For most people, the key role of an angel investor seems to be providing capital in exchange for significant equity to start-ups at an early stage. But the role of an angel investor is much more than that.
Indian start-ups have emerged drastically due to the widening scope of angel investing. This article sheds light on the world of angel investors. From investing methodology to functioning covers all the key aspects related to angel investing in India.
Different Roles of Angel Investors
The major key roles of an Angel Investor involve:
| Early Stage Funding | It is often the angel investors that provide the initial seed capital that is required. It takes care of major start-up operations like product development, hiring talent, and marketing products/services to end consumers. |
| Risk Taking Support | Angel Investors are prone to risk as they often invest in a highly unstable unproven business model. The risk involved is very high but the returns can be multifold. They are driven by the conviction of the founders. |
| Mentorship and Guidance | Angel Investors carry the experience of building big companies. Their mentorship, guidance, and advice can be of high value to the new founders to turn their ideas into profitable business models. |
| Bridge to Future Funding | If backed by an angel investor the credibility of the start-up increases. It makes future capital raises easier. |
| Flexible Terms | Unlike regular debt issued by banks or other financial institutions angel investors provide flexible terms. These terms can involve lucrative interest rates, royalty from sales, or a piece of profits incurred. |
Functioning of an Angel Investor
The functioning of investment by an angel investor involves more or less the following steps:
| Identifying Investment Opportunities | They look for new-age investment opportunities through ideas that can change the way our world operates. They can identify an opportunity through Pitch events for foundersNetworks/Personal connectionsOnline platforms for angel investors |
| Due Diligence | Angel investors conduct due diligence before investing. It involves:Evaluating the potentialAnalyzing projectionsAssessing the founder’s visionReviewing the risks involved |
| Structuring Investment | Once checked the investment is made in exchange of: EquityConvertible Debt All negotiations are made through legal agreements. |
| Post Investment Involvement | Angel investors have major roles post the investment like: Advising founders and managementIntroduction to networksStrategy to growTaking a seat on the board of directors |
| Exit Strategy | Angel investors tend to take an exit in one of the following manner: Acquisition by a bigger playerIPO (Initial Public Offer)Sale of stake to other onboarding investors |
Therefore, it can be inferred that the role of an angel investor is way more than just giving out money to a start-up. It’s their experience, network, and business advice that can play a huge role in the success of any emerging venture.
Indian Angel Investors and Their Investments
India has witnessed a surge in startup activity over the past decade. Indian angel investors have played a significant role in the success of Indian start-ups. Here are some of the most prominent Indian angel investors and their notable investments:
| Angel Investor | Major Investments |
| Sanjay Mehta | OYO Rooms, Block.one, Box8, FabAlley |
| Rajan Anandan | Unacademy, Innov8, BlueStone, Instamojo |
| Anupam Mittal | Ola, Shaadi.com, Big Basket, Druva |
| Kunal Bahl & Rohit Bansal | Razorpay, Shadowfax, Unacademy, GoMechanic |
| Nithin Kamath | Smallcase, Finshots, Stoa School |
| Deep Kalra | Zomato, Ixigo, Goibibo |
| Girish Mathrubootham | Dunzo, Airmeet, Rocketlane |
| Harsh Jain & Bhavit Seth | HalaPlay, Rooter, Elevar Sports |
The key focus areas of Indian Angel Investors have been fintech & financial services, edtech, D2C Brands, health tech, and gaming.
How to Find an Angel Investor in India
Finding the right angel investor is a challenge but can be a game-changer given the competitive landscape of start-ups.
Here’s a step-by-step guide on how to find an angel investor in India:
| 1 | Start with Angel Investment Networks | Several platforms connect founders to ideal angel investors. Indian Angel Network (IAN) Mumbai Angels Chennai Angels100X VCLead Angels |
| 2 | Use Online Platforms | Online platforms can provide access to multiple angel investors. Some of them are: LetsVenture AngelList India StartupIndia Hub Venture Catalysts |
| 3 | Leverage Your Network | Leverage network and professional circle for reaching out to potential angel investors who might be interested. |
| 4 | Reach Out with a Strong Pitch | A strong pitch is important for an impact that lasts long. It must contain the vision that you aspire your idea towards. |
| 5 | Join an Accelerator or Incubator | Programs like Y Combinator, Techstars India, GSVlabs, or IIT/IIM incubators offer access to mentors and angel networks as part of their ecosystem. |
Final Thoughts
Angel investors have become a driving force in India’s startup ecosystem, helping innovative ideas turn into successful businesses. Their involvement early in the journey can be the difference between a startup’s success and failure.
FAQ
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What is the goal of an angel investor?
The main goal of an angel investor can be considered to generate good returns on investment often high as the risk involved is also high.
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Why do we need an angel investor?
Angel Investors have the necessary experience and industry networks along with money that can be of real use for a start-up in its early stages.
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How do angel investors profit?
Angel investors make a profit if the start-up gets acquired by a bigger player at a much higher valuation. They also make a profit through IPO (Initial Public Offer) or sale of stake to other onboarding investors.
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Are Shark Tank angel investors?
Shark Tank investors can be classified as venture capitalists rather than angel investors.
