helping a bunch of youngsters start out on their own is an essential part of keeping in touch with their roots. “I like their ‘can do’ attitude and it somehow helps me retain that attitude in me. As you get older, you tend to accept things the way they are, your conviction to be able to bring out change is a bit lesser,” says Bhasin.
“Entrepreneurs enjoy creating companies, but running one tends to be boring,” says Srivastava, “After doing it two or three times you don’t want to do it again. At the same time, they want to enjoy the process of creating a new company. In short, with angel investing, entrepreneurs move from the role of the captain to that of the coach”.
So, are angels really investors? How come nobody mentioned money so far? “Of course, money is there, if the company becomes successful,” says Rohit Chand, one of the Saurabh’s compatriots from IIS Infotech and an angel investor. “But it is there somewhere in the background. The main motivation is that there is a joy in creating or helping to create. It gives a different type of satisfaction,” he adds.
“As an angel, you don’t calculate the returns that much,” says Ajoy Khandheria, who quit his career in telecom and IT ten years ago to become an entrepreneur. Over the past ten years Khandheria has been an entrepreneur, a professional investor investing other people’s money and an angel investor. He draws upon his experience to bring out the difference between normal venture investing and angel investing.
“As an angel, you are investing your own money. So your desires and criteria are different, you are investing in someone you know or in a field you know. And you are less likely to say even if 7 out of 10 fail, it’s okay. An angel has a personal involvement and wants each one to succeed. He relies much more on gut feel, less on market research and he does not calculate IRRs [internal rate of return]”.
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written by sumanth k., February 13, 2009
Is there funding offered for new product concept development - for individual innovators? I have been working on some of the folowing concepts in my individual capacity:
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Would appreciate any information in this regard.
Sincerely,
Sumanth K.
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