Angel investing seems to have become of the fashionable things to do. Lots of people want to be angel investors these days , because it seems to be the “ cool in thing “ to be doing .
I haven’t become an angel because I hope to get rich quick. It would be great if I could identify the next Facebook, but I have far more modest expectations as regards a financial ROI on my angel investing. I am much more realistic about my abilities , and understand that it can be really hard to identify who the winners are going to be amongst startups . Most of these companies have a very high mortality rate, and I have already lost quite a bit by investing in startups . It’s a fact of life that even VCs ( who are much smarter , better funded and more experienced than I am) don’t do a good job at picking future winners, so why would I expect to do any better than them ? I am not going to get upset if the investments don’t pan out. In fact, given the way India is growing, and because my friend, Manish Gupta at www.solidarity.in does such a great job in managing my equity portfolio, I feel the listed space is a far better and safer way of making money . It has a better return on investment . Angel investing locks up money for long periods of time , in companies which are illiquid, and most of whom will fold.
So if it’s not a financial return I'm looking for , then why do I do it ? Do I get a kick out of being part of a company which may go through a dramatic hypergrowth phase if the stars are properly aligned ? The problem is that as an investor, you are an arm’s length away from all the action, so you only get to experience the thrills of the ups and downs vicariously, which is not as much fun.
My primary reason for investing is that it’s the best form of learning I have experienced. The tuition fees are steep, but the mind becomes quite sharp when you are forced to put your money where your mouth is . I have learned a lot from entrepreneurs , when they make their pitches and presentations . These guys are very smart, and know a lot about their vertical, and are willing to share their knowledge with you . Not only do I learn a lot from the good founders ( how to run a business; how to craft a “ wow “ product; how to pivot: and how to deal with the lean times), I also learn what not to do from the bad founders ( the ones who never bother to return your calls after you have given then your money).
The learning does not come only from the founders - I learn tons from the other angel investors in the network as well. I am a member of Mumbai Angels, I3N and India Angel's Network. It’s a small ecosystem, and a lot of these people are much smarter and more experienced than I am . I learn from listening to the intelligent and probing questions they ask, and the investing decisions they make.
The most important reason I invest is that this is one way in which I can actually make a difference to the future. It’s not just a question of funding the founder - it’s more a question of leaving the world a better place , because of the products and services these companies create and deliver.
It’s possible that at least one ( and maybe more !) of these investments will have a significant impact , and it’s my hope that I will then have been a part of something which can change the world. It’s true that this doesn’t happen too offer; and that maybe none of the companies I have invested in will be able to accomplish this. However, the fact that I could potentially act as a catalyst to bring some of these dreams to reality is enough for me.
Here are some of the companies I have invested in. It might seem like quite a motley list, but I am not a “spray and pray” investor, and each of them has their own story to tell.
Evobi, at www.bibox.in which creates kits which spark creativity in children
Brun, which makes fetal monitors to help make childbirth safer
Avaz, at www.avazapp.com creates apps for autistic kids
It is my belief that as an investor, I can add value to the founders – not just money, but useful insights as well. If well-established, well-off, financially secure and mature citizens like me don’t do this, then who will ? India has lots of potential, and we need to help to unlock it. Our generation has a responsibility to mentor the next , and angel investing is a very tangible way of doing this. Rather than donate money to charities , I feel this is a far more organized way of getting the biggest bang for my buck. I am putting my money where my mouth is, and this is likely to provide the best results, as judged in terms of output and impact.
One startup founder commented - Some of us have left lucrative careers and are pursuing social entrepreneurship for the same reason - we want to do something big and impactful. There are easier ways to make a living but this is where our heart is and the best seat in the car is the driver's seat.
Perhaps I am now too old to drive the car, but being a navigator can be a lot of fun as well !